Over the past 17 years, investing in vice stocks (the S&P 500 stocks within the following GICS sub-industries) delivered almost triple the annual return than SPY (S&P 500 index fund):
- Brewers – 30201010
- Distillers & Vintners – 30201020
- Soft Drinks – 30201030
- Tobacco – 30203010
- Casinos & Gaming – 25301010
- Restaurants – 25301040
For this time period, the number of stocks in these sub-industries in the S&P 500 ranged between 14 and 20. I’ve abbreviated these as BeSToGaR (Beer, Spirits/Soft Drinks, Tobacco, Gaming, Restaurants).
Only investing in the top 3 of these stocks (as ranked by the 2 factors from a famous formula) and rebalancing every 3 months pushes the CAGR a few percentage points higher, though at the expense of a larger drawdown.
Widening the net to include stocks within the Russell 3000 (also top 3 with a 3 month rebalance) also improves performance.
Adding the drug retail (GICS 30101010) and food retail (GICS 30101030) is another iteration to consider. (BeSToGaRR; extra R for Retail).
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