Study says sin stocks are a better investment

The Wall Street Journal reports (subscription required) that "Over 41 years ended 2006, alcohol, tobacco and gambling shares returned about 3.5 percentage points a year more than other stocks, according to a new study slated for publication in the Journal of Financial Economics. Ironically, scrupulous investors might have created the outperformance by shunning such stocks, thereby leaving them available to other investors at bargain prices."

So there you have it: It might be possible to do well by doing good but it's easier to get rich investing in companies that do evil.

Vice stocks generally outperform the broader market during difficult economic times: Demand for cigarettes tends not to be affected by recessions and at least right now, the bad economy is driving gun sales .

However the performance of vice stocks doesn't appear to have held up particularly well over the past year. The Vice Fund recently reported (PDF File) that it was down 42.83% for the year ended March 31st, 2009 -- measurably worse than the category average of 38.13%.

If you believe the pundits who say we are close to emerging from a recession, this is the absolutely worst time to buy sin stocks: Their sales and earnings have been relatively flat during the recession and they're unlikely to get much of a boost from a macroeconomic turnaound.

Plus: You just sleep better owning shares in companies that don't kill people.