Tobacco exposure via an ETF can be easily obtained with a fund such as the Consumer Staples Select Sector SPDR (NYSEArca: XLP), the largest staples ETF. Philip Morris and Altria combine for nearly 13% of XLP’s weight and both are top-10 holdings of the fund. Staples are not cheap, though. Not only are staples the second-priciest S&P 500 sector behind discretionary at the moment, but staples are also trading above their five- and 10-year averages. [Financials are the Rodney Dangerfield Sector]
Gambling is the sinful sub-sector where high valuations are readily apparent. The Market Vectors-Gaming ETF (NYSEArca: BJK) “trades at nearly 20 times forward earnings. Wynn (NasdaqGM: WYNN), a top player in Vegas and Macau, sports an even higher P/E ratio of 24,” according to Money.
BJK may sound expensive, but the ETF’s 42.2% gain this year justifies the valuation. Further justifying the premium at which BJK trades is its 14.6% weight to China, which when it comes to gambling, means Macau. Macau is the world’s largest gambling hub and its growth trajectory is up, not flat or down.
Market Vectors-Gaming ETF
