A Long-Term Trend Offering Investment Opportunity

By Joshua Schroeder  NOV 02, 2012 9:55 AM

One long-term trend that may not be good for our country but may offer opportunity is growth in global obesity.


As an active but long-term investor, I believe in identifying long-term investment themes is a key element to success. One long-term trend that may offer investment opportunity is growth in global obesity.

Just looking at the US, a recent report by the Trust for America's Health and the Robert Wood Johnson Foundation says that since 1980 the adult obesity rate has doubled and rates for children have tripled. The report states that approximately 36% of adults are obese today, and that percentage could grow to 44% by 2030 if the current trends continue. Obesity-related medical costs are forecast to rise by $48 billion dollars to $66 billion a year over the same time period. Further, the report connects obesity to economic productivity, and says a heavier population could result in productivity losses of $390 to $580 billion per year.

[Editor's note: Several widely cited reports include Mexico, the UK, Slovakia, and Greece in the list of top-5 countries with obese adults, including those used for this article. The discrepancies are usually due to weather; a report cites medically measured data, self-reported data, or a combination of both. Using medically confirmed data, for instance, the OECD says the US and Mexico are joined by New Zealand, Chile, and Australia. By all accounts, however, the trend towards obesity is growing in populations outside the US.]

What might rising obesity rates in the US and the world mean to an investor? One way to start is by identifying the most common diseases and health problems associated with obesity along with the companies that benefit from them. According to the CDC (Center for Disease Control and Prevention), type 2 diabetes is the seventh leading cause of death and racks up $174 billion in total health care costs. The number of Americans with the disease has grown from 7.8 million to 25.8 million in the past 20 years and that growth is expected to continue. Heart disease and stroke are the first and fourth leading causes of death in the US, most resulting from obesity and hypertension according the CDC.

Next, assuming costs associated with obesity are expected to climb, one would look at what companies are best positioned to benefit.
These would include firms making treatments, companies providing good and services in the prevention category, and others that provide maintenance products or services.

To date, drug companies such as Pfizer (NYSE:PFE) that sells Lipitor for high cholesterol and Bristol-Myers Squibb's (NYSE:BMY) Plavix for heart attack and stroke prevention are two that historically have done well.

Outside of the drug market, prevention and maintenance companies might include Weight Watchers (NYSE:WTW), Vitamin Shoppe (NYSE:VSI), United Natural Foods (NASDAQ:UNFI), and Whole Foods (NASDAQ:WFM). Gyms, as well as some spas and resorts, could be good investments if the consumers' focus shifts more to wellness, nutrition, and fitness.

Sources: 1) Center for Disease Control www.CDC.gov;  2) “F as in Fat: How Obesity Threatens America´s Future by Trust for America´s Health” and the Robert Wood Johnson Foundation;  3) US Trust October 2012 Capital Markets Report

Twitter: @joshuaschroede2

Editor's note: This article originally appeared on investing and economics site, See It Market.
No positions in stocks mentioned.

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