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4 Stocks for the Preventative Health-Care Revolution

Jake Keator
July 24, 2013

It's no secret that rising health-care costs are a serious future concern. Individuals don't want to pay more and neither do insurers. The simplest way to battle health-care costs is at the source: YOU. Paying a premium in the short run for healthier food and exercise pays for itself down the road by reducing the need for expensive insurance premiums. Society is becoming more and more conscious of the benefits of healthy living, both in quality of life and cost-saving. Here are four companies poised to benefit from the preventative health-care revolution:

Source: Whole Foods.

It's all in the food
You are what you eat. Whole Foods (NASDAQ: WFM) delivers on that philosophy, serving high-quality food at premium prices. Customers have proven their willingness to pay because the company generates net margins of more than twice the grocery retail industry average and is growing aggressively. CEO John Mackey is a leader in the Conscious Capitalism movement, which aims to treat fairly all stakeholders in the business, including the community. If Whole Foods fails to meet the market's growth expectations, the stock could take a hit, but such a drop could be a great opportunity for long-term investors. Another recession and/or higher food costs would hurt margins, but in the long run, Whole Foods appears on course to dominate not just grocery retail but the preventative health-care sphere as well.

Source: Nike.

You can't exercise naked (in public)
(NYSE: NKE) is the most recognizable athletic brand in the world, and the more people exercise, the more Nike will be on their mind. Nike also houses other reputable brands such as Converse, Jordan, and Hurley and they aren't afraid to jettison losers like Cole Haan and Umbro. The company is growing aggressively abroad, with global revenue up 16% in FY2012. Nike also operates a direct-to-consumer business, which increased 23% overall in 2012. This is a key trend to watch, particularly the online segment, because the DTC model cuts out traditional retailers and means higher margins for Nike. Products such as the Fuelband, a fitness tracking bracelet, allow consumers to track their health via apps. This is another area to watch, particularly in the preventative health sphere, as more and more technology is developed to help individuals track their health on a daily basis. Finally, Nike faces stiff competition from companies like Adidas, Under Armour, and Foot Locker. Investors looking for growth might want to consider a smaller competitor, but Nike's brand will be almost impossible to completely displace.

Source: Wikimedia Commons.

It takes commitment
Obesity has been officially labeled a disease, and few companies have proven their ability to fight it like Weight Watchers (NYSE: WTW). Finding a diet is easy; sticking to it is much harder. That's where Weight Watchers' member network comes in. The company's diet is nothing special, but the member meetings keep customers motivated and paying. That's why Weight Watchers earns higher and more consistent net margins than its closest competitor, NutriSystem. While the member meetings are a sticky factor, the company is bloated with nearly $2.3 billion in long-term debt. With 2012 operating income of $510.8 million and a debt load nearly four times that amount, investors should be aware of the risks and the earnings they will miss out on in paying down the debt. That being said, Weight Watchers has a stable earnings history and should be able to handle the extra pounds. There are also threats from other weight loss mediums such as mobile that could steal cus