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Obesity, instant gratification and more millionaires: three themes for investors

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Written by: Paloma Kubiak
07/11/2016
Demographics and megatrends can help investors choose where to invest their money, but can these relatively new themes help generate an investment income?

Obesity

One in every four UK adults and one in every five children aged 10 – 11 are classed as obese, according to the NHS. The number defined as overweight has more than trebled in the past 30 years,

Worryingly, based on current estimates, more than half the population could be obese by 2050, the UN Food and Agriculture Organisation says.

As the nation gets larger, Andrew Herberts, head of private investment management (UK) at Thomas Miller Investment, says sugary and fatty snack manufacturers such as Coca Cola, Pepsi and Unilever “have been doing well on the back of our taste for junk food”.

However, he notes there is also a correlation with the growth of firms offering diabetes treatments and the rise in obesity. Diabetes UK estimates that by 2040, 10% of the world’s population will be living with diabetes.

As estimates suggest about 640 million people will be impacted, Herberts believes Novo Nordisk, Sanofi and Bristol Myers/Astrazeneca which offer treatments, are set to continue to benefit.

“In addition, companies producing outsized clothing for the ‘larger’ consumer have also done well, with N Brown Group seeing significant growth, and Sports Direct benefiting from the demand for comfortable sportswear clothing for the fuller figure,” he says.

For Garry White, chief investment commentator at Charles Stanley, obesity isn’t just a UK or European epidemic as developing nations are “rapidly catching up”, especially in the Middle East.

“Qatar, Kuwait, the United Arab Emirates (UAE), Bahrain, and Saudi Arabia rank in the top 15 countries for obesity, Qatar ranking the highest, at number six. FTSE 250 listed NMC Health is a private healthcare network operator in the UAE. Growth is supported by a positive outlook for healthcare in the UAE where the healthcare system is under-developed and mandatory healthcare insurance is being rolled out.”

Wealth

The number of millionaires in Britain has shot up since 2008 to just over 409,000 and NFU Mutual estimates the UK will have almost half a million millionaires by the end of this year and about 585,000 by 2020.

According to the Knight Frank Luxury Investment Index, which tracks the performance of 10 investments of ‘passion’, in the second quarter of 2016 classic cars and fine wines all featured at the top as the value of both increased by 8% on an annual basis.

The HAGI “Top Index” which tracks the value of the world’s top 50 most desirable cars has risen by 458% over the past 10 years.

White lists Inchcape for investors looking to make money on the rise in wealth as it’s a global car dealership that specialises in premium and luxury cars and spare parts.

Its partners include Rolls Royce, Mercedes-Benz and BMW and it has a presence in 26 countries around the world, with a strong presence in Asia and Russia.

“It’s recent third-quarter results showed that its global focus has boosted figures following the recent devaluation of sterling, with revenues rising by 15.3% at actual currency and by 4.8% on a constant-currency basis.”

White adds that growth is expected to slow somewhat in 2017, but the company has a cost cutting programme in place to continue to drive growth.

Instant gratification

With the rise in technology, society has become a vehement consumer and we want the information, service and goods instantly.

Herberts says that with the advent of firms like Just Eat, Deliveroo and UberEats, consumers can order takeaway or event restaurant quality food from the comfort of their sofa with just a few taps of their smartphone.

“Just Eat saw 62% order growth in 2014, 58% in 2015 and year-to-date 2016 is running at nearly 40% growth. This looks set to continue, and while we may not see an increase in overall takeaway food consumption, the change in delivery mechanism looks set to continue in this nearly £26bn  global market.”

He says that rather more mundanely, supermarkets such as Marks and Spencer now stock pre-peeled vegetables, “for those with the time to cook but without the inclination to go through the whole hassle of preparation.”

Amazon and Netflix have provided people with instant or next-day entertainment and he says this trend is only set to continue as Netflix produces more and more of its own content, and Amazon continues to invest in its “already impressive delivery infrastructure”.

White also rates Amazon for investors to gain an international exposure as part of their diversification strategy.

“Amazon is leading the way globally with instant gratification, with its “Prime” service offering next-day delivery on a wide range of items. It is also trialling one hour delivery in certain areas. At the end of October, Prime officially launched in China, although competition from established rivals such as Alibaba will be fierce.”

In the UK, White says Amazon is also taking on Britain’s major supermarkets, with its Amazon Fresh service.

“Amazon has spent many years refining its delivery service, so is in an ideal place to take on UK incumbent players. Profitability is unlikely to be a major concern but the service will demonstrate to consumers that they can almost buy every product from Amazon.”

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