Feeling chubby? Check out these obesity-blasting ASX stocks
Health & Biotech
Health & Biotech
Up until about four years ago obesity was an ‘it’ investment trend, as global funds spruiked the ‘sugar is the new tobacco’ theme and companies tested treatments specifically targeted at weight loss.
Since then the world has not become any more svelte and obesity as a way to fatten up your research has fallen out of favour, but it’s still a fascination for a few small caps and at least one global bank.
Holista CollTech (ASX:HCT) and Eagle Health (ASX:EHH) are two small caps directly targeting the obesity market.
Eagle Health is trying to sell a “diet shake” in China, promoting it as a diabetes control aid, but ran into problems in September 2018 when the Chinese FDA said it didn’t have the proper accreditation.
Holista CollTech has a much broader range covering low-GI bread, roti, pasta and noodles, low calorie sugar, and low fat chips.
Neither, however, have delivered investors much by way of returns over the last three years. Eagle is down 43 per cent to 23c since it listed in 2017 while Holista is down 60 per cent to 6.7c.
GI Dynamics (ASX:GID) is the other small cap directly involved with obesity treatment. It’s currently testing its EndoBarrier implant, which is a kind of sleeve delivered via endoscopy, and implanted in the intestine, where is can regulate the body’s hormone delivery.
The last results issued, in March, suggest it can help people lose about 10kg in 12 months.
As a biotech with a product that is some years off commercialisation, it’s in a different field to the prior two companies. They are down 32 per cent in the last three years, but from a lower base: 2.8c to 1.9c.
Pot stock Medlab Clinical (ASX:MDC) also has a sideline in weight management protein and gut health powders — none of which contain marijuana, it must be said.
Even grow-your-own-skin biotech PolyNovo (ASX:PNV) once had an obesity hustle.
It did a deal with Phosphagenics (ASX:POH) in 2010, when the latter was still run by convicted fraudster Esra Ogru, for a fat-blasting cellulite cream. The active ingredient as an oral fat-burning pill had just failed phase 2 clinical trials for obesity in women.
Phosphagenics only sold the label which developed the cream in 2017.
Australia is a bit small to have its own obesity ETF, but anything is possible in America.
Nasdaq-listed SLIM is up 41 per cent over the last three years and includes two locals in its 42 stocks and currencies.
Respiratory device maker ResMed (ASX:RMD) is on the list, as breathing problems are associated with obesity, as is Kiwi company Fisher & Paykel Healthcare (ASX:FPH) which also deals in breathing devices.
“Globesity” is an “expanding opportunity”, says a facetiously titled report from Swiss bank Julian Baer this month.
Genes are a big player in obesity and Australia and the US are the initial ‘fat countries’ when people talk about the issue, but the Pacific Islands have the largest per capita numbers and China has the most number of overweight and obese people, the report says.
Women are fatter than men, but “men are catching up fast”.
Investment houses and researchers from PWC, McKinsey, and Bank of America/Merrill Lynch to Wilson Asset Management last looked at the obesity theme in 2015 and 2016, when they brought together the economic cost, the continual evolution of the ‘wellness craze’, and considered the opportunities therein.
AMP Capital was a little late to the party, saying in 2017 that sugar specifically could be a bottom line baddy for some companies via rising public awareness.
Julian Baer revived the theme this month saying there are three times more obese and overweight people in the world than in 1980 and investors should be taking note.
The segments to watch are broad though: healthcare, food and beverages, wellness, sportswear, and wearables.
Within these categories they fancy healthcare companies working with cardiovascular, diabetes and kidney malfunction, and musculoskeletal disorders; food and drinks retailers and distributors; wellness tourism; athletic footwear; and health gadgets.
Among the ASX’s 2266-odd companies are squatters that fall into each of these categories, and as most of the All Ordinaries consists of small caps, it’s in the sub-$500m sphere where many are hiding.
Alone among the wearables purveyors are MyFiziq (ASX:MYQ), which has a smartphone body mass evaluator to tell you whether you’ve actually lost weight — or not. It recently signed a $6m deal with a Chinese company to plump up a very thin quarterly cash balance of $164,000.
Wilson Asset Management claimed in 2015 that JB Hi-Fi, Dick Smith and Harvey Norman were set to be beneficiaries of the health wearables craze but other retail headwinds muddied that trend for them.
Accent Group (ASX:AX1) is the main athletic footwear seller owning the Athlete’s Foot franchise — although outdoor clothier Kathmandu (ASX:KMD) may be able to make a claim that they too can classify as an athletic footwear specialist.
In the same vein, podiatry chain Healthia (ASX:HLA), which listed last year, could make a claim on the sports-feet-obesity theme.
Wellness tourism isn’t yet a thing on the ASX, but wellness certainly is.
A Stockhead review of the sector late in 2018 found 22 companies claiming to operate in the wellness space, from Bod Australia (ASX:BDA) to Bioxyne (ASX:BXN). See the full list here.
The Globesity report outlines an idea that health conscious consumers are more likely to reach for the organic banana than the cheap chocolate bar these days, and says food retailers and distributors are likely to be a better bet than Coca-Cola or McDonald’s.
Among the ASX’s small caps are a few companies trying to make a go of healthy food.
Oliver’s (ASX:OLI) has been trying since it listed and after years of promises, downgrades, board spills and disappointment, is again saying it’s turned things around.
Seafood, kombucha sellers, and milk formula makers have also been riding the health wave, mostly by tapping the Chinese obesity fears.
But this theme could also extend into Australia’s vibrant agriculture sector where Murray River Group (ASX:MRG) is trying to develop a market for organic raisins. Hemp food products, sold by companies like Elixinol Global (ASX:EXL) and ECS Botanics (ASX:ECS), are the latest health food du jour, and nuts as produced by companies like Select Harvest (ASX:SHV) are always a health stayer.
The Globesity report included biotechs involved in cardiovascular, diabetes and kidney malfunction, and musculoskeletal disorders in its obesity-money-maker trends, all large ASX sectors.
To name a small handful, CardieX (ASX:CDX) is a cardiovascular-wearables crossover, as its device monitors not just blood pressure but arterial stiffness. Admedus’ (ASX:AHZ) and REVA’s (ASX:RVA) heart implants are two small caps to round out the cardio theme.