Six ways to profit from America's expanding waistlines
With 25% of American adults classed as obese, there's money to be made in promoting healthier lifestyles. Marc Lichtenfeld picks six companies that are set to profit.
Did you know that 59 million American adults are obese? That's 25% of the adults in the country. Not overweight. Not "soft around the middle." Not, "Yeah, I could probably lose a few pounds." Obese.
Of course, it's no surprise that America loves to eat. It's also no surprise that many Americans eat too much and often, indulge in food that's bad for us
It's obvious that Americans have vaulted from plus size, to king size, to super size. There are even television shows like "The Biggest Loser" focused on the growing problem.
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And with the healthcare debate still swirling around Washington, it's a topic that is likely to attract more attention in terms of preventative healthcare measures that Americans can take. There is lots of work to be done and the big picture on any reform is still quite murky.
What is clear, however, is that there's going to be an increasing emphasis on wellness. After all, this is the most practical, cost-effective way to lower healthcare costs.
What's more, I believe this will be a profitable long-term theme for investors. Here are a few ideas to look at
America's new Route 66: The road to health
There are a couple of ways to kickstart a trend towards greater wellness. The incentives range from financial ones, such as lower insurance premiums, to higher taxes on junk food.
Alternatively, some people might simply realize on their own that if they stop eating donuts for breakfast and McDonald's for lunch, they'll feel better and have more energy.
In terms of investing, we'll break it down into two main areas information and diet/nutrition
Well-informed = Well-being
Websites that provide health information already have plenty of traffic. And with people increasingly looking to manage their own health, those numbers should rise. Here are two firms that could take advantage
Health Grades (Nasdaq: HGRD):
The company provides health information on thousands of conditions and symptoms. Additionally, it rates doctors and hospitals and can tell patients which doctor or hospital is rated highest for a particular condition.
For example, let's say someone is in Cedar Rapids, Iowa, and have pneumonia. After checking on healthgrades.com, they'll realise they want to be in one of the four hospitals in the area that have five-star ratings for survival. On the other hand, they'd avoid Fort Madison Community Hospital, which has just one star.
Health Grades also sells information to hospitals and doctors, and generates advertising revenue as well.
WebMd (Nasdaq: WBMD)
The firm is similar to Health Grades, although it doesn't rate hospitals and doctors. It has thousands of articles on all kinds of health related topics and private portals for health plan members.
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NutriSystem (Nasdaq: NTRI):
NutriSystem provides monthly food packages that are designed to help customers lose weight. Their high-profile TV ads feature celebrities from yester-year such as Dan Marino, Marie Osmond and Valerie Bertinelli, which resonate with the target audience of Americans age 40+.
And due to the heavy rotation of NTRI's commercials, the company has quickly moved to the forefront of the packaged weight-loss food business.
Weight Watchers (NYSE: WTW):
With nearly $1.5 billion in revenue, Weight Watchers is the leader in diet management. The company helps people manage their weight with online tools, meetings and cookbooks. Dieters who prefer to have more control over their weight loss process and not eat a meal that comes in a box, tend to gravitate toward WTW, versus NTRI or similar companies.
Jamba, Inc. (Nasdaq: JMBA):
This is the firm that owns and franchises the popular Jamba Juice stores. Jamba Juice offers fruit smoothies, juices and other healthy products.
The company has done a terrific job in marketing itself as a healthy alternative to desserts and other snacks. While its smoothies aren't as diet-friendly as you might think, a "Strawberries Wild" with strawberries, bananas, frozen yogurt and fruit juice is still better for you than Baskin Robbins.
Whole Foods (Nasdaq: WFMI):
The grocery business is notoriously difficult and Whole Foods faces stiff competition from neighbourhood supermarkets that are ramping up their organic and natural product offerings.
Nevertheless, the store enjoys strong brand loyalty with its customers, due to the trust it's built up in being among the first in the natural grocery business. If eating natural foods becomes increasingly important to Americans, more of them will gravitate towards WFMI.
Fatten up as America looks to slim down
The six companies I mentioned above aren't specific recommendations, but are good jumping off points for your own research.
You may notice that I've left out the fitness centre business here. There are two good reasons for it: It's an extremely competitive area and the companies are laden with debt. Although I believe more people will start hitting the gym in the coming years, it's not a business I want to invest my money in.
In summary, keep an eye on the wellness theme. Over the next few years, you'll likely see IPOs of other companies that aim to capitalize on the trend toward healthier living.
And as this budding trend emerges, we'll likely see many profitable opportunities. But do your homework now or as soon as you get home from the gym.
This article was written by Marc Lichtenfeld and was first published in the daily investment newsletter Investment U
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