Nearly six months into President Donald Trump's second term, the market has picked its winners—and it's not on ESG, the strategy built around environmental, social and governance principles.
As deregulation gains steam and culture wars escalate, a group of so-called “sin stocks” tied to guns, booze, tobacco, and gambling is sharply beating clean investing strategies.
Sin Stocks Are Smoking ESG—and Trump Might Be The Reason
Since Trump's inauguration on Jan. 20, 2025, the USA Mutuals Vice Fund (NASDAQ:VICEX) — a portfolio built around industries typically shunned by ethical investors — has jumped 16.4%. By contrast:
- The Vanguard ESG U.S. Stock ETF (NYSE:ESGV) is up just 3.5%.
- The SPDR S&P 500 ETF Trust (NYSE:SPY) gained 4.2%.
- The Invesco QQQ Trust (NASDAQ:QQQ) rose 6%.
This shift reflects a broader investor reallocation toward industries that benefit from Trump's deregulatory, America-first agenda—and away from sectors screened for ESG compliance.
What's Driving Sin Stocks Higher?
The USA Mutuals Vice Fund, launched in 2002, invests at least 80% of its assets in companies tied to alcohol, tobacco, gambling, and defense.
It concentrates a minimum of 25% in these four "vice industries," which the fund defines as sectors often subject to social disapproval or regulatory risk.
No single industry makes up more than 80% of the portfolio. The fund also maintains global exposure, investing at least 40% of assets in non-U.S. companies across a minimum of three countries.
Its top holdings as of March 31, 2025 have delivered eye-catching returns in 2025:
- BAE Systems plc (OTCPK: BAESY): +79.3%
- Philip Morris International Inc. (NYSE:PM): +51.8%
- British American Tobacco p.l.c. (NYSE:BTI): +46.9%
- Anheuser-Busch InBev SA/NV (NYSE:BUD): +38.8%
- RTX Corp. (NYSE:RTX): +28.0%
- Alibaba Group Holding Ltd. (NYSE:BABA): +28.5%
- Heineken N.V. (OTCPK: HEINY): +25.9%
- Northrop Grumman Corp. (NYSE:NOC): +9.4%
- Diageo plc (NYSE:DEO): -17.1% (the lone laggard).
In particular, a portfolio of defense contractors—tracked by the iShares U.S. Aerospace & Defense ETF (NYSE:ITA)—has surged 25% year-to-date, fueled by rising geopolitical tensions and further escalated by the recent Israel–Iran war.
“The Vice Fund remains committed to its core belief that certain stocks are undervalued because certain factions of society deem them morally questionable,” said portfolio manager Paul Strehle in the fund's latest quarterly report.
“Our core holdings remain military defense, casino, alcohol, and tobacco stocks because they typically have an inelastic customer base that is unlikely to be swayed by whether the product price rises or falls,” he added.
ESG Stocks Struggle Despite Big Tech Exposure
Despite the Vanguard ESG U.S. Stock ETF including several of the market's strongest tech names, it hasn't kept up with vice stocks.
Top 10 ESGV Holdings and 2025 YTD Returns:
- Nvidia Corp. (NASDAQ:NVDA): +18.1%
- Microsoft Corp. (NASDAQ:MSFT): +18.6%
- Apple Inc. (NASDAQ:AAPL): -15.1%
- Amazon.com Inc. (NASDAQ:AMZN): +2.0%
- Meta Platforms Inc. (NASDAQ:META): +24.3%
- Broadcom Inc. (NASDAQ:AVGO): +20.0%
- Alphabet Inc. (NASDAQ:GOOGL): -6.1%
- Tesla Inc. (NASDAQ:TSLA): -27.4%
- Alphabet Inc. (NASDAQ:GOOGL): -6.1%
- JPMorgan Chase & Co. (NYSE:JPM): +24.8%
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