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5 Best Sinfully Good Stocks to Buy Ahead of 2018

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Does morality matter to you? If yes, then you may abhor the idea of putting money into “sin stocks” that are into activities considered unethical. However, products or services in this space are relatively inelastic, and business is recession-proof. The very nature of their business ensures a steady stream of consumers irrespective of market conditions, which eventually lead to higher margins and solid profits.

And why not? While legalization of both recreational and medical marijuana will propel the pot industry to new highs, reduction in taxes will help alcohol producers save more. The cigarette industry, meanwhile, continues to make headway despite legal restrictions. As far as the gaming industry is concerned, growth in the Macau market and Japan opening to casinos will surely boost their bottom line heading into the New Year.

But before we zero in on stocks from this tempting space, let’s take a look at what’s in store for these companies.

Cannabis Sales Up This Year, With More Room to Expand

Per Marijuana Business Daily’s annual report, legal pot sales have skyrocketed 30% so far this year, which is equivalent to $5.1-$6.1 billion in total revenues. In fact, sales are expected to reach $6.7-$8.8 billion in the coming year, which will result in a whopping gain of at least 31%. Further, sales could top $17 billion by 2021.

Such a stellar growth is possible, as a number of U.S. states have voted to legalize recreational pot. Legalization of recreational weed in the state of California is helping Cannabis stocks move north. California’s weed market is expected to open in January, with weeds costing around $500 a pound.

Lest we forget, as of now, 29 states and the District of Columbia have already legalized the usage of medical marijuana. An increasing number of people are appreciating the medical value of marijuana as they believe it is safer compared to alcohol and a few other legal prescription drugs. Thus, medical marijuana industries in Illinois, Nevada and New York are poised to make the most as the pot market matures.

Alcohol Producers See Reduced Taxes, Cigarette Industry Fights Regulations

Recently, jubilant Republicans delivered a tax bill to President Donald Trump before Christmas, as promised. The Republican tax plan got the final approval by the House that gave Corporate America a massive permanent tax break. The tax bill also has a provision that will give alcohol producers a two-year reduction in federal excise tax worth $4.2 billion. Reduction in such taxes will encompass brewers, distilleries and wineries.

Kevin McElroy, the lead brewer at Random Row Brewing company, said, “I think it's great,” as the company will save $3.50 per barrel of beer from the tax break. He added that the new provision will save them $1,500 to $2,000 next year.

However, the same cannot be said of the U.S. tobacco industry. Cigarette sales have fallen considerably in the U.S. as the industry witnessed an increase in federal excise tax. The industry also faces stiff regulations and restrictions. Nevertheless, despite cigarette sales tanking, sales of flavored cigars continue to gain traction. Menthol cigarettes, meanwhile, continue to hold a constant market share. Smart marketing and advertising moves played a major role in helping the cigarette industry stay afloat.

Gambling Stocks Make Attractive Buys – Macau is the Key

The year 2017 has been superb for gaming stocks, with Wynn Resorts (WYNN - Free Report) and Melco Resorts (MLCO - Free Report) comfortably outperforming the broader market. The climb in casino stocks was mostly due to the uptick in Macau’s gambling market. In the first 11 months of this year, revenues surged 19.5%. Macau’s momentum has also been hitting highs lately, giving investors enough reason to be bullish going into next year.

That said, the big expansion for casino companies in 2018 will be in Japan. The country is expected to approve two more gaming licenses next year, while estimates are that Japan’s market could be worth $40 billion. Major casino players have made Japan their top priority for next year with an outlay of around $10 billion in building a single resort. This property from Las Vegas Sands Corp. (LVS - Free Report) will eventually become the biggest license opening since Singapore, a key market for owners of integrated resorts.

Top 5 Sin Stocks to Buy for 2018

As mentioned above, sinful stocks are well poised to gain traction in next year. Such stocks not only celebrate good times but are also useful during recessionary periods. We have selected five solid stocks from the pot, alcohol, tobacco and gaming industries. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Innovative Industrial Properties Inc (IIPR - Free Report) is focused on the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. The company has a Zacks Rank# 2 (Buy). The stock has given a stellar return of 53.9% so far this year and is poised to continue its winning run in 2018.

(Looking for the Best Stocks for 2018? Be among the first to see our Top Ten Stocks for 2018 portfolio here.)

Constellation Brands, Inc. (STZ - Free Report) together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States. The company has a Zacks Rank# 2. Constellation Brands has given an attractive return of 47.4% so far this year. The expected earnings growth for 2018 is 11.2%.

Boston Beer Company Inc (SAM - Free Report) is a craft brewer in the United States. The company is engaged in the business of producing and selling alcohol beverages primarily in the domestic market and in selected international markets. The company has a Zacks Rank# 1 (Strong Buy). The stock has given a promising return of 14.6% so far this year. For 2018, the expected earnings growth is 1.3%.

British American Tobacco PLC (BTI - Free Report) is the holding company of a group of companies which manufacture, market and sell tobacco products. The company has a Zacks Rank# 2. The stock has given an encouraging return of 18.9% so far this year and is posed to grow in 2018.

Las Vegas Sands Corp. is a hotel, gaming, and retail mall company headquartered in Las Vegas, Nevada. The company has a Zacks Rank# 2. The stock has given a superb return of 32.6% so far this year. The expected earnings growth for 2018 is 3.8%.

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