Medical Stocks: 75% of Americans to Be Obese by 2020

America is pretty much eating itself to death. And while there are several directions to point fingers and names to name, we'll leave that to another news blog.

As for investing strategy, here are the facts:

The OECD recently predicted that by 2020 75% of the U.S. population will be obese. This implies tens of trillions of dollars in health-care expenses.

To be clear, obesity is defined according to a body mass index (BMI), which calculates human body fat based on weight and height. A BMI of 30 or greater signifies obesity, while scores between 25 and 30 indicates simply being overweight.

Although America is leading the way in obesity rates, other countries are seeing an increase in obesity, too. Zero Hedge reports: "The U.S.'s next-closest "competitor" is Mexico, with a 30% obesity rate, while Canada and the U.K. have rates of 24% and 23%, respectively. Other highly developed countries such as Germany, Italy and France have rates below 15%, and Japan is all the way down at 3.9%. India's citizens are the trimmest, with a 2.1% obesity rate. The average for the 34 OECD member countries is 16.9% -- exactly half that of the United States."

Health problems associated with obesity are limitless. From clogged arteries, cancer, heart disease, stroke, high blood pressure, to osteoarthritis and gallstones. And the king of all health-concerns: Diabetes, which is also the leading cause of non-traumatic amputations, eye disease, kidney disease, and a major factor in the development of cardiovascular disease. And cardiovascular disease is the number one cause of death in patients with diabetes.

Business section: Investing ideas
It's been said that second derivatives of obesity include preventative care plays like Nike and lululemon athletica. But we are looking for more pure plays.

Because obesity creates massive profits for the pharma industry, and because Americans aren't likely to reverse course on this terrible trend, let's see if we can make our portfolios a little fatter in the process.

We created a universe of healthcare companies with exposure to diabetes, a good starting point for medical exposure. (Click here to access free, interactive tools to analyze these ideas.)

1. Abbott Laboratories: Engages in the discovery, development, manufacture, and sale of health care products worldwide. Market cap of $96.13B.  Relatively low correlation to the market (beta = 0.31), which may be appealing to risk averse investors. Offers a good dividend, and appears to have good liquidity to back it up -- dividend yield at 3.34%, current ratio at 1.54, and quick ratio at 1.32. The stock has gained 26.17% over the last year.

2. Alkermes: Provides extended-release injectable and oral products for the treatment of prevalent and chronic diseases, such as central nervous system disorders, reward disorders, addiction, diabetes, and autoimmune disorders. Market cap of $2.40B.  Relatively low correlation to the market (beta = 0.79), which may be appealing to risk averse investors. The stock is a short squeeze candidate, with a short float at 6.31% (equivalent to 5.24 days of average volume). The stock has had a couple of great days, gaining 8.42% over the last week.

3. Alere: Engages in the development, manufacture, and marketing of consumer and professional medical diagnostic products in the United States and internationally. Market cap of $2.06B.  The stock has lost 34.83% over the last year.

4. Amylin Pharmaceuticals (Nasdaq: AMLN  ) : Engages in the discovery, development, and commercialization of drug candidates for the treatment of diabetes, obesity, and other diseases. Market cap of $3.88B.  Exhibiting strong upside momentum--currently trading 38.69% above its SMA20, 45.09% above its SMA50, and 93.85% above its SMA200. The stock has had a couple of great days, gaining 56.73% over the last week.

5. Becton, Dickinson and Company: Develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. Market cap of $16.42B.  Relatively low correlation to the market (beta = 0.58), which may be appealing to risk averse investors. The stock has lost 1.41% over the last year.

6. Bristol-Myers Squibb Company (NYSE: BMY  ) : Develops, and delivers innovative medicines that help patients prevail over serious diseases. Market cap of $57.16B.  Relatively low correlation to the market (beta = 0.47), which may be appealing to risk averse investors. Offers a good dividend, and appears to have good liquidity to back it up -- dividend yield at 4.02%, current ratio at 1.97, and quick ratio at 1.79. The stock has gained 30.82% over the last year.

7. Elan Corporation (NYSE: ELN  ) : Operates as a neuroscience-based biotechnology company primarily in Ireland and the United States. Market cap of $8.73B.  The stock has had a good month, gaining 19.03%.

8. Forest Laboratories: Develops, manufactures, and sells branded and generic forms of ethical drug products. Market cap of $9.23B.  Relatively low correlation to the market (beta = 0.68), which may be appealing to risk averse investors. The stock is a short squeeze candidate, with a short float at 7.86% (equivalent to 11.67 days of average volume). The stock has gained 5.75% over the last year.

9. Eli Lilly: Develops, manufactures, and sells pharmaceutical products worldwide. Market cap of $46.79B.  Relatively low correlation to the market (beta = 0.7), which may be appealing to risk averse investors. Offers a good dividend, and appears to have good liquidity to back it up -- dividend yield at 4.86%, current ratio at 1.6, and quick ratio at 1.34. The stock has gained 21.34% over the last year.

10. Medtronic: Manufactures and sells device-based medical therapies worldwide. Market cap of $40.69B.  The stock has gained 1.77% over the last year.

11. Merck (NYSE: MRK  ) : Provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. Market cap of $117.86B.  Relatively low correlation to the market (beta = 0.65), which may be appealing to risk averse investors. Offers a good dividend, and appears to have good liquidity to back it up -- dividend yield at 4.34%, current ratio at 2.04, and quick ratio at 1.66. The stock has gained 21.84% over the last year.

12. Nordisk: Engages in the discovery, development, manufacture, and marketing of pharmaceutical products in Denmark and internationally. Market cap of $101.49B.  Relatively low correlation to the market (beta = 0.55), which may be appealing to risk averse investors. Exhibiting strong upside momentum -- currently trading 6.57% above its SMA20, 11.26% above its SMA50, and 29.47% above its SMA200. The stock has had a couple of great days, gaining 6.49% over the last week.

13. VIVUS Inc. (Nasdaq: VVUS  ) : Engages in the development and commercialization of therapeutic products for underserved markets in the United States. Market cap of $2.18B.  Exhibiting strong upside momentum -- currently trading 6.17% above its SMA20, 29.6% above its SMA50, and 103.1% above its SMA200. The stock has had a couple of great days, gaining 6.59% over the last week.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Rebecca Lipman owns shares of MRK. Data sourced from Finviz.

The Motley Fool owns shares of lululemon athletica, Abbott Laboratories, and Medtronic. Motley Fool newsletter services have recommended buying shares of lululemon athletica, Nike, and Becton. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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