Investing

5 ETFs Targeting Sinners

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So-called sin stocks have historically fallen into three main buckets: tobacco, alcohol and gambling. A fourth bucket, marijuana stocks, has developed over the past few years as recreational use of cannabis is more widely adopted.

Where there are stocks, there are exchange-traded (ETFs) and mutual funds that in one way or another are also trying to post a return on sin. We’ve already reviewed the marijuana funds available to U.S. investors, but more are likely to show up. And now that tobacco companies and beer and alcoholic beverage makers are investing in both smokeless tobacco products (e-cigarettes like Juul) and marijuana firms, more investors have exposure to the sin groups.

The largest companies in the sin trade, the ones that appear among the top holdings of several sin ETFs, are Altria Group Inc. (NYSE: MO), Philip Morris International Inc. (NYSE: PM), Constellation Brands Inc. (NYSE: STZ) and Las Vegas Sands Corp. (NYSE: LVS). Altria and Philip Morris make and market Marlboro cigarettes, among other brands, with Altria doing the U.S. business and Philip Morris the international. Constellation Brands owns beer brands Corona, Modelo and Pacifico, among others, as well as several wine brands. It trails far behind Anheuser-Busch InBev SA/NV (NYSE: BUD) in market cap but is among the top holdings in the large ETFs.

Diversifying has been the recent modus operandi of the big sin companies. Constellation Brands acquired a $4 billion stake last December in Canada-based marijuana grower Canopy Growth Corp. (NYSE: CGC), while Altria paid $1.8 billion for a stake in Cronos Group Inc. (NASDAQ: CRON). Not to be left behind, Altria last year took a $13 billion minority stake in e-cigarette maker Juul.

The Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) seeks to track the results of the Consumer Staples Select Sector Index and follows a replication strategy. The fund’s total asset value as of Monday, May 13, was about $11.2 billion. Its top holding is Procter & Gamble (14.96%), but both Philip Morris (4.06%) and Altria (3.96%) are among its top 10 holdings. Constellation Brands is in (2.31%) the top 15.

The net asset value of the fund at the May 13 close was $56.82 per share, with 194.7 million shares outstanding. The 52-week range is $48.33 to $57.82. The fund was established in December 1998 and has an expense ratio of 0.13%. Since its inception, the fund has returned 6.19%, and 13.34% over the past 10 years. For the year to March 31, the fund has returned 11.1%.

The Vanguard Consumer Staples ETF (NYSEARCA: VDC) seeks to track the performance of the MSCI US Investable Market Index/Consumer Staples. The fund’s total net asset value is $5.55 billion. Its top holding is Procter & Gamble (13.37%) with Philip Morris the fifth-largest (6.37%) and Altria the seventh largest (4.6%). Constellation Brands is 14th (1.86%).

The net asset value of the fund was $146.39 per share at the May 13 close, with 33.2 million shares outstanding. The 52-week range is $124.93 to $149.16. The fund was created in January 2004 and has an expense ratio of 0.1%. Since its inception, the fund has returned 9.69%, and 13.43% over the past 10 years. For the year to April 30, the fund has returned 14.22%.

The iShares Global Consumer Staples ETF (NYSEARCA: KXI) seeks to track the performance of the S&P Global 1200 Consumer Staples Index. The fund’s total net asset value is about $761 million. The fund’s top holding (of 107 total) is Nestle (8.67%), with Philip Morris (3.87%) sixth, beverage maker Diageo (3.01%) eighth and Altria (2.88%) 10th.

The net asset value of the fund was $51.79 per share at the May 13 close, with 14.6 million shares outstanding. The 52-week range is $44.30 to $52.80. The fund was created in September 2006 and has an expense ratio of 0.47%. Since its inception, the fund has returned 8.2%, and 12.15% over the past decade. For the year to March 31, the fund has returned 12.13%.

The VanEck Vectors Gaming ETF (BJK) seeks to track the performance of the MVIS Global Gaming Index, which requires that index companies generate at least half their revenue from gaming. The fund’s total net asset value is $29.47 million, and its top holding (of 44 total) is Las Vegas Sands with an 8.68% weight. Hong Kong-listed Galaxy Entertainment is the second-largest holding (8.17%), and Hong Kong-listed Sands China (7.48%) is third. Other U.S. firms in the top 10 holdings include MGM Resorts, Wynn Resorts, Gaming and Leisure Properties, Melco Resorts and VICI Properties.

The net asset value of the fund was $36.31 per share at the May 13 close, with 800,000 shares outstanding. The 52-week range is $30.81 to $50.35. The fund was created in January 2008 and has an expense ratio of 0.66%. Since its inception, the fund has returned 2.73%, and 10.25% over the past 10 years. For the year to March 31, the fund has returned 18.49%.

The AdvisorShares Vice ETF (NASDAQ: ACT) is an actively managed fund that invests at least 80% of its net assets in companies that derive at least half their net revenues from tobacco, alcohol or legal hemp/marijuana. The total net asset value of the fund is $13.49 million. The fund’s top holding (of 32) is Boston Beer with a weighting of 5.69%. Philip Morris (4.08%) and Altria (3.8%) are eighth and 10th, respectively. Diageo and British American Tobacco are both included in the top 15 as well.

The net asset value of the fund was $25.19 per share at the May 13 close, with 500,000 shares outstanding. The 52-week range is $20.88 to $27.73. The fund was created in December 2017 and has an expense ratio of 0.75%. Since its inception, the fund has returned 3.4%, and 3.94% over the past year. For the year to April 30, the fund has returned 19.41%.

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