Poisonous Addictive Portfolio — cigarettes, casinos and other stocks that provide a great return on investment
When we invest in companies, we are investing in a business. And the fundamental nature of every business is human.
Human nature (the collective conscious) dictates how the market performs as it reflects the confidence and outlook of the future by many of us.
When the economy turns bad, cigarette sales go up because people are stressed and they wanted something (anything) to help them escape reality, even for a short period of time. So is a casino and the amount of bets. It is human nature to avoid pain.
If we study psychology and history, we can have a better understanding and higher awareness of human nature and that could allow us to use information and news to our advantage.
Please be reminded that this article does not intend to serve as financial advice or investment advice, but merely as for informational and education purposes.
The Poisonous Addictive Portfolio
The goal of our investment is to create an all-weather portfolio that provides us with relatively stable income regardless of the conditions of the market.
And some of the types of companies that enjoy all-weather sales and profit, and are relatively unaffected by economic downturn and crisis, are cigarettes and casinos.
The three tobacco companies listed on the NYSE — Philip Morris International, British American Tobacco, and Altria, have compound annual returns of more than 11%, higher than S & P’s 8% in the same period, and better than Warren Buffett’s favorite Coca Cola 7.9 %.
Marlboro — Even if you are a non-smoker, you probably would have heard of this brand.
Altria is the world’s largest consumer goods group, Marlboro is its Majesty’s brand. Its shares have risen 10,000 times in 50 years.
Marlboro is the world’s largest cigarette brand, and its holding company — Altria (NYSE: MO) ranks first in the US tobacco industry with a 42.9% market share (a monopoly position). Marlboro contributes 88% to Altria’s profit.
Tobacco companies never innovate — it makes the same poisonous and addictive products over the last 100 years. Which makes it a comparable to Coca Cola, which produces on the same secret drink recipe for as long as it exists.
In a world where innovative companies are pursued, they are also the fastest ones to fall, while non-innovative companies build their monopoly market position with the same product over time. Time is the enemy of innovative companies but a friend of Coca Cola and Marlboro. The products are boring, and so is making money from their stocks. Simply buy and hold for decades, and without doing anything more, one day you woke up and realized that you are a millionaire.
There are many other tabacco companies, cannabis producer and distributor if you dig deeper.
Casino stocks are more susceptible to the economy than cigarettes but because the nature of gambling is exciting and addictive, casino stocks have a natural advantage.
Just be aware that the casino could be directly influenced by the tourism industry and when there are infectious diseases outbreak or political reason that causes tourism to reduce significantly, casino business could also be affected.
There are usually two types of prisons: one is a government-owned and another is operated by a private company. For the latter, it also falls under our poisonous addictive portfolio because there is no end (at least in the foreseeable future) of criminal or civil cases that could end up in prison. And it fits our all-weather criteria because this ‘prison’ business would only get better when the market is pessimistic.
The private prison GEO, for example, earns more than $ 2,000 per criminal. And the government steadily provides ‘customers’ to the prison company. It is like a real estate business in a sense except the tenant has a longer or fixed terms of the tenancy.
All in all…
While most of us are looking at bank stocks and technology stocks, there are many other companies and stocks that we can explore — the evil portfolio consisting of cigarettes companies, casinos, prisons etc could be something to look at because:
It is human nature to divulge into these things when things get tough and stressed
With the right asset allocation, they could potentially be part of your all-weather portfolio.
Note: this is not investment advice. I’m not financial planning professional. Just sharing what is working for me as part of my investing strategy or what I have learned on my investment journey. Please be reminded to do your own research and consider your own circumstances before making any financial decisions. You could also check with your financial professional to understand what would be best for your situation.