(Photo credit: Έλενα Λαγαρία)
That's the question Gerry Sullivan, portfolio manager of the Vice Fund (VICEX), raised in his interview with Forbes capital market reporter Abram Brown in "Guns, Booze and Gambling: Sinful Stocks for a Recession-Proof Portfolio."
Brown asked Sullivan if the vice industries-focused fund was considering adding any new sin stocks.
Here's Sullivan's response:
I’d consider video games an addiction. Apple products too. We’ve actually gone through and asked, is Apple a vice stock?
So, is it?
I asked tech experts, sin stock specialists, and a Jesuit priest.
What's a sin stock?
The Vice Fund concentrates on four sectors: alcohol, tobacco, gaming, and weapons/defense. Investopedia defines a "sinful stock" as "Stock from companies that are associated with (or are directly involved in) activities that are widely considered to be unethical or immoral." More broadly, vice industries tend to have higher barriers to entry, may or may not produce products that are harmful or addictive, and could have complex legal and tax issues.
The way investor James Altucher sees it, Apple is a "spice stock," somewhere between a vice stock and not.
"I would not think of [Apple] as a vice fund, but I certainly use the iPad as an escape, so it depends on how we define vice," Altucher says in an email. "Although I guess the best thing would be if I just meditated on planes, instead of played Temple Run the entire time."
Using Apple products may not be a sin, but the company's business practices could be considered sinful.
According to Bloomberg's Economics Brief editor Kevin Depew, "Apple comes closer to meeting vice criteria based on the Foxconn worker treatment allegations more than from producing so-called 'addictive' products."
Either way, Cult of Mac editor and publisher Leander Kahney is bullish on Apple.
"One share costs more than an iPad!" he writes me. "You could get a dozen hookers or half a kilo of coke instead."
"Apple users are hooked. No doubt about it," Kahney continues. "iPhones and iPods are gateway devices. Over and over I hear about someone who got an iPhone, and three weeks later they're loading up the iMac, iPads, AppleTV, the lot. They become addicted. Then they become addicted to the apps, to the experience."
"The iPhone is the worst," he warns. "See how twitchy you get when you leave the house without it."
Sin is where you find it
When I call Elliott Morss, a woman answers the phone. Morss is playing tennis, she tells me.
I hang up the phone and wait for Morss to call me back. I imagine Morss playing tennis on a backyard court. I have no idea if Morss has a tennis court in his backyard, but this is how I imagine him.
Morss is an economist who has worked in 45 countries and authored numerous books. Global finance and the entertainment industry are his beat.
I found Morss online because he has written about vice industries -- for example: vice industries as a hedge and when and how to invest in vice.
Morss and I discuss vice stocks. Morss is particularly interested in how vice stocks that feed addictions -- alcohol, tobacco, gambling -- perform over time. Many believe sin stocks are "recession proof," but Morss says it's more complicated than that. You may continue to smoke cigarettes during a recession, but you may cut back on your trips to Vegas.
"Sure people are wasting too much time on their Apple machines, but it’s not killing them," Morss tells me. "I don’t see it as being injurious to anyone."
These days, everything is an "addiction," but does it matter if it isn't hurting anyone?
"Most men are addicted to sex," Morss observes, by way of comparison. "That's just the way it is. That’s just the way we’re built. I don’t judge that negatively. I don’t see that as being a vice."
I reach Gerry Sullivan, the Vice Fund portfolio manager, on his mobile phone.
"Is Apple a vice stock is actually an interesting kind of question to ponder because there is no government agency that gives a thumbs up or thumbs down," Sullivan says. "Everyone has their own opinion."
For now, the answer is no, as far as the Vice Fund is concerned. For what Sullivan calls the "younger generation," it may be another story.
"If you take cigarettes from a smoker, and alcohol from a drinker, and an iPhone from what we might consider an over-user of Apple products, would the withdrawal behaviors be equal?" Sullivan wonders. "I think they could be."
The virtuous CEO
Before Father James J. Martin became a Jesuit priest, he was a Wharton grad who worked for General Electric and GE Capital. He wrote a book about his journey from corporate man to man of the cloth: In Good Company: The Fast Track from the Corporate World to Poverty, Chastity and Obedience.
I ask Father Martin if he invests in the stock market.
"I took a vow of poverty, so I don't have money," he laughs.
I ask him why he's laughing.
"I don’t have anything to invest," he explains, still laughing. "I literally have a couple hundred dollars in my bank account."
I ask Father Martin how an investor can tell a sinful stock from a virtuous stock.
"As Potter Stewart said about porn," Father Martin opines, "it's hard to define, but we know it when we see it."
Listening to Father Martin, I am relieved to learn that my constant iPhone checking is not a sin, per se.
"I think the obsessions with iPads, and smart phones, and things like that can be problematic," he says, "but I don't think it's sinful."
Instead, a "company that is engaged in sinful behavior or whose practices manifest vice" is the problem. Those who invest in these types of companies, Father Martin says, are "cooperating with evil."
"The vast overwhelming majority who work in business are good and moral people," Father Martin tells me. "There are opportunities for sin. That’s where your conscience comes in. We all have a gauge that tells us what’s right and what’s wrong. Not only, how is this going to help the community, but how is this going to help society, the poorest among us?"
