Obesity. Climate change. The world's ever-increasing energy needs. These are just some of the megatrends analysts see coming down the global pike, trends that investors can draft behind to make money from the companies that will benefit from them.
Welcome to the world of megatrend investing, where securities companies build portfolios around themes they believe will have long-term, lasting impacts on society.
No, It's Not Profiting at Others' Expense
If this investing style sounds like trying to profit from others' misery, rest assured, it's not. Sure, you could look at the global obesity epidemic and cynically buy stock in Coca-Cola (KO) and McDonald's (MCD), hoping that the world will keep overindulging its way to your benefit.
But what about investing in the companies positioned to fight obesity? Or those which, at the very least, will be forced to deal with the unavoidable repercussions of an overweight population until the issue is remedied?
Bank of America Merrill Lynch (MER) is proposing just that.
Fighting Fat Around the World
In a new report titled "Globesity -- The Global Fight Against Obesity," Merrill Lynch proposes a basket of 50 stocks it sees making gains from the fight against global obesity. The report identifies specific segments of four key sectors for investors to watch:
- Pharmaceuticals and health care: companies taking on obesity-related medical conditions; companies that specialize in equipment for overweight patients, like bigger beds and wider ambulance doors.
- Food: companies trying to access the $663 billion health-and-wellness market.
- Commercial weight loss, diet management, and nutrition: companies trying to access this already $4 billion U.S. market and the growing global one.
- Sports apparel and equipment: companies in tune with the belief that governments and the general public will become increasingly aware that exercise is of paramount importance in taking weight off and keeping it off, and as such will do well selling the necessary equipment.
A Clear Strategy for a Foggy Financial World
Intrigued by the idea of megatrend investing? You should be. It offers one of the closest things to a clearly defined investing path as you're likely to find in this post-crash, slow-growth financial world.
It doesn't take an expert to see that the four trends listed above are already in motion -- and catching the eyes of investors. "Obesity may be the most pressing health challenge facing the world today and efforts to tackle it will shape thinking by policy makers and in boardrooms around the world," says Sarbjit Nahal, equity strategist at Merrill Lynch Global Research and one of the researchers behind the globesity report.
But before you go charging off to contact Merrill Lynch or find obesity-fighting investments of your own, take careful note of the rest of Nahal's quote: "Global obesity is a megainvestment theme for the next 25 years and beyond."
That's right, 25 years and beyond. They don't call them megatrends for nothing.
Buying for the Really Long Term
Global obesity, climate change, energy issues, and the like are long-term problems. They are almost certain to play out, but your investing strategy has to be long term: buy-and-hold taken to the nth degree.
Buy-and-hold is still the classic way to invest in the stock market. It's what made Warren Buffet rich, and it's what The Motley Fool preaches as well.
That said, you can't just buy shares blindly in a trend-related company and then go fishing. Anyone remember Nutrisystem (NTRI)? Back in 2005, it became one of the hottest stocks around -- a company on a mission to help people everywhere tame their weight. At its peaks, Nutrisystem was going for more than $70 a share. Today? $10.95. So no matter what kind of investing strategy you follow, always stay alert.
You just have to remember that, over the long term, even companies surfing on the waves of megatrends are going to come and go. But keep a sharp eye on your investments, and those trends may reap you mega rewards.
John Grgurich is a regular contributor to The Motley Fool, and owns no shares in any of the companies mentioned in this article. The Motley Fool owns shares of Coca-Cola, McDonald's, and Bank of America. Motley Fool newsletter services have recommended buying shares of McDonald's and Coca-Cola.