Are Good Times, Bad Times?

by on April 14, 2009 at 10:58 am in Uncategorized | Permalink

The Vice Fund (VICEX),
a mutual fund which invests in the so-called "sin" industries like
distillers, casino operators and cigarette companies, has lost 42% over
the past twelve months. That's actually four percentage points worse
than the Standard & Poor's 500 index overall.

Meanwhile the Ave Maria suite of mutual funds, which invest only in
companies that comply with certain Roman Catholic values, have done
better. The Ave Maria Growth Fund is only down 33%. It's beaten Vice by
nine points and the S&P by five.

It's hardly a miracle — but maybe enough to raise eyebrows on Wall
Street, a secular place where the usual invocation is "let us prey."

More here.  Hat tip to John Chilton.

1 Freethinking Jeremy April 14, 2009 at 12:03 pm

9% difference between two portfolio strategies over a year is not useful for drawing any information. There is regularly much larger fluctuations between sectors and portfolios. It’s just statistical noise.

2 Joe April 14, 2009 at 12:58 pm

It’s the casino exposure in the Vice Fund that’s killing them. The problem is that casino companies are no longer in the business of “vice”. Over 50% of their revenues come from non-gaming activities like lodging, meals, shows, etc… These are not vices and are not nearly as inelastic in demand as gambling.

3 Yancey Ward April 14, 2009 at 3:28 pm

Joe has the same thought I do- it is the casino part that is killing them.

4 Michael April 14, 2009 at 8:28 pm

The casino angle is a little suspect since according to the link to MarketWatch, the top 10 holdings, which account for almost 75% of the total portfolio, contain just one casino company, and it’s a slot machine manufacturer. A major contributing factor to the disparity is VICEX’s concentration in just three industries: tobacco, alcohol, and military contractors, compared to AVEGX’s much more diversified holdings.

5 Joe April 14, 2009 at 9:12 pm

Michael, you need to look at 3/31/08 and 9/30/08 to see what their holdings were before the big declines. In March of 08 21% of the fund was in casinos and 15% at 9/30. Las Vegas Sands fell 90%, Wynn fell 60% and IGT fell at least 50%. If 20% of the fund falls 65%, that accounts for 31% of the total loss.

6 Ricardo April 15, 2009 at 1:52 am

If 20% of the fund falls 65%, that accounts for 31% of the total loss.

If you take a portfolio where 20% fell 65% and the remaining 80% was made up of the S&P and so fell 38%, you have a total return of 0.2*-0.65 + 0.8*-0.38 = -43.4%. Since the return of the actual portfolio was -42%, the non-casino portion of the portfolio actually beat the market by a small margin (to be as precise as these calculations allow, it would have declined -36.25%: not different in any significant way from the Catholic fund which declines -33%). Of course, the Ricardo Total Return fund which holds 60% cash blew both of these out of the water.

7 Fubu December 22, 2010 at 2:11 pm

Casinos are very profitable types of business, but if you noticed, lately there has been a casino online spree… lots of people prefer playing online from the comfort of their homes… and that is much cheaper when it comes to travel costs, drinks and food… No Deposit Casinos

8 ClintEastWood February 16, 2011 at 1:25 pm

If you want a list of blogs that are related to the business niche, you can try searching through a local business directory. That will surely help you to find very fast what you need. There you can also find financial predictions over certain periods of time.

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