Obesity Epidemic Could Mean Fatter Investment Returns

Companies that cater to an obese population could see decades of gains.

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Could your retirement depend on how fat the world gets?

A new report identifies stocks from companies that stand to gain from a vast market that's not likely to disappear anytime soon: people who are overweight.

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The report, from Bank of America Merrill Lynch, looks at long-term investment opportunities in areas that could benefit while the world's population grows fatter. Companies in areas like pharmaceuticals, food, commercial weight loss, and sporting goods are identified in the analysis. Altogether, the report points to 50 stocks that "should benefit long-term from the global fight against obesity."

"Global obesity is a mega-investment theme for the next 25 years and beyond," says Sarbjit Nahal, equity strategist at Bank of America Merrill Lynch Global Research, in a release accompanying the report.

The market of people with extra pounds to lose is gargantuan and growing. According to the World Health Organization, 1.4 billion people worldwide are overweight, and 500 million are obese. "By 2030, 50 to 60 percent of the population in many countries are on target to be classified as obese," says the report.

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That makes pharmaceuticals and healthcare a "significant market opportunity for new weight loss drugs and other approaches to dealing with obesity," in the report's words. Just this week, the FDA approved weight loss drug Qsymia, whose maker, Vivus, is among the stocks identified as having the highest exposure to the obesity trend. It is joined by obesity drug makers Arena Pharmaceuticals and Novo Nordisk.

Medical device manufacturers also will stand to profit, providing cardiovascular devices and orthopedic implants for patients with hearts and joints damaged by excess weight. The same goes for dialysis providers like DaVita, which cater to a growing diabetic population.

Likewise, food companies that are able to market themselves as part of the obesity solution stand to gain, like Danone, maker of Dannon yogurt and Evian water; produce seller Dole; and canned fruit and vegetable seller Seneca Foods, according to the report.

The commercial weight loss industry could easily take advantage of a population increasingly desperate to drop pounds. Anywhere from 42 to 54 percent of Americans are on a diet at any given time, according to the report, up from an estimated 33 percent in 2004. In a commercial weight loss market that exceeds $4 billion, Herbalife and Weight Watchers are two brands whose stocks could grow as the world's waistlines expand.

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Companies that promote sports and physical activity could also see long-term growth as people try to control their weight. However, these companies, like Adidas, Nike, and yogawear maker Lululemon, have less exposure to the obesity trend, with their growth dependent on many other factors than people's desire to lose weight.

This doesn't mean that investors should simply go buy up stocks tied to obesity. As with any investment, there are plenty of risks to playing with the trend. Weight loss drugs must go through a rigorous FDA approval process. The down economy also hurts these companies' prospects: the report notes that a healthy diet is more expensive than a junk food diet, and in a down economy, Americans are more likely to diet on their own than via programs like Weight Watchers or Jenny Craig.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at dkurtzleben@usnews.com.