There is no dedicated exchange traded fund for so-called sin stocks or makers alcohol, tobacco, firearms and casino operators. Military hardware makers can also be classified as sin stocks.
However, there are plenty of ETFs with which investors can build a sinful portfolio. Assuming some or all of the ETFs to be highlighted here were chosen, that less-than-innocent portfolio would have generated impressive returns in 2013, but some of the ETFs on the roster now sport lofty valuations.
“Thanks to the recent hot streak, most sin stocks are trading a bit above their 10-year average price/earnings ratios,” reports Susie Poppick for Money. The article goes on to note that not all vice stocks are richly valued, but investors would be wise to be choosy.
Few alcohol stocks are significant holdings in ETFs, but Anheuser-Busch InBev (NYSE: BUD) is 21.6% of the iShares MSCI Belgium Capped ETF (NYSEArca: EWK). From an investing standpoint, beer is not the compelling growth story that vodka or whiskey are, but Anheuser-Busch is expected to get a boost from the 2014 World Cup and the stock has helped EWK gain 14.4% this year.
EWK sports a P/E ratio just under 20, making it cheaper than the comparable Germany, Netherlands and Switzerland ETFs. [Belgium ETF: Cheap Beer]
Tobacco companies are not too pricey. “Their P/E ratios are 15% below those of other companies that make products that consumers use daily (like food), and 5% below the market,” Money reports, citing Stifel. However, accessing stocks like Altria (NYSE: MO) and Philip Morris (NYSE: MO) with ETFs does mean tacking a step up the valuation ladder.