The term “Sin stocks” refers to the stocks of companies engaged in immoral or unethical businesses …businesses they exploit human weaknesses to make a profit.

Alcohol, gambling, and tobacco are the most obvious examples but the list is quite long if you take into account different perspectives.

For example, vegetarians might categorize companies that deal in animal products as sin stocks.

Environmentalists might consider oil companies and coal mining companies.. As these companies are destroying our planet.

People of certain faiths where lending money is considered immoral might say banks and NBFCs are sin stocks.

And the list goes on but for all practical purposes, alcohol, tobacco, and gambling would top the charts of sin stocks.

Examples

In India, we have plenty of sin stocks…some of the famous ones are 

ITC – the long time investor favorite which is famous for cigarettes, then we have Godfrey Phillips and of course, VST industries, in which great Radhakishan Damani has made a killing. 

Then comes alcohol and we have players such as United Spirits, United Breweries, Radico Khaitan, etc. 

You may not know them by name but I am sure you’ve heard of or seen some of their famous brands.

And then we have a new breed of casino stocks such as Delta corp, whose floating casinos in Goa have become a tourist attraction in themselves.

Why are investors addicted to sin stocks?

Well, investors are high on the fact that these companies are recession-proof.

Yes, these companies don’t care about the economic cycle. 

As they say in Hindi, daru peene wale ko bahana chahiye…means a drunk needs an excuse to drink. Happy occasion – let’s celebrate with a drink. Sad occasion – let’s drown our sorrows in drinks.

So, yes these companies are surprisingly recession-proof because human weaknesses don’t change with economic cycles, right?

Remember back in 2020, during the Covid crisis, how other businesses were struggling to survive, these sin companies were enjoying the customer loyalties…but how desperate people were lined up in front?

The other reason why investors indulge in sin stocks is that government regulations make it harder for new competitors to enter the market. There are tons of licensing and compliance requirements that any new company has to go through before becoming a viable competitor.

But, here is the thing… government intervention works both ways and that’s one of the biggest 

Conclusion

Ok, so that was the intro to sin stocks. 

To be honest, it was hard for me to remain unbiased on a topic like this because it’s pretty much black and white but I want to know what you guys think…what do you say?

Whether sin stocks be allowed to trade publicly or not?