Investing For The Diabetes Epidemic

By Aaron Levitt | July 30, 2010 AAA

Sometimes in investing we can find opportunities in sobering statistics. On a global scale, diabetes is reaching epidemic proportions with an estimated 285 million suffers worldwide. In America, nearly 24 million residents have been diagnosed and that number is expected to grow by an additional 12 million by 2020. Costs for diabetes care in the United States alone are estimated to be over $218 billion. Whatever the reason for this growing worldwide trend, (increasing sedentary lifestyle, food choices etc.) opportunities exist for investors in the companies that are working towards a cure or treat diabetes. (Perform a thorough checkup to uncover a medical stock with a clean bill of health. To learn more, see Investing In The Healthcare Sector.)

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Long-Term Trend
The National Institute of Health estimates that obesity and related complications such as diabetes are our nation's chief health concern. There are nearly 133 million Americans that are currently considered overweight. This puts them at risk for the quickly growing Adult Onset or Type II Diabetes. The trend is a worldwide phenomenon. The World Health Organization research shows that more than 1 billion adults are overweight and at least 300 million of them clinically obese. As the world moves towards less physical activity and increased consumption of nutritionally deficient foods with higher levels of sugar and saturated fats, obesity rates and its complications will continue to rise, globally. This increase is often faster in developing countries. India is projected to have the most diabetes cases globally by the end of 2025.

A Portfolio Play
As we live longer, healthcare as a long-term trend makes sense despite the recent shake-ups regarding healthcare reform. Broad based exchange traded funds such as the Health Care Select Sector SPDR (NYSE:XLV) or the iShares Dow Jones U.S. Pharmaceuticals (NYSE:IHE) are good ways to play the sector. Since the HealthShares specific funds are no longer traded, investors wanting diabetes exclusive exposure need to look at individual companies. Here are a few picks.

Dialysis
One of the tragic effects of diabetes is the potential for kidney failure. Millions of people around the world suffer from this condition. Both DaVita (NYSE:DVA) and Fresenius Medical Care AG (NYSE:FMS) own and operate kidney dialysis centers. DaVita primarily focuses on the United States, while Fresenius operates around the world. Fresenius is also one of the chief producers of heparin, a blood thinner used in the dialysis.

Medical Devices
The diabetes sub-sector is the largest market for medical devices, growing from $12.4 billion in 2000 to current levels of nearly $27 billion today. Investors can play the device angle through several avenues from syringe manufacturers like Retractable Technologies (NYSE:RVP) and West Pharmaceutical (NYSE:WST), glucose monitors through Becton; Dickinson and Company (NYSE:BDX) or cutting edge insulin pumps through Medtronic (NYSE:MDT).

Diabetes Drugs
While there are several new therapy's in the works for diabetes care, insulin still remains at the bread and butter of the industry. Novo Nordisk (NYSE:NVO) became one of the first manufacturers of insulin in 1923 and currently supplies more than half of the worlds dosage. The company represents a pure drug player in the diabetes ring without the biotech stock risk.

The Bottom Line
Sadly, diabetes is quickly becoming a global epidemic. Nearly 300 million people suffer from the disease worldwide. As inactivity and high fat diets continue to seep into our lifestyles, the problem will compound them selves. Within these grim statistics, investors can find opportunities with the companies that are fighting this epidemic. The previous stocks represent a good starting point for further research. (Don't assume you're insured. Find out what you can expect from this healthcare program. For further reading, see What Does Medicare Cover?)

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