"Unethical"/Non-ESG stocks?

Seems like ethical investing is all the rage these days however, plenty of sin-related companies (tobacco, private prisons, alcohol, guns, etc) are also fairly profitable.

Since I'm not above alpha, what are some really good 'unethical' stocks to invest in?

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Comments (49)

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Jan 9, 2022 - 5:14pm

To name a few reasons -ย 

Terrible for privacy

Terrible for free speech

Addictive and bad for people's mental health, especially teenagers

Intentionally makes people upset and angry to improve retention

Now they're trying to create the Matrix (metaverse) where you can be a slave in Zuck's virtual universe.

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Jan 9, 2022 - 2:43pm

The Marijuana industry is about to blow up. I saw one HBS grad moved straight to CO to work in the biz.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Jan 9, 2022 - 7:42pm

not only that, but I feel like it would probably turn into something like the modern beer industry, with a lot of niche small-batch growers, but a few large corporate mass producers who would be selling subpar product.

Quant (หˆkwรคnt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

Jan 9, 2022 - 4:33pm

VICEX ( its underperformed for years) Friends run MJ. Good luck, not betting my money.

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
Jan 9, 2022 - 6:47pm

Altria. The stock hasn't performed great over the last 5 years (and the JUUL investment was a bad move), but the dividend yield has stayed around 7-8% for a long time and as such it is a favorite of long time dividend investors.

Jan 9, 2022 - 7:46pm

I haven't looked into it myself, but a lot of people on r/ValueInvesting really like British American Tobacco ($BTI), not sure which is the better name in the industry

Quant (หˆkwรคnt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

Jan 9, 2022 - 9:47pm

Funny you mention them, since they are a company I follow. A pretty significant piece of my day-to-day work until very recently was rating ESG portfolios and looking at a few stocks that were repeatedly coming up as a "bad" investment in ESG terms. From an ESG perspective, I'm thinking it's going to be tough in terms of being a long term winner. However, since so many institutional investors are dumping the stock (because of ESG initiatives), it's going to be way undervalued. I just don't see a major way for it to improve its value without any institutional investors being there. Maybe some people will bet against ESG as a concept and be successful. Who knows

Jan 10, 2022 - 11:22am

Interesting you mention, since I think $RICK doesn't technically fall under my company's ESG blacklist, so perhaps it has made it through the cracks on my end. Saw how the stock has performed in the past and it looks solid. Did you choose to invest in it?

Jan 10, 2022 - 11:38am

I wish. I've only tracked it as a joke and its my go to whenever someone asks me what stock they should buy. I used to follow it closer and management seems solid; they know the levers of the business. The first meaningful price action when it broke out of the ~$10 range was when they got legitimate bank financing across their business. Not sure what the current drivers of stock performance are.ย 

Array

Jan 10, 2022 - 2:57pm

Strip clubs are very profitable, but RICK also make alot of acquisitions. They buy strip clubs at 6x EBITDA when they themselves have an EV/EBITDA of something like 14. It's basically arbitrage between public and private multiples. And considering the number of strip clubs in the US that run by independant owners there's a very long runaway for RICK to continue what they're doing.

Jan 10, 2022 - 11:45am

I've always wanted to start an anti esg etf.....call it "burn" or something.ย  Basically load it up with profitable fossil fuels, defense stocks, gun stocks, private prisons, lgbt conversion therapy providers, etc etc.

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Jan 10, 2022 - 12:58pm

Can we address the elephant in the room here that ESG is basically just a way to siphon funds away from Republican backed companies?
It has nothing to do with "ethics" - just purely politics.ย 

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Jan 10, 2022 - 2:35pm

That's the free market my friend.ย  Clearly, the US government isn't going to end their love affair with unethical companies any time soon, but people want to feel good about how they invest, so investment managers use ESG standards to fill the needs of their customers.

It's interesting how you equate poor environmental policies, negative social impacts, and bad governance with being run by Republican donors... that's really saying something...ย 

Jan 10, 2022 - 2:48pm

It's interesting how equate poor environmental policies, negative social impacts, and bad governance with being run by Republican donors... that's really saying something...

If this is your takeaway, you're missing the point. "ESG" is just a buzzword meant to define Republican orgs as bad, not that Republican organizations are inherently bad hence my gripe with the term.

For instance, how our defense companies inherently bad? I'm definitely againstย  unnecessary wars and think both sides are guilty of doing that (looking at you LBJ, Bush, etc.) but that doesn't make defense infrastructure bad. Any country needs that to survive. Same goes with O&G. In terms of energy consumption yes it's not as green as solar panels, but it's also more accessible for the common person and can be easily produced here in the US leading to more jobs. Guns aren't inherently bad either - it's protected in our second amendment rights. Prisons also are needed to house criminals. Too many liberals take it on themselves these days to sympathize with the criminal rather than the victim.

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Jan 11, 2022 - 9:35am

We've got ESG offerings and a fund that's a pure play on the military-industrial complex.ย  (I bounced a couple changes around a few military friends back when we were looking to re-index it but nobody had data that showed Newport News as a military contractor because they break revenue down geographically.ย  It sank the project)ย  Compliance will have a conniption if I ever drop one of my own tickers though.

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
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Jan 10, 2022 - 2:27pm

Altria, MO, in my opinion is a great value stock and certainly a sin stock. They mostly sell tobacco but have exposure to cannabis through Cronos and Alcohol through Anheuser Busch.

They pay an 8% dividend yield, are extremely low beta and actually increased sales during 2020/21 due to people stress-smoking and I think they can continue to capitalize on humanity's desire for sin through cannabis, alcohol, tobacco, vaping (own 35% of JUUL which kinda was a flop), and smokeless products.

Prior to the pandemic revenues were declining about 1%/year. Even if we are pessimistic and assume that FCF will decline 4%/year then the stock is fairly valued where it is right now. But if it is able to keep people smoking and take advantage of new opportunities, then it is undervalued.

Jan 11, 2022 - 12:02pm

I wouldn't fish in these waters. I despise the liberal push against 'sin' stocks as much as anyone else, but sustainability is actually critically important for business fundamentals LT. Businesses that are good for all stakeholders tend to see the most value creation over time so just try to hit these easier triples instead of taking risky bets on sin stocks

Facebook could be a good one to enter though IMO

Jan 11, 2022 - 4:17pm

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Jan 11, 2022 - 6:14pm

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