We’re all thinking about it but we don’t say it out loud – that’s the underlying theme behind vice stocks. During an economically challenging cycle, people need some downtime. Certain companies can provide it better than others.
Of course, the label vice stocks carry a tawdry reputation. However, the progressive nature of society means that certain pursuits and activities that were frowned upon earlier are now considered blasé. Further, as Generation Z – the most diverse demographic thus far – grows in purchasing power, it’s their ideals that should dominate.
What does that mean for vice stocks in the long run? At some point, we’re going to label these ideas as just “stocks” without any qualifiers. Until then, here are some slightly controversial ideas to spice up your portfolio.
Innovative Industrial Properties (IIPR)
Structured as a real estate investment trust or REIT, Innovative Industrial Properties (NYSE:IIPR) is billed as the leading provider of real estate capital for the regulated cannabis industry. Per its website, the company has invested a total of $2.4 billion in the cannabis space. As well, it features 108 properties covering almost 9 million total square feet. In addition, Innovative conducts business in 19 states.
That latter statistic is especially important for vice stocks catering to the cannabis sector. Not too long ago, the idea of legalized, regulated cannabis seemed like a pipe dream. And to be sure, marijuana remains a Schedule I drug. Still, legislative efforts are ongoing. As more people accept cannabis as an alternative solution, IIPR could be off to the races.
Until then, you’re going to have to make do with a three-year revenue growth rate of 33.7%. Even better, IIPR offers a robust forward dividend yield of 8.02%. That’s well above the average for REITs, which is already lofty at 4.46%.
Turning Point Brands (TPB)
Another intriguing name among vice stocks, Turning Point Brands (NYSE:TPB) is a leading manufacturer, marketer and distributor of branded consumer products. These include alternative smoking accessories and consumables with active ingredients. Now, it’s true that anti-tobacco advocacy groups have succeeded in removing the “cool factor” from cigarettes. Still, tobacco overall remains a big business.
According to Grand View Research, the U.S. tobacco sector reached a valuation of $75.9 billion in 2021. Further, the sector could expand at a compound annual growth rate (CAGR) of 3.4% from 2022 to 2030. At the forecast culmination point, the industry could print revenue of $102.7 billion.
The argument isn’t that Turning Point will somehow dominate the tobacco industry. With a market capitalization of less than $400 million, that’s not happening. However, it just needs to grab a big-enough chunk of the market to do some “damage” if you will.
Even better for speculators, TPB stock faded 13% since the start of the year. It may be de-risked now, making Turning Point one of the enticing vice stocks to consider.
RCI Hospitality (RICK)
Frankly, it’s difficult to talk about vice stocks and not mention RCI Hospitality (NASDAQ:RICK). Stretching the definition of the word “hospitality” to its most euphemistic, RCI is basically an establishment for gentlemen. I don’t want to explain any further to avoid getting penalized by the SEO algorithmic overlords.
Fundamentally, what makes RICK such a powerful name among vice stocks is the industry’s underlying resilience. As CNBC reported during the fallout from the Great Recession, the world’s biggest fabric-free enterprises stated that business was booming despite the downturn. Again, without getting into too many sordid details, the adrenaline rush from this endeavor may help ameliorate various life and financial pressures.
By the way, I’m not advocating such an approach to challenges. I’m just giving an explanation as to the booming demand.
Basically, with the “hospitality” industry proving its worth during the worst of times, another slowdown could actually be a positive for RICK stock. Notably, H.C. Wainwright sees shares flying to $115, implying almost 105% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
