Healthy Investing Could Make You Wealthy

Let’s start with the bad news: According to one recent study, 66% of Americans are overweight. Or even worse, more than a third of people are considered obese. This, of course, has allowed an array of otherwise avoidable medical issues to reach nearly pandemic levels, including heart disease, stroke, diabetes and some forms of cancer.

In the end we all pay the price, literally. Unhealthy people dealing with health issues put more strain on the health care system, which results in higher costs for everyone. Add to that a rapidly aging Baby Boomer population, and you’ve got a perfect storm for a health-care crisis.

Now the good news: The landscape is beginning to change. Looking and feeling good is in. Americans are getting off the couch and becoming more conscious about what is going into their bodies. For investors, there are huge opportunities investing in health and fitness companies, here are three ways that focusing on being healthy could make you wealthy:

Food: Eating organic and natural foods isn’t just a fad. It’s fast becoming the norm across a wider universe of health-conscious consumers. The trend that Whole Foods started has forced other grocers to re-think the way they do business.

Larger national chains like Kroger and Safeway can no longer afford to ignore this growing demographic and are increasingly making an effort to compete in the organic market. A core part Target’s plan to re-invigorate growth has been to overhaul its languishing food business, replacing many of its packaged and processed offerings with fresher, healthier alternatives. Even Wal-Mart and Costco has considered its approach.

This shift has opened the door for the companies that specialize in organic food products. Hain Celestial Group and WhiteWave Foods Co have been two of the biggest beneficiaries. Both companies supply grocers and other large chains nationwide with organic foods, milk and natural personal care products. While they both have lofty valuations, there remains room for growth given that we expect this trend toward healthy eating to continue well into the future.

Clothing: Today, it’s not enough to be healthy and fit. You have to demonstrate that with what you wear. That, in part, explains the so-called ‘athleisure’ trend. Gym clothes and sportswear are now fashion pieces. The light-weight running jacket has replaced the polo, running shoes have supplanted loafers and yoga pants have become the new blue jeans.

This has fueled the rise of Lululemon, which remains an attractive asset despite a few stumbles in recent years, including a well-publicized yoga pants recall and power struggle between the board and company founder Chip Wilson. In a world where consumers are willing to pay a premium high-quality athletic apparel, Lululemon will continue to perform well. The same goes for Nike. Possessing perhaps the strongest global brand recognition this side of Apple, the company continues to hold a dominant position in the athletic shoe market, and like Lululemon it fetches steep prices for its sportswear and other apparel.

Under Armour is hard to ignore, having carved out a nice niche with younger consumers and hit gold on recent marketing deals with high-profile athletes, including Stephen Curry and Jordan Speith. Under Armour has expanded into shoes and more importantly, technology by investing in fitness apps. But, ultimately, it’s hard to justify an investment in the company at its current valuation but the company continues to do very well.

Fitness Trackers: As the population gets older and more conscious of health, wearable devices have become more ubiquitous. You see people wearing them at the gym or running, but you’ll also see just as many at the office or out on the town. Wearing a fitness tracker is now in.

Whatever the case, Fitbit has taken advantage, doubling its sales within the last year. And looking ahead, they could do it again next year. At the same time, however, it has some legal hurdles to climb and its current valuation is unreasonably high. Fitbit has become the entry level product for fitness trackers and with its low price point, it’s building the market for trackers.

Garmin is another major player in this space that on its face seems like a no-brainer. But the problem is they have yet to release a product that is attractive to the mass market. Most of their offerings are tailored to hard-core athletes. That significantly limits Garmin’s appeal from an investment perspective. Garmin has had trouble attracting non athletes as they are not easy to use and lack style.

In the end, that leaves Apple as perhaps the best wearable play. The Apple Watch is multi-purpose, but its fitness tracker capabilities are among its best uses. Apple Watch combines functionality with style and with the legions of baby boomers focusing on their health, the Apple Watch does much more than counting steps. We see a great future for the Apple Watch and the other wearable companies. Also, Apple remains an under priced company, and – and perhaps most importantly – the watch is a very small part of its business, giving investors a greater level of product diversity than the other options like Fitbit are capable of providing.

In many ways, the trend toward healthier living has been exemplified by the declining fortunes of an American institution: McDonald’s. Once a staple, the fast food chain has suffered a very well-documented fall in recent years, juggling its management team multiple times amid declining sales and a seemingly up-hill battle to stay relevant.

Some of McDonald’s’ struggles have been due poor service. Some of them has been due to an overcrowded menu. But most of all, they are due to shifting consumer attitudes and tastes. As an investor, look for fresher, healthier alternatives.

Ross Gerber is CEO and president of Santa Monica, Calif.-based Gerber Kawasaki, an investment advisory and wealth management firm with approximately $375 million in assets under advisement. Gerber Kawasaki clients and employees may own positions in various companies mentioned in the article.

By Ross Gerber

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.