We finish the week by discussing two exchange-traded funds (ETFs) that could be appropriate for those looking to invest in so-called "sin" or "vice" shares. Such businesses typically focus on tobacco, alcohol, defence industries, gambling, marijuana and adult entertainment.
Market participants whose personal convictions permit them to invest in "sin stocks" could include them in diversified long-term portfolios. We should note that alcohol and tobacco stocks typically pay stable dividends.
With that information here’re our two funds for today.
1. AdvisorShares Vice ETF
Current Price: $30.97
52-Week Range: $25.42 - $36.86
Dividend Yield: 1.17%
Expense Ratio: 0.99% per year
The AdvisorShares Vice ETF (NYSE:VICE) invests in shares of vice businesses worldwide. This actively managed fund initially began trading in December 2017. In November 2020, however, it changed its ticker.
VICE has 38 holdings, where the leading 10 names comprise around 45% of net assets of almost $12.1 million. This means it is a small ETF with a high expense ratio.
The fund’s sector allocation by weighting is as follows: Gambling and casinos (30.5%), restaurants and hospitality (16.3%), alcohol (also 16.3%), video games and e-sports (13.5%), tobacco (6.5%) and others. Close to 90% of the firms are based in North America.
Among the top holdings are the gun companies Smith & Wesson Brands (NASDAQ:SWBI) and Sturm Ruger & Company (NYSE:RGR); gaming entertainment group Boyd Gaming (NYSE:BYD); real estate investment trust (REIT) Gaming and Leisure Properties (NASDAQ:GLPI), which leases property to gaming operators; and audio technology company Turtle Beach (NASDAQ:HEAR).
Mexico has recently filed a lawsuit in the US against 10 gun companies, including SWBI and RGR. Therefore, these names could be volatile in the weeks ahead.
So far in 2021, VICE is up 2.4% and hit a record high in June. However, since then it has come under pressure and shed about 14% of its value. Potential investors could regard this decline as a good opportunity to buy into the fund.
2. ETFMG Alternative Harvest ETF
Current Price: $15.88
52-Week Range: $10.12 - $34.58
Dividend Yield: 2.20%
Expense Ratio: 0.75% per year
Recent metrics suggest the “global cannabis market size was valued at $20.6 billion in 2019 and is reckoned to record a compound annual growth rate of 28.5% during 2021-2027 to accumulate $118.9 billion by the end of analysis timeframe.”
The ETFMG Alternative Harvest (NYSE:MJ) was the first US-based fund to invest in the global cannabis industry. However, since then it has widened its focus. Now, in terms of sectors, we see pharmaceuticals (51.5%) followed by tobacco (22.6%), home improvement retail (9.8%) and biotechnology (4.9%).
MJ, which has 32 holdings, tracks Prime Alternative Harvest Index. The fund started trading December 2015. The top 10 names make up close to 55% of net assets of $1.23 billion.
Canopy Growth (NASDAQ:CGC); Tilray (NASDAQ:TLRY), GrowGeneration (NASDAQ:GRWG); OrganiGram Holdings (NASDAQ:OGI) and Aurora Cannabis (NASDAQ:ACB) lead the names in the roster.
Just over 48% of the companies are based in the US, followed by 41.6% in Canada, where cannabis was legalized in late 2018. Many of our readers might know that marijuana is an agricultural commodity whose production is capital intensive.
Although legalization in Canada has provided tailwinds for the industry, many firms have nonetheless been dealing with supply-chain issues as well as the lack of sufficient demand. As a result, most of these Canadian producers are not yet profitable and continue to burn through significant amounts of cash.
These cannabis firms need to see federal legalization in the US for which there is no definite timeframe.
MJ returned about 28% in the past year, and 14% year-to-date. However, after seeing a multi-year high in February, MJ has come under pressure. Investors who believe the sector is likely to grow, especially upon federal legalization in the US, might consider researching the fund further.