Friday, April 8, 2011

Sin Versus the S&P 500: Sin Wins! (VICEX)

A quasi-periodic look at the wages of sin.
Our headline is a play on the title of Richard Brautigan's 1968 poem The Pill Versus the Springhill Mine Disaster.
Springhill was the site of three different coal mining disasters, in 1891, 1956 and 1958, killing at least 238 miners.

We first examined the profit to be had by being naughty back in April 2007:
Moral Judgment On 'Sin Stocks' Means Higher Returns For Vice-Friendly Investors
...Prof. Hong lists his research interests as: 
"Asset pricing with less-than-fully-rational investors; differences of opinion, short-sales constraints and asset prices; social interaction and financial markets; career concerns, biased forecasts and security analysts; organization, performance and mutual funds; asset pricing with asymmetric information and other market imperfections."
Hey! Mine too!
Professor Hong has put together a pretty impressive c.v. including associate editor at the Journal of Finance and a Directorship of the American Finance Association. He hangs his hat at Princeton.

One proxy is the Vice fund, first mentioned in 2007 and again in 2008.
Here's the one year comparison chart, from Yahoo Finance:

Chart forVice (VICEX)

Here are the funds' holdings.
Here's the three year chart comparing VICEX with the S&P, the country's largest coal company (BTU) and the Wilderhill clean energy ETF (PBW). Over this time period VICEX trails the S&P but Peabody Energy decisively outperforms. Going out to five years, VICE is back on top: