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Contrarian investors wanting to bet against ESG can buy these niche ETFs.


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Newton's third law states that "for every action, there is an equal and opposite reaction." I'm not a physics expert, but it seems like this law might actually apply to what's going on in the ETF industry these days, especially when it comes to environmental, social, and governance (ESG) considerations.
Without getting into the nitty-gritty, it’s worth noting that ESG-related criteria are increasingly popular when it comes to screening ETFs. Numerous ETF providers are either offering ESG-oriented products or disclosing ESG metrics for existing funds in their lineup.
Naturally, some ETF providers are doing the exact opposite. These ETF providers are either launching funds that actively seek exposure in non-ESG-friendly sectors like oil, tobacco, gaming, or alcohol, or in some cases make "anti-woke" considerations an explicit part of their investment thesis.
Previously, I wrote about what a hypothetical anti-ESG ETF would look like and had IndexOne create a custom index of alcohol, tobacco, oil, and firearms stocks for me. Today, I'll be going over three real-life anti-ESG ETFs you can buy on the market today. Let's get into it!
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BAD stands for "betting, alcohol, and drugs." This ETF tracks the proprietary EQM BAD Index (BADIDX), which currently holds a portfolio of 54 large-cap U.S. stocks in the gaming, alcohol, cannabis, and pharmaceuticals industry. It charges a 0.75% expense ratio and is passively managed.
BAD's investment thesis centers around the trend toward increasing legalization in betting and cannabis, the inelasticity of consumer staples like alcohol and tobacco, and the willingness of many of these companies to adapt to, and circumvent, legislation and trends that work against them.
In my opinion, it’s not a bad idea (no pun intended). Many tobacco and alcohol companies pay high dividends, possess robust profitability, and have lower than average betas, making them less cyclical and sensitive to economic fluctuations.
A potential alternative (and tax-loss harvesting partner) for BAD is VICE, which is actively managed and tracks a portfolio of global stocks involved in "vice industries." These include tobacco, alcohol, video games, gambling, and fast food. The ETF costs an expense ratio of 0.99%.
VICE's investment thesis centers around the historically consistent, non-cyclical demand in the tobacco and alcohol industries. As a result, these companies possess good margins, free cash flow, and resilience across market cycles, in addition to the previously mentioned high dividends.
The tobacco and alcohol companies in VICE also enjoy a wide economic moat, which refers to their ability to fend off competitors and maintain their pricing power. This is thanks to intangible factors like brand loyalty and economies of scale, and tangible ones like distribution capabilities.
The logo for YALL looks like it came straight out of Donald Trump's campaign handbook. Upon visiting the ETF's landing page, I'm urged to "SPEAK TO A PATRIOTIC ADVISOR NOW" and am solicited to download my free copy of "Your Guide to Patriotic Investing."
YALL's investment strategy explicitly excludes companies that either endorse politically left social agendas, engage in activism, or make left-leaning public statements ("virtue signaling"). If you're not a fan of liberal politics when it comes to investment selection, then this ETF might be for you.
After screening for these considerations, YALL selects 30-40 U.S. stocks with a track record of creating strong domestic job growth for Americans. Honestly, YALL's current holdings are nothing too controversial, with popular stocks like Tesla, NVIDIA, Amgen, Broadcom, and Boeing in the top ranks.
The ETF currently charges an expense ratio of 0.65% and has attracted $26.8 million in assets under management since its debut in October. Personally, I would never invest according to political considerations, but YALL might be suitable for the most right-wing of investors.
Please note this article is for information purposes only and does not constitute investment advice.
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