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TheStreet Open House

5 'Sin Stocks' to Play Defense in 2014

Stocks in this article: SAMMOWYNNRTNDEO

 

 

BALTIMORE (Stockpickr) -- As the S&P 500 enters another corrective week, it's time to turn defensive with your portfolio. And one of the best ways to do that is by turning to a life of sin. Let me explain.

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As an investor, the best defense is a good defense. And the best offense is a good defense too. Thats not just some investing platitude. Its backed up by stock market research. According to data collected by Cambria Investment Management CIO Mebane Faber, missing both the best and worst days of the year with a defensive market posture actually outperforms a buy-and-hold approach.

That's a pretty ringing endorsement for putting defensive names in your portfolio. But contrary to popular belief, defensive stocks don't have to be boring. Sin stocks offer an interesting mix of downside protection, income generation and, well, fun

Dont let the name fool you; sin stock companies aren't in the business of burning down old folks' homes. Instead, alcohol, tobacco, gambling and weapons firms are all classical examples of sin stocks. So what makes sin stocks so attractive when anxiety ratchets higher?

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For starters, sin stocks tend to be businesses that provide a stress outlet for consumers. As a result, recession resistant revenues and sticky customer bases are the norm. The devil's in the details with sin stocks; because these firms generally sport wide economic moats and deeper margins than traditional consumer plays, sin stocks benefit from an extra qualitative boost that you cant find in any other group right now. That's not to say that sin stocks are recession-proof -- they're not. But they are certainly recession-resistant, which is more than an offense-centered investment strategy can offer.

Here's a look at five sin stocks that could outperform in this market.

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