Let’s Talk About Vice: McDonald’s Corporation (MCD), JPMorgan Chase & Co. (JPM), Apollo Group Inc (APOL)

Page 1 of 2

In socially responsible investing, it’s pretty well established that alcohol, tobacco, firearms, and gambling stocks are off the table. They’re commonly known as “sin stocks.”

Some investors embrace sin stocks; cash gushes when people pay for naughtiness, and even though addictive products may cause harm to those who use them, we all know that the reality is that many people do choose to use them.

Government isn’t even above capitalizing off such companies. “Sin taxes” may seem like a negative incentive, but the truth is, state governments can generate some mean revenues from their sale. Prohibition ended during the Great Depression because alcohol was obviously in great demand and legality led to tax revenues. State lotteries are another good example of government’s love-hate relationship with sin.

There are a lot of ways individuals can strike out against sin stocks and vice-filled industries — giving investors and policymakers less means to profit from them. One can avoid investing in these companies, and avoid using their unhealthy wares.

However, when it comes to vice and harmful outcomes, maybe investors should rethink their position on what sin stocks really are, especially given the recent drive to push certain foods and drinks into this category. In this day and age, maybe the real sin stocks aren’t companies whose products customers abuse by choice, but those whose products abuse their customers.

McDonald's (MCD)The sin squad takes on sugar
It’s no surprise that many people find fast-food joints like McDonald’s Corporation (NYSE:MCD) reprehensible; public pressure from individuals, health organizations, and politicians has been directed at companies like McDonald’s for years.

Companies like Mickey D’s have also been responding. For example, McDonald’s now has Happy Meals with fewer fries and with apple slices, and it posts calorie information on its menus. You don’t have to buy a Big Mac and fries, either; McDonald’s also offers healthier fare such as yogurt, side salads, and fruit smoothies.

The anti-sugar and anti-junk-food sentiment is spreading, though. Soda giants like The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) both face increasing heated criticism over their servings of “sugar water,” helping America grow its obesity problems (and related health problems) into an epidemic.

Much was made about Coke’s recent anti-obesity ads, which have received a cynical response. Although Pepsi is working to increase its healthy food offerings (and Pepsi’s product portfolio includes everything from Doritos to Quaker Oats to Sun Chips), it’s still known for its hated “sugar water.”

At some point, though, the discussion about vice has to include how important it is to allow consumers to make educated choices. Maybe ignorance of risks matched with companies’ fighting to hide the risks of their products is the most sinful thing.

Personally, I don’t buy that fast-food stocks are “vice stocks” per se. There’s a point where we take judgment too far.

Don’t worry, though; I haven’t lost my edge. I believe there are industries where we don’t judge nearly enough.

The customer abusers
I’ve been thinking of a few other industries that should be viewed as vice-ridden. I’d argue that these companies prey on people’s hopes for security and therefore may be the most sinful of all.

Financial companies: Socially responsible Appleseed Fund broke from the pack when it blocked too-big-to-fail banks from its investment portfolios after the financial crisis. Financial companies took on so much risk that they threatened the well-being of our entire economy. They privatized profits and socialized losses. A recent Bloomberg article points out that not only is “too-big-to-fail” still out there, but that huge companies including JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC), and Wells Fargo & Company (NYSE:WFC) have grown since 2007 and may even be “too hard to fix.”

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!