12 Best Sin Stocks To Invest in 2024

In this article, we discuss the 12 best sin stocks to invest in 2024.

Publicly listed companies whose revenues are generated by things usually considered unethical are called “sin stocks”. They are the stocks of the companies that are involved in businesses like alcohol, tobacco, gambling, adult entertainment, weapons manufacturing, and cannabis. It is important to keep in mind that this idea could be subjective. For example, while a lot of people consider cannabis a harmful drug, others consider it beneficial, especially medical marijuana.

Sin stocks are quite popular among investors because of their potential for strong financial performance, including dividends and capital appreciation. Some sin stocks have even performed better than the defensive consumer staples sector over the last three rough economic years. After the stock markets around the globe crashed in February 2020, many stocks and ETFs hit their lowest on March 20, 2020. Some of them included Constellation Brands, Inc. (NYSE:STZ), MGM Resorts International (NYSE:MGM), and Consumer Staples Select Sector SPDR Fund (XLP). Since then, Constellation Brands, Inc. (NYSE:STZ) and MGM Resorts International (NYSE:MGM) have gained over 100% and 390% as of the December 14 market close, respectively. On the other hand, the Consumer Staples Select Sector SPDR Fund (XLP) is up just by over 41%. The inelastic demand of sin stock consumers makes them one of the best recession-proof investments.

The Effect of the Word “Sin”

It is commonly believed that sin stocks are usually avoided by institutions, and in turn, it negatively affects these companies. However, a Columbia Business School report suggests that it is not entirely true. The research mentions a research paper by Shivaram Rajgopal, the Kester and Byrnes Professor of Accounting at Columbia Business School, and his co-authors, Robert Eccles, visiting professor at Oxford University, and Jing Xie, assistant professor at Hong Kong Polytechnic University. According to their research, their investigation initially found that institutions generally have less equity in such companies. However, the trend mostly faded away when they adjusted for variations in key fundamentals such as historical performance and investment in research and development between sin and non-sin stocks. In conclusion, the word “sin” matters less to institutions than weaker or riskier fundamentals. Shivaram Rajgopal said:

“Regardless of the stigma associated with sin stocks, institutions would probably be expected to hold more of, say, profitable firms, larger firms, firms with better past performance, and so on.”

Tobacco Industry in Light of Declining Smokers

CNN reports that the number of cigarette smokers in the USA declined from 50% of the adult population in the 1940s to 12.5% by 2021. The decline started in the 1960s, yet tobacco companies have remained fundamentally strong over the years. Altria Group, Inc. (NYSE:MO) is one of the biggest tobacco companies in the US. Between 1968 and 2015, the company rose 20% annually. Nevertheless, the company stock has seen price and revenue declines over the last few years due to the declining number of smokers.

Despite the numbers, our previous article reported that the global tobacco market is expected to grow at a compound annual growth rate (CAGR) of 2.1% between 2023 and 2030. The growth is predicted in light of the growing demand for tobacco products in developing countries. Over 80% of the smokers around the world exist in middle-income countries. In addition, e-cigarettes are also expected to rise in demand and experience a CAGR of 4.4% between 2023 and 2028.

Moreover, big tobacco companies have also been investing heavily in the cannabis industry, a market that is expected to grow by $46.90 billion between 2022 and 2027, registering a CAGR of 24.03%. In July, Philip Morris International Inc. (NYSE:PM) announced that it will acquire the Israeli cannabis company Syqe Medical for around $650 million. Other giants such as Altria Group, Inc. (NYSE:MO) and British American Tobacco p.l.c. (NYSE:BTI) have also invested significantly in the cannabis industry.

Apart from Philip Morris International Inc. (NYSE:PM), some of the best sin stocks to invest in 2024 include Caesars Entertainment, Inc. (NASDAQ:CZR) and Constellation Brands, Inc. (NYSE:STZ). If you want to look at other sin stocks to invest in, you can check out 15 Best Casino Stocks To Buy Heading Into 2024.

Pixabay/Public Domain

Our Methodology

For this article, we made a list of stocks involved in gambling, tobacco, alcohol, and others that fall into the category of “unethical” or so-called “sin” stocks.

Out of our dataset, we chose the companies according to the number of their hedge fund investors. The data was taken from Insider Monkey’s Q3 database of 910 elite hedge funds. We skipped the stocks whose hedge fund sentiment dropped significantly between the second and third quarters of 2023, along with the stocks with negative ratings and remarks given by Wall Street analysts.

The stocks are listed in ascending order of the number of their hedge fund investors.

12 Best Sin Stocks To Invest in 2024

12. RCI Hospitality Holdings, Inc. (NASDAQ:RICK)

Number of Hedge Fund Holders: 11

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) is a Texas-based holding company that operates several businesses, including live adult entertainment, restaurant and bar operations, and business communications.

On December 4, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) announced a quarterly dividend of $0.06, payable by December 29 to the shareholders of record on December 15. At the time of writing on December 14, the stock’s dividend yield was 0.091%.

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) is one of the best sin stocks to invest in 2024, along with Philip Morris International Inc. (NYSE:PM), Caesars Entertainment, Inc. (NASDAQ:CZR), and Constellation Brands, Inc. (NYSE:STZ).

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) was mentioned in Ace River Capital’s third quarter 2023 investor letter. Here is what it said:

“The fund’s top position is RCI Hospitality Holdings, Inc. (NASDAQ:RICK). RICK is the only publicly traded owner of adult nightclubs in the US. Currently they own 56 clubs across 13 states and an additional 13 sports-bar restaurants with the “Bombshells” concept that has recently begun franchising. With few municipalities issuing new adult entertainment licenses these businesses function as local monopolies with excellent unit economics. The Bombshells segment works well as an alternative investment if no attractive acquisitions are available, and the share price is trading higher than the repurchase target range. (See Capital Allocation Strategy below).

The stock has seen a large drawdown of 40% from its highs in the 90s earlier this year. The company has estimated its FCF for FY24 to be in the $68M-$78M range and provided the slide below in its Q2 earnings presentation…” (Click here to read the full text)

11. PENN Entertainment, Inc. (NASDAQ:PENN)

Number of Hedge Fund Holders: 28

PENN Entertainment, Inc. (NASDAQ:PENN), previously called Penn National Gaming, owns and runs gaming, racing, and fitness facilities, casinos, bars and lounges, sportsbooks, and more.

On December 5, PENN Entertainment, Inc. (NASDAQ:PENN) announced a long-term partnership with Quail Hollow Club and the PGA Tour. Under the multi-faceted deal, PENN Sports Interactive will receive full market access to ESPN BET in North Carolina, and it will be the exclusive official betting operator of the Wells Fargo Championship.

On December 8, Needham reaffirmed a Buy rating with a price target of $33 on PENN Entertainment, Inc. (NASDAQ:PENN)’s stock. Citing the hedge fund investors’ expectations for the market share of ESPN Bet, the firm called it impressive for the sports betting platform and said that it is a positive factor in the near term.

Baron Funds commented on PENN Entertainment, Inc. (NASDAQ:PENN) in its second quarter 2023 investor letter. Here is what it said:

“PENN Entertainment, Inc. (NASDAQ:PENN) operates regional casinos across the U.S. Shares fell on investor concerns that a potential recession would negatively impact visitor spending. While an increase in competition and economic deterioration in certain regional markets is pressuring results, we believe PENN will successfully navigate current headwinds given its strong balance sheet and cash flow profile. We believe PENN will continue generating strong cash flow to invest in its digital gaming opportunity and return cash to shareholders through buybacks. PENN’s stock, which fell to an historical trough EBITDA multiple during the quarter, should revert to its historical average multiple as conditions improve and its digital gaming operation reaches breakeven revenue and cash flow in 2024.”

10. Diageo plc (NYSE:DEO)

Number of Hedge Fund Holders: 30

Diageo plc (NYSE:DEO) is one of the leading alcoholic beverage companies that produces and sells its products in over 180 countries under more than 200 brands. 

According to Insider Monkey’s database, hedge fund sentiment was positive toward Diageo plc (NYSE:DEO) in Q3, as 30 funds had investments in the stock, up from 25 in the previous quarter. Tom Gayner’s Markel Gayner Asset Management was the most prominent investor in the company, with 1.35 million shares worth $201.424 million.

Vulcan Value Partners mentioned Diageo plc (NYSE:DEO) in its third quarter 2023 investor letter. Here is what it said:

“Diageo plc (NYSE:DEO) is a global spirits and beer producer with over 200 brands, including Johnnie Walker, Crown Royal, Guinness, Smirnoff, Baileys, Don Julio, and Casamigos. Diageo’s spirits segment generates more than 80% of the company’s revenue, and the spirits segment has been taking share from beer and wine over the last decade. The company is diversified across geographies, brands, and alcohol categories. Diageo has strong margins and high returns on invested capital. Its management team has an excellent track record for brand and product innovation, moving into high-growth categories at the right time. The company has pricing power and performs well during recessions. Additionally, the premiumization trend has been a tailwind to Diageo’s revenue, and we believe this trend will continue, driven by an expanding global middle class and preference for higher quality spirits.”

9. Boyd Gaming Corporation (NYSE:BYD)

Number of Hedge Fund Holders: 30

Boyd Gaming Corporation (NYSE:BYD) is a Nevada-based company that provides gaming, casino, and hospitality management services.

Boyd Gaming Corporation (NYSE:BYD) was covered by 10 Wall Street analysts over the last three months, and 9 kept a Buy rating on the stock. The average price target of $75.20 represents an upside of 23.80% at the time of writing on December 14.

On December 7, Boyd Gaming Corporation (NYSE:BYD) declared a quarterly dividend of $0.16, and it is payable by January 15 to the shareholders of record on December 22. The stock had a dividend yield of 20.49% at the time of writing on December 14.

8. Molson Coors Beverage Company (NYSE:TAP)

Number of Hedge Fund Holders: 38

Molson Coors Beverage Company (NYSE:TAP) produces and distributes beers, vodka soda, and more under multiple brands, including Blue Moon, Molson Canadian, Cobra, Miller High Life, Coors, etc.

On November 9, Molson Coors Beverage Company (NYSE:TAP) announced a quarterly dividend of $0.41, payable by December 15 to the shareholders of record on December 1. The stock’s dividend yield was 2.60% at the time of writing on December 14.

According to Insider Monkey’s database, 38 hedge funds held a stake in Molson Coors Beverage Company (NYSE:TAP)’s stock in the third quarter. Paul Marshall And Ian Wace’s Marshall Wace LLP was the biggest shareholder and increased its stake in the stock by 76% to 3.77 million shares worth $239.705 million.

Meridian Funds commented on Molson Coors Beverage Company (NYSE:TAP) in its second quarter 2023 investor letter. Here is what it said:

“Molson Coors Beverage Company (NYSE:TAP) is the second largest brewing company in the U.S. and ranks among the Top 5 globally. For several years, the company struggled to grow earnings as domestic beer lost share to imports, craft brewers, seltzer, and other alcoholic beverages, and we avoided investing in it due to a lack of a solid strategy to revitalize growth. In the third quarter of 2021, however, we decided the risk/reward profile tipped in our favor as management was following a coherent innovation plan, our industry research indicated improved optimism within the distribution network, and the valuation and company expectations were low. Our patience paid off during the quarter as the stock gained due largely to broader market share improvements by beer relative to seltzer as well as a boycott of key rival Bud Light, which benefitted Molson Coors’ Coors Light and Miller Lite brands. We trimmed some of our exposure as the stock gained for risk management purposes but maintained a sizeable position.”

7. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 40

Altria Group, Inc. (NYSE:MO), through its subsidiaries, is one of the leading tobacco companies in the U.S. It sells and markets its products through several companies, including Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Company, Helix Innovations LLC, and NJoy.

According to Altria Group, Inc. (NYSE:MO), as of 2022, the company’s brand, Marlboro, covers 42.5% of the USA’s cigarette market. The company, as a whole, has captured nearly 48% of the US cigarette market share.

On December 6, Altria Group, Inc. (NYSE:MO) declared a $0.98 quarterly dividend, payable by January 10 to the shareholders of record on December 21. At the time of writing on December 14, the stock’s dividend yield was 9.31%.

6. Wynn Resorts, Limited (NASDAQ:WYNN)

Number of Hedge Fund Holders: 41

Wynn Resorts, Limited (NASDAQ:WYNN) develops and runs multiple destination casino resorts. The company owns Wynn Las Vegas, Encore Boston Harbor, Wynn Macau, and Wynn Palace, Cotai.

Ten Wall Street analysts covered Wynn Resorts, Limited (NASDAQ:WYNN) over the last three months, and 8 maintained a Buy rating on the stock. The average price target of $117.39 had an upside of 30.72% at the time of writing on December 14.

Philip Morris International Inc. (NYSE:PM), Caesars Entertainment, Inc. (NASDAQ:CZR), and Constellation Brands, Inc. (NYSE:STZ) are some of the best sin stocks to invest in 2024 besides Wynn Resorts, Limited (NASDAQ:WYNN).

Wynn Resorts, Limited (NASDAQ:WYNN) was mentioned in Baron Funds’ third quarter 2023 investor letter. Here is what it said:

“The shares of Wynn Resorts, Limited, an owner and operator of hotels and casino resorts, declined 14.5% during the period held in the third quarter. We remain optimistic about the multi-year prospects for the company. We believe the re-emergence of business activity in Macau will drive additional shareholder value. If cash flow returns to the level achieved in 2019 prior to COVID-19, we believe Wynn’s shares will increase to $150 per share, or more than 60% higher than where they have recently traded.

We believe additional drivers for future value creation beyond a re-emergence in Macau business activity include: (i) our expectation for long-term growth opportunities in the company’s U.S.-centric markets of Las Vegas and Boston, including an expansion of Wynn’s Encore Boston Harbor resort; (ii) Wynn’s plans to develop an integrated resort in the United Arab Emirates with 1,500 hotel rooms and a casino that is similar in size to that of Encore Boston Harbor; (iii) opportunities to improve cash-flow margins by rightsizing labor and achieving lower staff costs in Macau; (iv) the possibility that Wynn is granted a New York casino license in 2023; and (v) an expansion in the company’s valuation multiple to levels achieved prior to the pandemic.”

5. Las Vegas Sands Corp. (NYSE:LVS)

Number of Hedge Fund Holders: 45

Las Vegas Sands Corp. (NYSE:LVS) develops and runs destination properties all over the world, including gambling and entertainment facilities, accommodations, and more.

On December 14, JPMorgan analyst Joseph Greff lowered the price target on Las Vegas Sands Corp. (NYSE:LVS)’s stock to $56 from $64 and maintained an Overweight rating on the shares.

Out of the 12 Wall Street analysts that covered Las Vegas Sands Corp. (NYSE:LVS), 10 kept a Buy rating on the stock. At the time of writing on December 14, the average price target of $64.33 represented an upside of 32.34%.

Baron Funds commented on Las Vegas Sands Corp. (NYSE:LVS) in its first quarter 2023 investor letter. Here is what it said:

“In the first quarter of 2023, we re-acquired shares in Macau-centric casino gaming companies Wynn Resorts, Limited and Las Vegas Sands Corp. (NYSE:LVS) with the following considerations in mind:

Since the early days of the COVID-19 pandemic in 2020 through mid-2022, the shares of Wynn and Las Vegas Sands significantly underperformed the share price performance of other U.S.-centric casino gaming and lodging companies due in large part to extremely limited travel mobility to Macau during China’s Zero-COVID policy. Just as business activity and the shares of U.S.-centric casino gaming companies rebounded sharply once people felt comfortable to travel to Las Vegas and other U.S. regional gaming markets, we have felt that Macau business activity and the shares of Macau-centric casino gaming companies would follow in the footsteps of Las Vegas-centric and other U.S. gaming and lodging companies and inflect positively once people were permitted to travel to Macau more freely.

China recently abandoned it’s Zero-COVID policy and removed travel restrictions in January 2023. We now believe both Wynn and Las Vegas Sands are well positioned to capitalize on China’s reopening.

For Las Vegas Sands, we believe additional drivers for future value creation beyond a re-emergence in Macau business activity include: (i) our expectation for a continued positive inflection in visitation and cash flow at Marina Bay Sands, Singapore; (ii) Las Vegas Sands’ plans to invest $4.5 billion in Macau and Singapore in the next 10 years; (iii) the company’s plans to pursue a New York casino and its prioritization of Texas as a new market; and (iv) the possibility that Las Vegas Sands reinstates its dividend in the next few years…” (Click here to read the full text)

4. MGM Resorts International (NYSE:MGM)

Number of Hedge Fund Holders: 47

MGM Resorts International (NYSE:MGM) is one of the top hospitality companies and is the owner and operator of casino and non-casino resort projects in the U.S., China, and Japan.

According to Insider Monkey’s database that tracks 910 elite hedge funds, 47 funds had investments in MGM Resorts International (NYSE:MGM)’s stock in the third quarter. With 6.42 million shares worth $236.138 million Keith Meister’s Corvex Capital was the biggest investor in the company.

MGM Resorts International (NYSE:MGM) was mentioned in Longleaf Partners’ third quarter 2023 investor letter. Here is what it said:

“Digital holding company IAC was the largest detractor in the quarter after reporting weak earnings, particularly at underlying holding Angi, which represents a relatively small (single-digit %) proportion of the value but has an outsized impact on IAC’s stock price. Casino and online gaming company MGM Resorts International (NYSE:MGM) (which we also own directly and was a detractor in the quarter) comprises the largest portion of the IAC value. MGM faced multiple headwinds this quarter with a cyberattack that impacted all its properties and pending labor strikes in Las Vegas. Even with these events factored into our appraisal, MGM remains highly discounted today, and management is taking advantage of the price weakness to add value through meaningful share repurchase.”

3. Constellation Brands, Inc. (NYSE:STZ)

Number of Hedge Fund Holders: 50

Constellation Brands, Inc. (NYSE:STZ) is a New York-based company that produces and sells beer, wine, and spirits under various brands, including Corona Familiar, Mount Veeder, Ruffino, and others.

On December 1, Goldman Sachs made Constellation Brands, Inc. (NYSE:STZ) a part of the firm’s Conviction Buy List. The firm maintained a Buy rating on the shares with a $290 price target. The analyst mentioned his conviction in the beer distribution opportunity and expectation of stability in the company’s wine business.

Constellation Brands, Inc. (NYSE:STZ) was covered by 20 Wall Street analysts over the last three months, and 17 kept a Buy rating on the stock. The average price target of $291.89 had an upside of 21.10% at the time of writing on December 14.

2. Caesars Entertainment, Inc. (NASDAQ:CZR)

Number of Hedge Fund Holders: 56

Caesars Entertainment, Inc. (NASDAQ:CZR), previously Eldorado Resorts, Inc., provides gaming and hospitality services through more than 50 destinations.

In the third quarter, the number of hedge fund investors in Caesars Entertainment, Inc. (NASDAQ:CZR) went down compared to Q2, but the total stake value increased to $1.27 billion in Q3 from $1.155 billion in Q2. One of the top stakeholders of the company was billionaire Ken Griffin’s Citadel Investment Group. The firm increased its stake in the stock by 1797% to 2.9 million shares worth $135.054 million. 

On December 13, TD Cowen lowered the price target on Caesars Entertainment, Inc. (NASDAQ:CZR)’s stock to $63 from $76 and kept an Outperform rating. Despite the decreased price target, the analyst mentioned that the firm is confident about the company’s fundamentals.

Baron Funds mentioned Caesars Entertainment, Inc. (NASDAQ:CZR) in its first quarter 2023 investor letter. Here is what it said:

“In the most recent quarter, we reduced our investment in Caesars Entertainment, Inc. (NASDAQ:CZR), the largest casino-entertainment company in the U.S. and one of the world’s most diversified casino-entertainment providers. We chose to modestly reduce our significant exposure in travel-related real estate companies and reallocated the capital to other non-travel related real estate companies. We are big fans of CEO Tom Reeg and remain optimistic about the long-term prospects for the company.”

1. Philip Morris International Inc. (NYSE:PM)

Number of Hedge Fund Holders: 62

Philip Morris International Inc. (NYSE:PM) is a famous tobacco products manufacturer and distributor that sells its products under the brands of Marlboro, Parliament, Virginia S., L&M, Lark, Merit, and others.

On December 7, Philip Morris International Inc. (NYSE:PM) declared a quarterly dividend of $1.30, payable by January 10 to the shareholders of record on December 21. The stock’s dividend yield was 5.49% at the time of writing on December 14.

Over the last three months, Philip Morris International Inc. (NYSE:PM) was covered by 11 Wall Street analysts, and 9 kept a Buy rating on the stock. The average price target of $107.59 represented an upside of 13.65% at the time of writing on December 14.

Ariel Investments commented on Philip Morris International Inc. (NYSE:PM) in its first-quarter 2023 investor letter. Here is what it said:

“Finally, tobacco maker, Philip Morris International Inc. (NYSE:PM) declined in the period on concerns related to supply-chain disruptions resulting from the war in Ukraine, which we view as temporary. We believe the favorable economics and margin expansion associated with market share gains from the IQOS brand and Reduced Risk Products should yield value creation opportunities in the years ahead. Furthermore, at current trading levels, we think the company’s operating leverage, pricing power, and free cash flow profile offer a margin of safety.”

You can also look at the 15 Best Motorcycle Insurance Companies Heading into 2024 and the 12 Best Growth Stocks to Buy Today According to Billionaire Ken Fisher.

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Disclosure. None. 12 Best Sin Stocks To Invest in 2024 is originally published on Insider Monkey.