Vice Squad

I kept the same five sin-stock names (Altria, Philip Morris, AB InBev, MGM, DraftKings) but rebalanced the weights based on recent fundamentals, momentum, and volatility. On the steady dividend side: Altria just raised its full-year EPS guidance and remains a reliable ~6% yielder, but I trimmed it slightly (24.3%→20%) after a rough week (-2.9% today, -4.5% over the month) that suggests near-term profit-taking. Philip Morris gets a bump (21%→22%) given its strongest 3-month return (+11.7%) among the tobacco pair and continued smoke-free growth momentum. AB InBev gets a bump too (16.5%→18%) after a strong quarter (23% EPS growth, volumes back to growth, shares near 52-week highs) and the best 6-month return (+13.3%) of the dividend group, while still carrying a real (if modest) 1.6% yield. On the cyclical casino/betting side, I shifted weight toward MGM (19.8%→22%) over DraftKings (18.4%→18%): MGM posted record Las Vegas and regional revenue this quarter with much lower volatility (24% annualized vs. DraftKings' 57%), while DraftKings, despite reaffirming full-year guidance and strong user growth, just missed on revenue and EPS and remains a higher-beta, pre-profitability name. I deliberately avoided adding Caesars (CZR) despite its eye-catching 48% six-month return and low volatility — those numbers reflect a pending $31/share all-cash buyout by Fertitta Entertainment, not real operating momentum, so CZR now trades as a merger-arbitrage instrument with capped upside rather than a genuine cyclical casino play. The result is roughly a 60/40 split between steady dividend payers and cyclical gaming names, tilted toward the strongest recent performers in each bucket.

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Starting from an all-cash portfolio, I built a five-name 'sin stock' basket that pairs cash-generative dividend payers with more volatile casino/betting names, as the brief asks. On the income side, Altria (25%) gets the largest weight because it combines the highest yield in the universe (5.8%) with the strongest price momentum (+4.9%/+11.3%/+31.4% over 1/3/6 months) and Wall Street still prices it as a discount cash machine — one report notes Altria has a forward dividend yield close to 6%. Philip Morris (20%) is the second dividend anchor: its 3.1% yield is lower, but its smoke-free business (IQOS/ZYN) is growing fast, with net revenues rising 9.1% to $10.1 billion in Q1 2026 and EPS up 16%. Anheuser-Busch InBev (15%) adds alcohol exposure with decent momentum (+27% over 6 months) even though its 1.7% yield is modest, rounding out the steady-cash-flow sleeve at roughly 60% of the portfolio. On the cyclical side, I chose MGM Resorts (20%) over Caesars: Caesars has already agreed to be acquired by Fertitta Entertainment for a fixed $31/share, which caps its upside as a merger-arbitrage situation, whereas MGM is still an independent public company that recently received (and is reviewing) a $48.30/share take-private proposal from People Inc., leaving room for a higher bid, rejection, or continued trading upside, on top of already-strong momentum (+24%/+28% over 3/6 months). Finally, DraftKings (20%) provides pure-play sports-betting exposure: it has no dividend and is down sharply over the past year, but momentum has turned positive recently (+6%/+17.5% over 1/3 months) as it launched a new prediction-markets product and heads into a World Cup catalyst period, making it the higher-beta complement to the casino and tobacco names. Overall the mix is roughly 60% steady dividend payers (MO/PM/BUD) and 40% cyclical gaming names (MGM/DKNG), fully invested with no single position above the 25% cap.