3 Best Sin ETFs To Buy Now

Best Sin ETFs To Buy: Companies trading in the so-called “vice” industries – tobacco, alcohol, gambling etc. – traditionally perform well regardless of current market conditions, because the non-cyclical nature of consumer habits ensures there’s always a year-round demand for their products and services.

As a result of this, vice stocks are often seen as both a safe and profitable investment option. And one of the easiest ways to invest in them is with one of the many vice ETFs on offer. 

Here are three of the best. 

AdvisorShares Vice ETF (VICE)

The AdvisorShares Vice ETF (VICE) is a highly diversified, actively managed vice and leisure play that boasts as its portfolio manager the acclaimed Dan Ahern, author of the highly influential 2004 publication Investing in Vice.

The fund invests in a wide range of global companies operating in most of the traditional vice industries, including the usual alcohol, tobacco and gambling firms, as well as the less covered e-sports, iGaming and fantasy sports sectors.

Its top holding is the Boston Beer Company, Inc. (SAM), which performed exceptionally well over the last twelve months, gaining more than 100% in value during that time. The fund’s second most heavily weighted company is the Turtle Beach Corporation (HEAR), which had an even better year, appreciating by almost 200% since May 2020.

VICE’s exposure to the growing e-sports industry makes the fund particularly attractive. The e-sports ecosystem is growing revenues at a rapid clip, with global revenue expected to increase over 68% from $950 million in 2020 to $1,598 million in 2023. 

However, there are two potential drawbacks that might worry investors thinking about putting money into fund. First, despite the fund having been around for almost four years now, it’s still only managed to attract around $13 million in investment; and, for an actively managed portfolio like this, this lack of liquidity might be an issue further down the line.

Second, AdvisorShares commands a fairly steep management fee of 0.99%, which could also eat away at investor returns in the event of a future market downturn.

But with Dan Ahern’s successful – if contrarian – investment expertise on hand, the VICE ETF should remain a solid option for most investors out there.

VanEck Vectors Gaming ETF (BJK)

The potential of sports betting presents one of the best and most rewarding opportunities for investors right now – but figuring out which stocks to invest in to maximize this opportunity is difficult. This is where the VanEck Vectors Gaming ETF (BJK) comes in.

The fund aims to track the MVIS Global Gaming Index (MVBJKTR), facilitating a broad exposure to a raft of traditional gambling businesses, such as casino hotels and racetracks, plus newer forms of betting platforms including online and e-gaming companies.

Although many states in the U.S. still do not permit legal forms of gambling, the volume in wagers of those that do is huge. In 2019 alone, $909 million worth of bets were placed in just 12 jurisdictions.

Gambling revenue is predicted to grow from 2019’s numbers to around $7 billion in 2025, with 80% of that stemming from online betting. Indeed, powerful catalysts exist to further inflate these revenue forecasts as more states legalize gambling in the future.

VanEck’s total net assets for the Gaming fund stand at a healthy $157 million, and its net expense ratio is currently 0.65%.

Historically, the fund has returned dividends of over 1% most years since 2012, varying in range from $0.52 to $1.88. However, in 2020, its distribution came in at just $0.22, probably due in part to the closing of gambling resorts in response to the coronavirus pandemic. 

That said, the fund’s share price has performed well the last year, growing almost 60% to its present valuation of around $52. If the betting industry’s tailwinds persist, BJK should expect to see its fortunes continue to rise.

ETFMG Alternative Harvest ETF (MJ)

Alternative Harvest is the world’s largest exchange-traded fund designed to target the globally expanding cannabis ecosystem. The fund tracks the Prime Alternative Harvest Index, which hopes to benefit from both long-term and event-driven trends in the cannabis industry.

Recently, hopes for the cannabis industry took something of a beating, with many major weed stocks underperforming badly, and a good number of companies represented on the MJ fund currently trading at unfavorably high multiples. 

GrowGeneration Corp. (GRWG) – the fund’s second largest holding – has, for instance, a one-year forward P/E ratio of 71.43. Admittedly, the majority of cannabis firms are still growing – GRWG has year-on-year revenue growth of 151%, for example – but even so, short-term volatility in the sector should make even the most reckless investor think twice.

However, the cannabis industry is essentially a long-play from an investment perspective, and positive signs from various state and national legislatures suggesting legalization and widespread acceptance of the drug are promising.

Given that the industry is still developing, investment exposure through a vehicle like MJ seems the most sensible way to get a foothold into cannabis and cannabis-adjacent stock. The fund holds a total of 31 distinct assets, is worth over $1.5 billion, and has a reasonable expense ratio of 0.75%. 

Its portfolio is well diversified within the field of cannabis-related companies too. For instance, Alternative Harvest includes materials engineering firms like Schweitzer-Mauduit International, Inc. (SWM), who develop hemp-derived products for the non-consumable market.

MJ is down over 40% from its February high, and, if the cannabis market fulfills expectations over the coming years, its discounted price right now could offer a great opportunity to get in early on a very lucrative industry.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.