Professor William Dukes, a WWII soldier that survived combat and later became a distinguished tenured professor at Texas Tech, passed away in June 2015. One of his special side projects at Texas Tech involved studying “sin stocks” and examining (1) whether they generated superior returns; (2) why they generated superior returns; and (3) what type of investors owned these stocks.
Professor Dukes concluded that yes, sin stocks generated 2.8% extra annual returns per year since 1973. And these stocks tended to be owned by private investors that remained outside the limelight and institutional funds that are run by small committees. According to Professor Dukes’ survey of money managers that declined to make investments in tobacco, gaming, and alcohol, the most cited reason was “It wouldn’t look good to clients and the media.”