Don’t Forget Sin Companies

This is an interesting story from Bloomberg.

A Scotch whisky matured for more than six decades sold for 25,200 pounds ($37,245) at an Edinburgh auction today as collectors vied for rare malts.

The bottle is one of 61 produced by the Glenfiddich distillery and the whisky has matured for 64 years, host Bonhams said in its catalog. It was bought by an unidentified purchaser over the telephone. Bidding started at 10,000 pounds.

Many of the uber-rich are making what are called “alternative” investments and buying things like aged scotch, paintings, diamonds, expensive cars, and other worldly goods and storing them away for fear that their paper investments will cascade down in value.  It is an interesting concept.

Of more relevance here on this blog (joe blow retail investor) is the whole concept of Sin Companies, as I call them.  Some people try to let their consciences get in the way of their investing, but I have never looked at it that way.  People are always going to smoke, drink and do other things to try to escape their realities.  It isn’t my problem.  My problem is to find ways to maximize yield for my investments.

I have always been a huge fan of MO and I own a sizable chunk in my portfolio – and I always will.  The cigarette business is almost a purely cash business, as is liquor.  Hardly any accounts receivable.  I wish my business ran that way!  Right now, the yield on MO is a staggering 7% ($1.40, at $19.86/share as of this writing).

I don’t see an end in sight for MO as many, many young people smoke and in the key area of the Far East, EVERYONE smokes like chimneys all day long.  Phillip Morris International is also a nice choice.

If you like booze companies, try to pick one with large international exposure.  As people in China and India get more money, they will be buying more, and better quality booze.  I have some exposure to Indian technical people and in off the cuff conversations, it seems that they are crazy for Jack Daniels of all things.  Brown-Forman might be for you, although over the past year that stock has had a huge run-up.

I guess in the end, I am the type of person that doesn’t really care about what others do with their bodies and always look to the Sin Companies to round out parts of my portfolio.  Others don’t share this same philosophy and I can respect that as well.

One thought on “Don’t Forget Sin Companies”

  1. Diageo from the UK has been a sin stock that I recommended in the past and is in portfolio 2. I will have to review this stock for future recommendations. We bought at a peak and it has gone down at least partially due to the decline in the Pound since this stock was purchased it was like 2 pounds to a dollar but now it is far less at something like 1.40 pounds to a dollar… this turns into a 30% loss on the currency movement, alone (it is down 18% over that time, so it has at least shown a gain prior to the currency hit). This probably deserves its own post.


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