The Dark Side of Investing

Rodney’s talk of $12 cigarette packs and judgmental taxes gets me thinking about “vice” stocks.

Think cigarettes… booze… video games…

These are just a few of the vices that people turnrn to in hard times – whether you define “hard times” as an economic recession or just another annoying bad day.

Vice stocks are known for performing well in recessions. If frustrated people are motivated to drink and smoke when times are good… they certainly aren’t going to stop when times are bad… whatever the cost.

Here’s a look at Philip Morris Internrnational’s stock price over the past few years:

Philip Morris Stock

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The cigarette maker’s stock dropped from 2008 (blue circle) to 2009 as the whole market crashed. But since early 2009 it’s been on a tear.

Most stocks are either below, or slightly above, their 2008 peaks. Philip Morris blew past its 2008 peak in late 2010 and never looked back.

I’ve drawn three upward-sloping trend lines – each one is increasingly steeper.

In total, the stock is up 190%. At a high of $94.13, that’s nearly triple its low of $32.

I guess tapping into consumers’ “dark sides” is one bright spot in this troubled economy.

To quote the Most Interesting Man in the World (the vice-pushing Dos Equis beer spokesman):

“Some say having a dark side will lead to no good…I certainly hope so.”

Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.