The stock market can wait
One of the themes we follow here at Montgomery is healthcare. As western populations age, we expect their need for healthcare to increase materially. Also, the Baby Boomer generation is affluent, and it will likely be prepared to pay for quality care.
Recent research has also indicated that the generation behind them – Generation X – will also be placing increased demands on the healthcare system. In particular, Australian researchers have found that Gen X is developing obesity and related chronic conditions at an earlier age, and will need expensive treatment sooner than the Baby Boomers. This is thought to be due to increasing energy density in readily available foods, and improved transport making walking a thing of the past.
While this may well be useful as an investment theme, there is obviously a terrible cost here for individual Australians, and indeed, Australia as a nation.
Tim joined Montgomery in July 2012 and is a senior member of the investment team. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Tim focuses on quant investing and market-neutral strategies.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
John Penn
:
“This is thought to be due to increasing energy density in readily available foods, and improved transport making walking a thing of the past.”
My understanding is it’s due to greatly increased salt, sugar and fat in just about everything, and that portion sizes seem to have roughly doubled since the 70’s. The human body wasn’t designed to live in a pastry shop…
Personally I avoid public transport as it’s become evident to me over the years that it’s the easiest place to pick up cold and flu bugs (every time I stopped using it for a period I stopped getting colds.)
Roger Montgomery
:
Thanks for the that John. Interesting to have the portion size argument put in perspective. I did note recently – after visiting my mother and pulling a few plates out of her cupboard to share lunch – that plates seemed have grown in size. Hers were significantly smaller than I remember although I suspect that plate sizes have crept up and I have not noticed. Indeed I read this online after you posted your comment: “Let’s look at the plates we’re filling at meal time. Here are the facts. In the 1960′s a dinner plate size was 9 inches and fit about 800 calories of food. By the late 1980′s, it was up to 10 inches adding another 200 calories for a total of 1000 calories. By 2000, the newly enlarged 11 inch dinner plate held 1,600 calories and today’s 12 inch packed plate can handle almost 1,900 calories. We’ve doubled the number of calories you can fit on that plate. Now you see the problem with going back for seconds and thirds. Just do the math.”
John Penn
:
Yes indeed Roger, and like many things it all seems to have started in the USA – this is one of the best books on the subject:
http://www.amazon.com/Salt-Sugar-Fat-Giants-Hooked/dp/1400069807
Beth Codling
:
What are your thoughts on the inevitable end for us all, death? Surely the funeral industry will be one of growth. I bought Invocare years ago when it floated and am looking at an entry point to expand my holdings.
Roger Montgomery
:
Hi beth: You might like to read our comment here: http://rogermontgomery.com/a-cause-for-concern/
John Penn
:
Don’t be so negative Beth, top scientists are working on ending that Death thing right now, e.g. http://www.sens.org/
Andrew Legget
:
Very interesting observation, thanks for sharing this Tim. The fact that the report is saying that Gen X might need medical help BEFORE the boomers is an astonoshing find.
Healthcare is a great example of an industry with inelastic demand. You are not going to hold off getting medical help or your prescribed medicine because the price has went up. You can go the generics when available but you are still not going to put off the purchase completley.
A more elastic off shoot from healthcare and one where i think some potential upside might be available if you find the correct company is what i call the “fitness and wellbeing” market. Vitamins and supplement stores seem to be popping up everywhere whilst also seeing their shelf space and variety in supermarkets/chemists increase. There seems to be more Quinoa and less Big Macs. I might need to look at the recent McDonalds earnings to see if this hypothesis is backed by data.
I would be interested to see a trend of generations and active gym visits over the last few years as i belive that at the Gen Y level there has been a bigger shift towards what could be called healthier living (we will ignore the fact that some take steroids). If this trend exists then it may open up some opportunities for businesses attached to this trend.