{"id":27206,"date":"2012-02-07T08:25:03","date_gmt":"2012-02-07T13:25:03","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/02\/07\/sin-stocks-trailing-their-more-virtuous-peers-in-2012\/"},"modified":"2012-02-07T08:25:03","modified_gmt":"2012-02-07T13:25:03","slug":"sin-stocks-trailing-their-more-virtuous-peers-in-2012","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/02\/07\/sin-stocks-trailing-their-more-virtuous-peers-in-2012\/","title":{"rendered":"Sin Stocks Trailing Their More Virtuous Peers in 2012"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

With the first week of February behind us, one trend has been unmistakable in early 2012: cyclical and more speculative sectors are outperforming defensive ones (see Figure 1<\/strong>).\u00a0 At 13 percent YTD returns apiece, materials and financials have nearly doubled the 6.9 percent return of the S&P 500.\u00a0 More staid utilities, telecom and consumer staples are actually in negative territory.<\/p>\n

\"\"<\/a><\/p>\n

Figure 1<\/p>\n<\/div>\n

Though I consider \u201csin stocks\u201d to be a stock sector in of themselves, tobacco and alcohol generally fall under the umbrella of defensive consumer staples.\u00a0 And as such, the sin stock recommendations of the Sizemore Investment Letter have underperformed the market year to date (see Figure 2<\/strong>).<\/p>\n

\"\"<\/a><\/p>\n

Figure 2<\/p>\n<\/div>\n

After massively outperforming the market in 2011, <\/strong>Sizemore Investment Letter<\/em> recommendations Altria (NYSE:$<\/span>MO<\/a>), Philip Morris International (NYSE:$<\/span>PM<\/a>)<\/strong>, and Diageo (NYSE:$<\/span>DEO<\/a>)<\/strong> have all underperformed the S&P 500 year to date.<\/p>\n

I continue to recommend the three, and I expect all to generate market-beating returns over time.\u00a0 Sin stocks such as these throw off buckets of cash flow and pay great dividends.\u00a0 They are exactly the kinds of stocks you want to own during a protracted sideways market; at a time when capital gains are unreliable, getting paid in cold, hard cash may be the only return you get at all. And while there is no such thing as a truly \u201crecession proof\u201d stock, tobacco and alcohol are about as recession resistant as they come.<\/p>\n

Bottom line: it makes sense to have sin stocks as a core piece of your long-term portfolio.\u00a0 (For a longer explanation on the virtues of investing in vice, see \u201cThe Price of Sin<\/a>.\u201d<\/strong>)<\/p>\n

Investing for the long-term is great, but many readers are no doubt asking \u201cwhat about now?\u201d<\/em><\/p>\n

Whether sin stocks enjoy a good 2012 or not will largely depend on what happens in Europe.\u00a0 If the crisis conditions continue to ease, more speculative sectors should continue to outperform for at least the first two quarters of the year.\u00a0 This is the scenario that the Sizemore Investment Letter<\/em> considers most likely, and we\u2019ve chosen German, Spanish, and Emerging Market stocks as our preferred way to profit from this return of risk appetites.<\/p>\n

But as investors, we must always hope for the best but prepare for the worst.\u00a0 If Europe slips back into crisis, I expect 2012 to follow the same basic path as 2011: on again \/ off again volatility in a market that hangs on every conflicting word coming out of the mouths of European policymakers.\u00a0 In this scenario, sin stocks would be an attractive safe haven, as they were in 2011.<\/p>\n

In the Sizemore Investment Letter<\/em>, we\u2019re increasing our risk exposure by allocating to riskier sectors.\u00a0 But we\u2019re also hedging our bets by maintaining long-term positions in our core sin stocks.\u00a0 Tobacco and booze served us well during a very turbulent period in the stock market, providing calm and stability when it was needed most.\u00a0 We would expect much the same were the volatility to return.<\/p>\n

And if the stocks themselves aren\u2019t sufficient to help us relax\u2026well\u2026we might just have to rely on the products.\u00a0 Scotch, anyone?<\/p>\n

If you liked this article by Sizemore Insights<\/i>, you\u2019d probably enjoy The Sizemore Investment Letter<\/i>, our premium members-only newsletter. Click here<\/a> for more information.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter With the first week of February behind us, one trend has been unmistakable in early 2012: cyclical and more speculative sectors are outperforming defensive ones (see Figure 1).\u00a0 At 13 percent YTD returns apiece, materials and financials have nearly doubled the 6.9 percent return of the S&P 500.\u00a0 More staid utilities, … <\/p>\n

Continue reading “Sin Stocks Trailing Their More Virtuous Peers in 2012”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-27206","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/27206","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=27206"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/27206\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=27206"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=27206"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=27206"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}