Sin stocks can have long term cash flow generation and valuation advantages.
Small cap, under-followed, and unloved stocks can provide hidden value.
Combining the two can result in multi-bagger opportunities.
It is the articles on lesser known companies like these, where Seeking Alpha really shines.
“You will always be fond of me. I represent to you all the sins you never had the courage to commit.”
Oscar Wilde
Why I Love Sin (stocks).
A few weeks ago, I had a reader comment questioning the morality of one of my investments. Jokingly, I responded to look for my next article, “Marijuana, Gambling, and Strip Clubs: Why I Love Sin (stocks)”. At the time I was just teasing, but it started me thinking, why not? After all, these stocks frequently have sizable moats, generate strong cash flows, and in fact are some of the best returning stocks I have owned over the years. If nothing else, it’s a great chance to stick some salacious pictures in an article (which should be good for few clicks).
So, first a bit of an eye opener. Guess what the top performing stock over the last 5 decades is?
- Microsoft (NASDAQ:MSFT) or Cisco (NASDAQ:CSCO)? Nope.
- Google (NASDAQ:GOOG) (NASDAQ:GOOGL) or Amazon (NASDAQ:AMZN)? Nada.
- Apple (NASDAQ:AAPL) or Berkshire Hathaway (NYSE:BRK.B)? Net, Nien, Nao, Non (but you are getting closer)
The number one performing stock, up more than 20% annually over the last half century is, drum-roll please… Altria (NYSE:MO). Yep, the company that brings us Marlboro cigarettes. A company that actually contributes to the death of its own customer base, and is reviled throughout the US as promoting a disgusting, poisonous habit, is the highest returning stock over the last 50 years. You might not agree with the ethics of owning such a stock, but it’s hard to say it has not been profitable.
You see revulsion, hatred, fear, and disgust can actually be a good thing for long term shareholders. It keeps a company’s stock cheap despite superior financial performance. It allows one to re-invest dividends or the company to buy back stock at good prices thereby taking advantage of the 8th wonder of the world, compound interest. It’s no wonder many Altria investors would simultaneously love the stock, and highly discourage their loved ones from ever using the product.
credit:seekingalpha.com
