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Mark Leibovit’s ‘The VR Vice Letter’ provides investors, portfolio managers and traders his unique insights, opinions and recommendations on ‘sin’ or ‘vice’ equities which includes cannabis (marijuana), alcohol, weapons and defense, gaming, prostitution, sexual paraphernalia, entertainment, travel including cruises, luxury goods including jewelry, and luxury cars (e.g. a Tesla), fast food restaurants and even big pharma (drugs are a Vice too!).
While economic cycles come and go, and the lower end of the leisure market suffers from people having less money for fun when times are tough, the pursuit of a good time and the good life are universal goals. Alcohol may be considered socially responsible in the investing sense, but its use is socially acceptable. We feel there is no reason to sit on the sidelines and miss out on opportunity. Do you know there are dozens of publicly traded cannabis related stocks? Some say there are as many as 200 and we keep digging daily to find them. Marijuana (Cannabis) is now legal as a recreational substance in Colorado, Washington, Oregon and Alaska and legal medically in Arizona, New Mexico, Montana, Illinois, Delaware, Hawaii, Michigan, New Hampshire, and New Jersey and Guam. States with both medical and decriminalization laws include: California, Nevada, Minnesota, New York, Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont. The medicinal use of cannabis is legal in a number of countries including Canada, Czech Republic and Israel. Possession is effectively in the Netherlands and Uruguay.
Not only is ‘vice investing’ fund but it can be quite financially sound, especially when timing is correct. The phrase from Gordon Gekko that ‘greed is good’ is apropo. Companies that derive a significant portion of their revenues from products or services considered socially irresponsible are covered and traded herein. In the U.S., consumers have an appetite for luxury. The emerging middle class in China is buying automobiles and engaging in international travel. In Russia, the nouveau rich are sipping champagne and eating caviar. Whoever they are and wherever they are, consumers are spending money on more than just the basics and companies are profiting from their purchases. And, now the legalization of cannabis for both recreational and medical use has created a new ‘gold rush’ of investment opportunity.
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Mark Leibovit in the L.A. TIMES at the Arcview Cannabis meeting in Las Vegas
Mark Leibovit Bio:
Mark Leibovit, CIMA, is Chief Market Strategist for VRTrader.Com. His technical expertise is in overall market timing and stock selection based upon his proprietary VOLUME REVERSAL ™ methodology and Annual Forecast Model.
Mr.Leibovit’s extensive media television profile includes seven years as a consultant ‘Elf’ on “Louis Rukeyser’s Wall Street Week” television program, and over thirty years as a Market Monitor guest for PBS “The Nightly Business Report”. He also has appeared on Fox Business News, CNBC, BNN (Canada), and Bloomberg, and has been interviewed in Barrons, Business Week, Forbes and The Wall Street Journal.
Mark Leibovit was ranked Timer Digest’s #2 Gold Market timer for 2011, and has also been named the #1 Gold Market timer for the 5 year period ending in 2010, and the #1 U.S. Market Timer for 2006 and the #1 Intermediate U.S. Market Timer for the ten year period December, 1997 to 2007.
He was a ‘Market Maker’ on the Chicago Board Options Exchange and the Midwest Options Exchange and then went on to serve as Director of Research at Freehling & Co. and later Director of Technical Research at Rodman and Renshaw (both in Chicago). Mr. Leibovit now publishes a series of newsletters at www.LeibovitVRNewsletters.com and hosts his own weekly national radio talk show – Wall Street Raw through the GCNlive.com network along with affiliated radio stations. He is both a Certified Investment Management Analyst (CIMA) and Accredited Investment Fiduciary (AIF), and is also a member of the Market Technicians Association and CFA Institute.
Mr.Leibovit’s specialty is Volume Analysis and his proprietary Leibovit Volume Reversal Indicator is well known for forecasting accurate signals of trend direction and reversals in the equity, metals and futures markets. He has historical experience recognizing, bull and bear markets and signaling alerts prior to market crashes. His indicator is currently available on the Metastock, eSignal and TradeStation platforms.
His comprehensive study on Volume Analysis, The Trader’s Book of Volume published by McGraw-Hill is a definitive guide to volume trading. It is now also published in Chinese. Mark has appeared in speaking engagements and seminars in the U.S. and Canada and provides customized Volume Analysis for managers and institutions
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Betting on Vice Over Virtue in ETFs
The rationale for vice investing is simple: bad habits are hard to kick, even in tough economic times.
From tobacco to sex and alcohol to gambling, consumers are always tempted to indulge in various “vices”, giving investors’ confidence that these industries will always have business regardless of an economic downturn.
And sinful activities can be a smart portfolio play. The Vice Fund (VICEX) is all sin all the time, devoting itself entirely to socially irresponsible stocks. The fund launched in 2002 and has outperformed the S&P 500 over the past three years by investing in manufacturers of gaming equipment, tobacco products and alcoholic beverages.
VICEX posted a 16.59% gain from 2009-2012, topping the S&P’s 10.66% climb. The fund’s top holders are tobacco manufacturers Altria (MO), Philip Morris (PMI) and Lorillard (LO), accounting for more than 16% of its assets.
Despite the mutual-fund industry’s overall exposure to some of these “sinful” stocks, exchange traded funds have yet to fully embrace the strategy. In fact, a sin ETF launched by FocusShares based on the ISE SINdex, an index tracking alcohol producers, casinos and tobacco manufactures, closed within a year after failing to gain market traction, leaving no ETF exclusively devoted to sin stocks.
The closest thing to a vice exchange traded fund is the Market Vectors Gaming ETF (BJK) which is comprised of companies that generate more than half of their revenues from the gaming industry. BJK is up more than 8% so far this year and 12.8% over the past 6 months, nearly double the return of the S&P 500. Las Vegas Sands (LVS), Sands China and Galaxy Entertainment are BJK’s largest holdings, accounting for approximately 23% of its assets.
While there is no ETF invested solely in alcohol or tobacco, there are funds that give investors exposure to publicly traded companies benefiting from the business of producing guilty pleasures. The iShares S&P Global Consumer Staples Index (KXI) provides exposure to high-yield, dividend-paying tobacco and alcohol companies. Philip Morris, Altria, British American Tobacco, Anheuser-Busch Inbev (BUD) and Diageo (DEO) are among the fund’s top 10 holdings, accounting for 16% of its assets. KXI is up 16.8% over the past year and 37.8% over the last five years.
Of course, there’s another sin investment that remains lucrative: sex. Demand for pornography, condom manufacturers, gentlemen’s clubs and medications aimed to enhance sexual performances fuels the multibillion-dollar industry.
The PowerShares Dynamic Pharmaceuticals’ (PJP) is a way for investors to play Pfizer’s (PFE) Viagra and Eli Lilly’s (LLY) Cialis, which each garnered approximately $2 billion in sales last year. Pfizer and Eli Lilly account for more than 10% of the fund, which is up 134.7% over the past five years.
So, despite the fact that there are no ETFs specifically geared toward sin stocks, several funds are poised to profit off “bad” habits, and if recent performance is any indication, the “no morals” investment strategy is working just fine.
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