Gambling, Drugs and Alcohol
Lets see how many firewalls block this email.. this ETF was launched in early Dec, but I missed it as i was out skiing, but i felt compelled to cover it....
Sin stock ETF with shortest name ever
ETF newcomer the BAD Investment Company has launched an ETF that buys all the companies your parents tell you not to.
BAD ETF (BAD) – which, at just six letters long, has the shortest name of any ETF in the world – invest in what are called “sin stocks”. These are companies in gambling, alcohol, marijuana and drugs.
Sinful companies are identified by reading their financial statements, media reports, and other research.
Examples of companies included in the fund are casino operators Wynn Resorts and Las Vegas Sands. Alcohol companies like Diageo and Corrs. As well as plain old pharmaceutical companies like Abbvie and Pfizer.
The index, called the EQM BAD Index, is equally weighted and open to large global companies.
This is not the first sin stock ETF in the United States. AdvisorShares Vice ETF (VICE) pursues a similar strategy.
The fund charges 0.75%.
Bernie’s commentary – BAD idea
The thesis behind this fund is as follows: ESG funds are becoming more common. As a matter of practice, ESG funds exclude companies like casinos and alcohol businesses. But… casinos, drug makers, alcohol companies are highly profitable. And that ESG investors avoid them can make them cheap—and especially cheap given the profit they make. This aversion of ESG investors thus creates an opportunity for other investors with fewer ethical misgivings.
While the thesis makes sense, there’s a few things I don’t quite agree with:
- The fund name. It’s nice to have the shortest name ever. And I too hate it when long fund names distort my excel spreadsheets. But “BAD ETF” – without even the word “the” in front – kind of sounds like you’re speaking to a dog. “Bad dog. Bad boy. Bad ETF.”
- Why are big pharmaceutical companies in this? Who thinks Pfizer is a sin stock? Excluding these businesses is not standard at all for mainstream ESG frameworks.
- Alcohol companies are in structural decline. Their stock prices aren’t necessarily cheap. The upcoming generations – generation Z and millennials – are drinking significantly less. There has been a lot of social commentary around this, much of which has praised the young for their discipline. But in my view their break with alcohol likely has darker roots. Drinking is a social activity—what you do with your friends and family. Millennials have fewer friends (both platonic and lovers) and family sizes are shrinking. And while millennials are less addicted to alcohol, they are more addicted to social media and electronic devices, does our definition of sin need to expand to include Facebook.