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Fat America – You Ain’t Seen Nothing Yet

11 October 2012 in Trading Ideas

The latest data on obesity rates in the US are far from pretty – nearly 36% of all adults are obese, and so are about 17% of children aged 2 to 19, according to a report earlier this year from the Centers for Disease Control and Prevention (CDC).

But even more disturbing are recent projections that it’s only going to get worse.

How much worse? A recent report by the Trust for America’s Health and the Robert Wood Johnson Foundation estimates that half of US adults will be obese by 2030 – unless the citizenry changes its ways.

The report used state-by-state data from the CDC to project future rates, with an expectation that in every US state the obesity rate would be at least 44% by 2030. In 13 of those states, the average rate would exceed 60%.

Obesity, in this case, is defined as having a body mass index (BMI) above 30. BMI is calculated by taking your weight in pounds, dividing it by the square of height in inches, and multiplying the result by 703. According to a recent Reuters article, obesity rates have more than doubled from the 15% level in 1980, while obesity rates have more than tripled in children.

The correlation with obesity to education and income is also worth noting. The report found that about one-third of adults without a high school diploma were obese, compared with about one-fifth of those who graduated from a university or technical college.

And one-third of adults who earn less than $15,000 a year obese, compared with one-quarter of those adults making more than $50,000. According to Reuters, this connection to poverty reflects such facts that calorie-dense foods are cheap and that poor neighborhoods have fewer playgrounds, sidewalks and other amenities that encourage exercise.

Ultimately, these expectations of growing obesity carry with them expectations of more people contracting obesity-related diseases, from type 2 diabetes to endometrial cancer, meaning higher medical costs. According to the report, this will boost annual obesity-related medical costs by $66 billion to $210 million.

With that sort of economic impact, it’s also possible that methods to combat the obesity epidemic – either as treatments or preventative measures — will come into favor as a matter of a national health necessity. That’s part of the thesis behind the new Fighting Fat motif, which comprises stocks of companies that include diabetes care, stomach stapling, weight-loss drugs and fitness center operators.