Don't Feel Guilty About Your Vices -- Invest in Them

After a year or so of pandemic restrictions, we're now seeing a growing number of folks looking to re-engage with family, friends and loved ones -- and just get out of the house.

It's hardly a surprise then that consumers -- some of them flush with COVID stimulus checks -- are shopping and dining out. And their impact is showing up in economic reports. Of course, the year-over-year comparisons landing are rather misleading, given the impact of the pandemic this time last year, but it's still a real shift. 

Some of this change is playing out at food joints -- like McDonald's (MCD) , Wendy's (WEN) , Restaurant Brands' (QSR)  Burger King, Yum Brand's (YUM)  Habit Burger and Five Guys and In-n-Out Burger. From an industry and sector classification, those quick-service companies are categorized as Consumer Cyclical and Restaurants, respectively, but I see a far better fit with my Guilt Pleasure investment theme.

One of the classical interpretations of "guilty pleasure" defines it as something that one enjoys despite feeling that it is not generally "held in high regard" or induces a feeling of guilt. I prefer to define it as those little treats and other items that even though they may not be the best thing for us, we are likely to indulge in -- no matter where we are in the economic cycle. This makes them relatively inelastic. Fast food fits that bill as do several other items including tobacco, alcohol, coffee, gaming and gambling, ice cream, chocolate, candy, and other treats, like my personal favorite the Oreo. From an investor's perspective, that can include names as diverse as Altria (MO) , Phillip Morris International (PM) , Molson Coors (TAP) , and Boston Beer (SAM)  to Starbucks (SBUX) , Electronic Arts (EA) , MGM Resorts (MGM) , Hershey (HSY) , Mondelez International (MDLZ) , PepsiCo (PEP)  and Coca-Cola (KO)  as well as their competitors.

It's been rather well documented that chocolate sales were a hit during the pandemic, as consumers looked for creature comforts while enduring what some may refer to as soft solitary confinement in their homes. Aside from anecdotal evidence of longer lines at restaurants and drive-thrus, recently Pernod Ricard (PDRDY), the company behind such well-known alcohol brands such as Absolut Vodka, Chivas Regal, Jameson Irish whiskey, and others, lifted its outlook citing the "pace of recovery is proving stronger than anticipated" with on-trade demand accelerating as restrictions are lifted. For those not familiar with the term "On-trade," it refers to consuming alcohol on licensed premises, better known as bars and restaurants. This confirms the reopening view on not only Anheuser Busch Inbev  (BUD)  and Constellation Brands (STZ) , but it also speaks to what is an improving landscape for Coca-Cola's away from home business and the same for PepsiCo and to a lesser extent Keurig Dr. Pepper (KDP) .

When assessing these opportunities, we need to be mindful that many of them, including the beer and beverage companies, will see a pick-up in their restaurant and bar-related businesses, but they will also likely experience a softening in grocery-related demand similar to what's been depicted in recent monthly retail sales reports. Meanwhile, the fast-food restaurant stocks have had a good run of late as well, but with airlines reporting an increase in leisure travel and the Nevada Gaming Control Board's monthly revenue report showing a pick-up on the Las Vegas strip, gambling companies, such as MGM Resorts, Las Vegas Sands (LVS) , Wynn Resorts (WYNN) , and Caesars Entertainment (CZR)  are ones investors are likely to turn to. Among the crew, the one with the greatest upside to be had, roughly 30% to the Wall Street price target consensus of $68, is Las Vegas Sands.

The coming days will be ones to watch for Las Vegas Sands, as we will soon get the Nevada Gaming Control Board's May report as well as the June one for Macau. I say this, because pre-pandemic, Macau with its casinos, hotels, and hospitality, and shopping accounted for roughly 65% of revenue for Las Vegas Sands. And as Las Vegas has begun to recover with more on the horizon, overall gaming growth in Macau turned positive on a year-to-date basis in April and was up almost 29% on that basis exiting May.

There is one other way to go about tapping into my Guilty Pleasure investment theme and that's with the Advisor Shares Vice exchange-traded fund  (VICE) , which touches many of various aspects and has 37 holdings, with the heaviest concentration in gaming and casinos (30% of assets) followed by alcohol (21%) and restaurants and hospitality (20%). I would note that its trading volume is a bit thin, but its year-to-date results show the Guilty Pleasures theme is working.

And if after all of that Guilty Pleasure talk you feel like you need to detox your portfolio -- or are worried perhaps about diabetes and obesity, Amplify ETFs very recently launched its Cleaner Living ETF with the ticker (DTOX) . Quite a different pair trade, but one that works rather well from a thematic perspective.

(WYNN is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells this stock? Learn more now.)

At the time of publication, Versace had no position in any security mentioned.