Can Naughty Companies Be Good Investments?

Back in 2001, Mother Jones magazine published an article called "Ten Worst Corporations of 2000." Investors may not agree with that assessment.

The article actually derided the 13 worst corporate citizens, in its view. But if you had invested in those stocks six years ago, you would have more than doubled your money, receiving an averaged annualized return of 13.98%. As a matter of fact, every stock on the list is up, except for Ford Motor(F Quote). We have put together a portfolio of the entire list of "worst" stocks on Stockpickr.com.

Vice stocks are a critical part of diversification in an environment with rising interest rates and a slowing economy. Let's face it, when times are tough what are you going to do? Drink, smoke and go to movies.

British American Tobacco(BTI Quote) was on the list because, according to the article, they were involved in a worldwide cigarette smuggling scheme. The article cited information found by the International Consortium of Investigative Journalists and the group Action on Smoking and Health. The stock is up almost 500% since the article first appeared, an average annualized return of 31.5%. The stock currently has a P/E of 17 with a yield of 4.9%.

This is one of the holdings of the Vice Fund, which holds a lot of other good "bad" companies. The fund invests 80% of its assets in companies that are considered "socially irresponsible," and has had an average annual return of 18.7% for the last three years. Other components of the Vice Fund include Altria(MO Quote), Boeing(BA Quote) and Wynn Resorts(WYNN Quote).

To watch Gregg Greenberg's video take of this column, click here.