live better, live longer - edward jones · live better, live longer. for many people, a new year...
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Please see the full company research reports for important disclosures on the companies mentioned in this report. You can also contact a local Edward Jones financial advisor or write the Research Department at Edward Jones, 12555 Manchester Road, St. Louis, MO 63131, to receive a complete company opinion.
Live Better, Live LongerFor many people, a new year means New Year's resolutions. And it's probably not surprising
to anyone that the most popular resolutions tend to be related to health and wellness – losing
weight, quitting smoking and exercising more. The U.S. population is aging, health care costs
are rising, and millennials are placing a strong emphasis on being healthy. As a result, 70% of
Americans say they are actively trying to become healthier1 – and not just when the calendar
flips to a new year. Health and wellness are more than just trends in the United States – they’ve
become a way of life.
Living Better: Conscious ConsumersIn an effort to improve their quality of life, consumers are spending more on health-related products. Thirty-four percent of consumers’ total monthly food, beverage, health, beauty and household product spending goes toward items that promise health and wellness benefits.2 Consumers are increasingly concerned with what they put in and on their bodies. They’re paying more attention to product ingredients and are 13% more likely to read product labels today than they were in 2006.3 People are also looking at the overall picture
when it comes to products – where ingredients are sourced and what the process is in preparing them. This increased awareness has given way to an increase in natural and organic
product sales, which have grown on average 10% annually since 2007. We estimate the industry will continue to grow at a high single-digit pace for the next several years. While
the majority of the natural and organic market is food, consumer products are also gaining popularity – for example, lotions, toothpaste and hair products that aren’t
made with chemicals such as parabens or sulfates.
$50.0
$45.0
$40.0
$35.0
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0
U.S. Organic Sales ($ billions)
$18.2$21.3
$31.4
$43.3
$49.4
2007 2009 2013 2015 2017
10% Average Annual Growth
Source: Organic Trade Association
We believe this lifestyle evolution doesn’t depend on the economy. Regardless of what's going on in the stock markets, people will continue to focus on improving the quality and length of their lives. As an investor, you may be able to benefit from this healthy lifestyle movement by investing in consumer staples and health care companies that are evolving to meet these demands.
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U . S . S E C T O R
R E P O R T
As natural and organic products gain popularity, price is becoming less important. Consumers are willing to spend 31% more a week on average on food that is produced in safe and sustainable ways.3 Many large, well-known companies are increasing their presence in the natural and organic marketplace through new product innovations and by acquiring smaller companies. Retailers are increasing shelf space for products catering to health-conscious consumers, and many food and consumer-products companies are launching new product lines featuring natural – and fewer – ingredients. Growth in this market is helping companies in the Consumer Staples sector offset slowing growth rates in their traditional product lines. While it is still up for debate whether natural and organic products are scientifically healthier, consumers have made up their minds. We expect them to remain mindful in their purchasing decisions over the longer term as they continue to strive to live better.
Living Longer: Delaying AgingAlong with maintaining a healthy lifestyle, people are also trying to delay the aging process. For many, the first step is forming healthy habits. People are exercising more, eating better, smoking less and being more diligent about preventive health care. Companies are doing their part by launching campaigns – incentives to quit smoking, for example, or offering nutritious food options – to help employees make healthy choices that can add years to a person’s life. Also, Americans are spending over $70 billion a year on medicines prescribed for age-related diseases such as high blood pressure, heart disease and diabetes.4 Pharmaceutical and medical device innovation continues to thrive, helping treat age-related conditions and even conditions that were once deemed fatal. All of these advances have led to an increase in the average U.S. life expectancy.
Not only are people trying to slow the aging process on the inside, but they are also trying to slow the appearance of aging. Anti-aging products have grown into a multibillion-dollar industry as people look for ways to hide age spots and wrinkles. Many consumer-products companies are developing new lotions, creams, serums and vitamins that cater to those looking to delay the appearance of aging, and this has been one of the largest growth drivers of the skin-care industry in recent years. Such innovation doesn’t show signs of slowing down, and we expect this to drive continued growth in the anti-aging space.
Source: OECD
U.S. Average Life Expectancy at Birth
80
78
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68
66
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Please see the full company research reports for important disclosures on the companies mentioned in this report. You can also contact a local Edward Jones financial advisor, or write the Research Department, Edward Jones, 12555 Manchester Road, St. Louis, MO 63131, to receive a complete company opinion.
Estée Lauder (EL)Offers many anti-aging and other skin-care products as part of its prestige beauty brands
Medtronic (MDT)Offers a wide range of health care products that help treat diabetes, heart disease, chronic pain and vascular issues
Novartis (NVS)Develops pharmaceutical and eye-care products to treat a wide range of diseases such as glaucoma and various cancers
How We Value and Recommend StocksWhen valuing consumer staples and health care companies, we use various methods including, but not limited to, comparing price-to-earnings ratios (P/Es) and PEGY ratios (price-to-earnings ratio divided by growth plus dividend yield) to historical and peer averages. We also use discounted cash flow models to incorporate long-term growth expectations.
Investment RisksSome potential risks involved with investing in the Consumer Staples sector include deteriorating economic conditions, a slowdown in consumer spending, rising interest rates, higher commodity prices and currency fluctuations. Some risks related to Health Care sector companies include political and regulatory risks, pricing pressure, and product failures and/or liabilities.
Investment IdeasIf appropriate for your portfolio, consider stocks in the Consumer Staples and Health Care sectors. We’ve highlighted some Buy-rated companies that we believe are poised to benefit from this movement as they attempt to grow the overall importance of health and wellness within their respective product portfolios.
Kraft Heinz Company (KHC)
Renovating many brands to remove artificial ingredients and introducing new natural/organic versions of classic products
McCormick (MKC)Leader in spices and seasonings used by health-conscious consumers to make food taste better instead of salt and fat. McCormick’s premium spice line is entirely organic.
Procter & Gamble (PG)Many brands are innovating to offer chemical-free, natural versions of popular household products
Companies Helping People Live Better
Companies Helping People Live Longer or Delay Aging
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Analyst Certification I certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers, and no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in the research report. John Boylan, CFA; Ashtyn Evans, CFA; Brittany Weissman, CFA.
Important Disclosures Past performance does not guarantee future results.
Dividends can be increased, decreased or eliminated at any time without notice.
All investment decisions need to take into consideration individuals’ unique circumstances such as risk tolerance, taxes, asset allocation and diversification.
The Edward Jones Research Rating referenced does not take into account your particular investment profile and is not intended as an express recommendation to purchase, hold or sell particular securities, financial instruments or strategies. You should contact your Edward Jones financial advisor before acting upon the Edward Jones Research Rating referenced.
The firm has organizational and administrative arrangements in place to prevent and avoid conflicts of interest in respect to research recommendations.
It is the policy of Edward Jones that analysts or their associates are not permitted to have an owner-ship position in the companies they follow directly or through derivatives.
Analysts are not compensated based on investment banking services transactions or activities.
This publication is for information only. While the statements contained in this report are taken from sources that we believe to be reliable, we do not guarantee their accuracy. However, this statement does not apply to disclosures concerning Edward Jones or analyst certification. Some of this information is provided by an independent research service. The issues mentioned herein are subject to price change without notice. Additional information is available upon request.
Diversification does not guarantee a profit or protect against loss. You should make investment decisions based on your unique objectives, risk tolerance and financial circumstances. Investing in equities involves risks. The value of an
investment will fluctuate with changes in market conditions and may lose some or all of its principal.
Buy-rated companies mentioned in this report that are followed by Edward Jones (prices as of October 8, 2018):
Estée Lauder (EL- $139.98)
Kraft Heinz Company (KHC- $57.06)
McCormick (MKC – $136.07)
Medtronic (MDT – $95.97)
Novartis (NVS – $85.26)
Procter & Gamble (PG – $82.40)
Brittany Weissman, CFA edwardjones.comAshtyn Evans, CFA Member SIPC Equity Analysts
Actions for InvestorsRegardless of the overall health of the economy, we believe consumers will continue to strive for a healthy lifestyle and pay for products to improve their quality of life or help them live longer. As a result, companies are finding ways to meet the demands of healthier lifestyles. Many of these companies offer attractive dividend yields and can play a defensive role in your portfolio. For more information about opportunities in the Consumer Staples and Health Care sectors, talk to your financial advisor. Together, you can identify the stocks that may be appropriate for you.
Sources1. Nielsen and the Natural Marketing Institute. Health and Wellness in America: The Consumer Perspective. August 2014.
2. AlixPartners. Eat Well, Drink Well: Capturing the Health and Wellness Superuser in the Food and Beverage Sector. Fourth Quarter 2013.
3. Gibbs-rbb. 2014 Conscious Consumer Study.
4. American Academy of Anti-Aging Medicine. Anti-Aging and Longevity Market Facts.
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