April 13, 2021

ETF Play For The End Of The Pandemic

ETF Play For The End Of The Pandemic
ETF Play For The End Of The Pandemic

Imagine the pandemic ending. Well, I am sure you have already done that, maybe even a few times over the last 12 months.

The pandemic ended through whatever means, and now it is ‘safe’ to go live your life, similar to how we all did before last year.

What do you do? What do others do?

Maybe go out and party? Go on a vacation? Relax and over-indulge a little in some activities during the pandemic you couldn’t or didn’t want to do?

Well, perhaps, in a nutshell, be a little ‘sinful’?

What you consider sinful may be different than others, but most likely, you’re relaxing or celebrating will likely involve alcohol, to some extent. And it’s not hard to see how a lot of other American’s will be partaking in a drink or two the day the pandemic officially comes to an end.

Furthermore, even right now, as more vaccines get put into arms, some States are beginning to relax restrictions, and we begin to creep closer to the warmer summer months. We already see pent-up demand for alcohol hit the industry. We are starting to see more and more people gather in slightly larger groups than before and celebrate the fact that they haven’t seen each other in months. Most of those celebrations are involving alcohol.

Or maybe now you feel comfortable traveling? Go on vacation for the first time in a year? Relax a little more than normal and have a few more drinks.

While it’s not likely that most people completely stopped drinking during the pandemic, it is highly probable that most people didn’t drink as much during the pandemic. Whether that is because they were not going out to bars, restaurants, going on vacation, or gathering with friends and family, the fact of the matter is alcohol sales were down during the pandemic. In reality, that is very likely to change when this is all over.

We have already begun seeing air travel and hotel stays tick higher. If you are thinking about jumping on those investments, the time was a few months ago. However, industries like alcohol may still offer upside when demand hits the hardest, the right when the pandemic is officially over, and people feel comfortable gathering in larger groups and having celebrations.

With that in mind, buying an ETF now, which holds some alcohol stocks, combined with some other industries that may benefit from the pandemic truly being over, may be an excellent idea.

One ETF in particular that could see a nice upswing when this is all over is the AdvisorShares Vice ETF (VICE). Some call this the ‘sin stock’ ETF, but in reality, it holds a range of different companies in the food and beverage industry and the tobacco and gaming realms.

The ETF has 47% of its assets in cyclical consumer stocks and 35% in non-cyclical consumer, with a large number of holdings in the alcohol space. The ETF owns restaurant stocks, casinos, and tobacco stocks, but in reality, all of these businesses will likely see a boost in sales when the pandemic ends.

Year-to-date, the ETF is up 10%, compared to the Vanguard S&P 500 ETF (VOO) being up 6.22%, that is likely in anticipation of re-opening the economy fully, but I believe we could still see a move higher when earnings season kicks in and actual sales numbers are reported. Vice has 36 holdings, a yield of just over 1%, a weighted average market cap of $35 billion, but a rather high expense ratio of 0.99%. However, that expense ratio may not be the worst thing in the world if you plan to hold VICE just until the economy fully re-opens and its holdings get that one-time re-open boost.

Obviously, this type of fund is not for everyone since it does package up all of the sin stocks in one nice bundle, and there is nothing wrong with investing with an eye on the moral compass. However, it has been proven that investing in businesses that others scoff at has been a market-beating strategy over the years.

(From me to you, let’s ‘Cheers’ to a quick end to this pandemic and profitable investments in the future.)

Matt Thalman
INO.com Contributor – ETFs
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.