| Thursday April 17th 2014

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The Vice Fund


The Vice Fund is an investment strategy that is defensive in nature, where investors are banking that growth in the industries will take place independent of any economic conditions.

They invest in companies, both domestic and foreign, engaged in the aerospace and defense industries, owners and operators of casinos and gaming facilities, manufacturers of gaming equipment such as slot machines, manufacturers of cigarettes and other tobacco products, and brewers, distillers, and producers of other alcoholic beverages. They believe that there are numerous investment opportunities in these sectors which have been largely overlooked by other funds. While many of the most widely held and well-known mutual funds invest in companies doing business in these sectors, no other mutual fund concentrates solely on these four sectors.

“People will see the fund and think it’s one thing that it’s really not. We’re not doing this to make any sort of political statement or a social commentary, and we’re not advocating these behaviors in any way. Our job is to study the fundamentals behind these industries and these businesses and try to make money for our investors.”

The Altria Group, which controls cigarette giants Philip Morris USA and Philip Morris International, is traded on the New York Stock Exchange and is the largest holding in the Vice Fund, making up more than 7 percent of the assets. Phillip Morris International recently signed a deal with China to distribute Marlboro cigarettes in the country.

“Tobacco is still a great investment because the cigarette companies have tremendous pricing power,” Norton said.

Gaming, alcohol, tobacco and the defense sectors are all tied together by five common threads according to Norton. Those are high demand regardless of economic conditions, the global nature of the businesses, high barriers to entry, large profits, and having the government as the largest beneficiary because of high tax rates.

To summarize: The Vice Fund is a mutual fund that primarily focuses on alcohol, tobacco, gaming (casinos mostly), and defense (weapons). In case you don’t know what they are, mutual funds are pooled investments that are run by managers who select and purchase individual stocks. Without going into depth about investing and diversifying, let me just say that mutual funds are a better idea than trying to pick your own stocks.

Since the Vice Fund started in 2002, it’s posted an annual return just above 20%. Mind you, that’s been during a bull market run, so it’s not going to do that well every year. However, you can only compare individual investments to either their peers, or the overall market; and in that sense, this fund is still kicking the crap of its competition. I look at it this way: no matter if the economy’s weak or strong, people will still smoke, they’ll still drink, they’ll still gamble, and god knows this country isn’t giving up starting wars any time soon… so the industries that this mutual fund invests in should continue to do well when other business sectors (automotive, home-building, etc.) struggle due to tough economic times. It’s tough not to like, and every time you go to the bar, you can view it as you’re investing in yourself.

Minimum investment is $4000 USD.

Link: The Vice Fund

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