|Each of these names is holding strong (above neutral), even as on the surface, discretionary spending should be tightening… |
But the data doesn’t lie.
Yesterday, we touched on an area that appeared to be unusually recession-resistant in our June MegaTrends report: gambling.
You can see this on the chart below…
|But this behavior isn't limited to ONLY gambling. |
Take alcoholic drinks…while consumption doesn’t significantly rise during a recession, alcohol-related stocks are considered recession-proof as demand doesn’t wane, remaining relatively stable.
Mentions of alcoholic drinks are currently trending +16% YoY.
So with the economy struggling and the S&P 500 hitting bear market territory, here are 3 sin stock names we're watching…
Churchill Downs (CHDN)
|Churchill Downs has doubled down on Live Horse Racing and Historical Racing Games after exiting the online sports betting market. |
And, LikeFolio data shows the company may have made a bold choice, with consumers talking about betting on horse races trending +21% QoQ and +39% YoY.
In addition, despite the Kentucky Derby being long gone, Purchase Intent for CHDN is trending +155% QoQ and +35% YoY, while Overall Mentions are pacing +187% QoQ and +62% YoY.
Altria Group (MO)
Altria Group is one of the largest producers and marketers of tobacco and cigarette-related products.
Similar to alcoholic drinks, and for more obvious reasons, cigarette sales are not significantly impacted during a recession, usually remaining steady.
|At the moment, Purchase Intent Mentions for Altria is trending +11% QoQ and +17% YoY. Even through the pandemic, demand remained resilient. |
Despite analyst concerns regarding competition and its relationship with Philip Morris, which it used to own, MO is still one to watch.
RCI Hospitality (RICK)
Let’s label RCI as the ultimate sin stock…
The company, through its subsidiaries, operates strip clubs, nightclubs, and sports bars/restaurants.
The end of the pandemic has, as expected, seen demand for RCI’s clubs, bars, and restaurants surge, and despite inflation concerns, there is no let-up.
Purchase Intent is at its highest level since August 2019, pacing an enormous 105% QoQ and 221% YoY, while Overall Mentions are at +25% QoQ and +32% YoY, the highest level since 2018.
Bottom Line: Despite inflation concerns and the rising risk (expected by the majority of economists) of a recession, sin stocks usually do not experience a significant drop in demand.
So far, that sentiment has remained true despite inflation soaring and purchasing power being squeezed.