August 9, 2019
By Emily Heaven, Global research analyst specializing in the healthcare sector, Newton Investment Management.
Wellness has become a huge consumer trend over the last few years. From jade rollers to gluten-free everything to Fitbits to juice cleanses, taking care of your health and wellbeing has become the purview of the individual and we are now more aware than ever of our own health. This is creating a host of opportunities across the investment universe, although there are risks to be mindful of too, as is the case with any investment trend.
Around the world, greater interest in health and wellbeing is being prompted in part by the rising cost of healthcare. Since 2008, the average contribution of a US worker towards their healthcare premiums has increased by 65%, making staying healthy seem all the more valuable.1
The rise of technology has also contributed to this, as there are now a number of healthcare apps available to help with tracking food intake, water intake, activity levels, sleep quality, hormonal cycles and medication timings, among many other things. More than three billion healthcare apps were downloaded in 2015, up 30% year on year.2 This democratization of health information empowers people to do more to improve their wellbeing.
The Health Consumer
As people spend more on their healthcare and take more interest in it, we are seeing individuals behave not just as patients but more like consumers too. This means brand becomes very important. Healthcare companies now have new impetus to consider their branding and marketing to patients (not just doctors), to try to entice them to choose their products or services. Companies that understand the market and brand themselves effectively are likely to have an edge.
As consumers, people also expect greater convenience from their healthcare providers than they have in the past. No longer willing to wait two weeks to see a doctor, people are turning to healthcare apps, which enable consultations with doctors over the phone on demand, effectively allowing people to walk around with a doctor in their pocket.
In Israel, 57% of consultations with children now happen by smartphone, which is important for busy parents who want their child to be checked out as soon as possible.3 Companies with strong brands and the ability to improve the efficiency of healthcare delivery are poised to do very well. This trend is having a big impact on a number of companies involved in preventative measures too. The fitness industry is growing rapidly, with gym penetration increasing around the world. In the last seven years, UK gym membership has grown by 2.6 million.
Technology is part of this new exercise regime too, with 77% of 18-24 year olds using technology as part of their fitness routine.4 This might include using YouTube to do a workout at home, using wearable technology to track your heart rate and calorie expenditure, or using a fitness app to keep track of your progress in the gym or on the scales.
Intertwined with wellness is nutrition; malnutrition – which includes hunger, undernourishment, obesity and micronutrient deficiencies – affects 40% of the world’s population, and costs the global economy $3.5 trillion each year.5, 6 It is so severe that the UN has designated the decade of 2016-2025 as the decade for nutrition, in a hope to improve outcomes around the world. This creates a major opportunity for companies offering treatment for diseases related to obesity and nutrition deficiency as well as for those offering healthier options and nutritional supplements.
There is also an increasing awareness of the importance of mental health. With 300 million people across the world suffering from depression and the World Health Organization estimating that depression and anxiety cost the global economy one trillion dollars each year in lost productivity, there are economic gains to be made by treating mental health more effectively.
Wellness in Practice
There are many real-life examples that show this wellness theme in practice. From the US to South Africa to China, health insurance companies are now offering their members wearable devices to improve healthcare outcomes and reduce healthcare costs. A US health insurer that offered its members wearables to track their activity in return for a discount on their insurance premium found that those who accepted saw lower healthcare costs and far fewer hospital visits than those who did not. In contrast, there is evidence in Australia that younger, healthier people are shunning expensive healthcare insurance and instead investing in sports, recreational activities and supplements to keep them healthy instead.7
There is also a growing range of diagnostic tools available through healthcare apps on your phone. It is now possible to take a picture of a mole, upload it via your smartphone and have it analysed by a doctor anywhere in the world to find out if it is healthy or needs further investigation.
Of course, while there are many opportunities for companies in this area, there are also risks. Regulatory bodies and governments may well step in, as they have done recently in the UK by implementing a sugar tax to try to curb rising rates of obesity. Consumers also tend to demand price transparency as they aim to maximize value for money, and this is likely to threaten certain profit pools in healthcare, in cases where companies have thrived on lots of opacity about the true cost of their products or services. There are also lower barriers to entry in consumer-led healthcare compared to traditional healthcare, which may exert pressure on margins in the industry.
There are a number of aspects of our changing healthcare landscape that warrant further exploration, of which wellness and the consumerization of healthcare is only one. We believe that this focus on wellness, combined with the technological revolution, is going to present great investment opportunities over the coming years, as well as help us identify areas at risk that we want to avoid.
1 Kaiser: 2018 Employer health benefits survey, 3 October 2018
2 Research guidance, 31 January 2015
3 Dell Healthcare
4 Citi Research
5 GLOPLAN, 2016
6 UN News: One in three people suffers malnutrition at global cost of $3.5 trillion a year – UN, 1 December 2016
Newton and/or the Newton Investment Management brand refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Investment Management (North America) Limited (NIMNA Ltd) and Newton Investment Management (North America) LLC (NIMNA LLC). NIMNA LLC personnel are supervised persons of NIMNA Ltd and NIMNA LLC does not provide investment advice, all of which is conducted by NIMNA Ltd. NIMNA LLC and NIMNA Ltd are the only Newton companies authorized to offer services in the U.S. In the UK, NIMNA Ltd is authorized and regulated by the Financial Conduct Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Assets under management include assets managed by all of these companies listed above except NIMNA LLC, which provides marketing services in the U.S. for NIMNA Ltd.
All investments involve risk, including loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.
Views expressed are those of the advisor stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular investment, strategy, investment manager or account arrangement. Certain information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Dreyfus Cash Investment Strategies is a division of BNY Mellon Investment Adviser, Inc.; Dreyfus Cash Solutions is a division of BNY Mellon Securities Corporation, a registered broker dealer. BNY Mellon Investment Adviser, Inc., Newton and BNY Mellon Securities Corporation are companies of BNY Mellon. © 2019 BNY Mellon Securities Corporation, distributor. 240 Greenwich St., 9th Floor, New York, NY 10286.