Why Health Care Is the Mother of All Mega Trends
In 2004, The Washington Post Co. had a market cap of close to $9 billion.
The crown jewel of the company was The Washington Post, the nation’s fifth-largest newspaper.
But the advertising landscape was quickly changing from print to digital.
As advertising dollars flowed to online platforms, newspapers struggled to adapt.
Falling ad revenue and plunging circulation destroyed what was once a powerful industry.
In 2013, Jeff Bezos, founder of Amazon and one of the richest people in the world, bought The Washington Post for $250 million.
Even though Bezos is one of the greatest businessmen of the last 100 years…
The paper continues to lose money.
How’s it possible that Bezos, who founded Amazon and turned it into one of the most valuable companies on the planet…
Can’t turn around a simple business like The Post?
It’s a lesson taught by Warren Buffett that Bezos didn’t learn.
Buffett said that when brilliant management tackles a business with a reputation for bad economics … “It is the reputation of the business that remains intact.”
Bezos is seeing that play out right now.
The talk on the street is The Post is on track to lose $100 million this year.
I learned early on in my 40-year career that it’s much easier to swim with the tide than to work on my stroke.
It’s pretty hard NOT to make money buying shares of a business that is in a mega trend.
Investing in a company in a mega trend is like floating down the lazy river … you go pretty far without much effort.
And there’s one mega trend that’s sitting head and shoulders above the rest … that a lot of investors are missing.
And I think I know why.
1 out of 10
I started on Wall Street as a floor trader in 1983.
And over that time, I’d say that less than 1 out of every 10 professional investors I met used an approach that’s even remotely close to mine.
One out of ten!
Most investors stay in the middle of the herd and do what everybody else is doing. Artificial intelligence is hot, they buy AI stocks … electric vehicles (EVs) are hot, they jump and buy EV stocks.
The reason they do that is because they don’t have the confidence and conviction to think on their own.
I’ve been at lunches with hedge fund managers — friends of mine. We all share ideas about what we are looking at.
More times than I can recall, a great idea died on the table because, and I quote: “I could never buy an out-of-favor industry … my clients would kill me.”
In other words, they needed to buy what everyone else was buying. This way if it went down, they could all commiserate together.
No one would get blamed. If they all jumped into AI stocks and it went lower, their clients would understand because … “everyone else was investing in it.”
Folks … that’s not what Alpha Investors do.
We are not afraid of stepping out.
We don’t invest because others agree or disagree with us … this isn’t a popularity contest.
We buy because our facts and analysis are right.
We are confident in our decisions and don’t need confirmation.
EVs and AI are big mega trends. But the difference between me and my hedge fund friends is that I’m not buying until it checks all of my Alpha-4 Approach boxes:
Real talk: We think differently than other investors. That’s why we make money. Let me show you what I mean…
Hidden in Plain Sight
Some of the biggest mega trends of this decade are financials and semiconductors.
It’s estimated that the alternative asset management industry is currently at $14 trillion and growing.
And the growth of artificial intelligence, cloud computing, 5G and data volume are fueling the mega trends in the semiconductor industry.
Semiconductor sales are expected to reach $1 trillion by 2030.
But there’s one that could be the biggest trend of the next 10 years…
Let’s face it. We’re getting older. My knees can attest to that.
The baby boomer generation, those born between 1946 and 1964, are currently between 57 and 75 years old.
According to the U.S. Census Bureau, there are 70 million baby boomers in the United States.
In 2020, about 17% of the American population was 65 years old or over — a figure which is expected to reach 22% by 2050.
This is a significant increase from 1950, when only 8% of the population was 65 or over.
And this is fueling the mother of all mega trends: Health care.
It’s an inevitable industry — it can’t be stopped by recessions, inflation or the Federal Reserve’s interest rate plans.
In my Alpha Investor portfolio, we added HCA Healthcare (NYSE: HCA) in 2020 to ride this mega trend … during the height of the COVID-19 pandemic.
HCA is the largest hospital chain in the U.S. Hospitals during the pandemic were not doing any elective surgeries because of the overwhelming amount of COVID-19 cases.
Elective surgeries — those that need to be scheduled, such as hip replacements, pacemakers and such — are moneymakers for hospitals.
Hospitals were taking handouts from the government to stay open because they were caring for COVID-19 patients. In terms of making money, it was bleak.
But I saw behind the headlines — I saw an opportunity.
Once the pandemic slowed down, elective surgeries wouldn’t go away — instead, there’d be pent-up demand!
I spoke with colleagues of mine in the medical industry and they confirmed what I thought: Hospitals are going to be moneymakers.
So I recommended HCA and received a few emails from subscribers that weren’t too favorable. One subscriber asked if I had lost my mind!
I didn’t focus on that … because my facts and analysis were right — and I didn’t care who agreed with me.
Bottom line, HCA is up close to 200% since we added it … nearly four times better than the S&P 500 Index.
HCA Health Care vs. the S&P 500
That’s why we think differently.
The 800-Pound Gorilla in Health Care
Health care is essential … it’s basically recession-proof.
And Mr. Market is missing the boat on this one!
That’s why I just released a new health care recommendation in the Alpha Investor newsletter:
(Want to read the issue? See how you can here.)
I have been following this company for the past few years — just waiting for a great price before adding it to our portfolio.
Over the past five years, the company’s growth has moved higher along with the aging population.
Revenue has climbed more than 60% to $324 billion.
And according to our research, that growth is just getting started.
It’s a great day to be an Alpha Investor.
And if you want to be an Alpha Investor: Don’t swim against the current. Ride the wave of a mega trend.
I’d love to hear from you! What mega trend do you think will soar this decade? Share your answer here.
Founder, Alpha Investor
The OTHER Buffett Was Worth Over $1 Billion
We tend to talk a lot about Warren Buffett around here, and with good reason. He’s arguably the greatest investor of all time — the GOAT, if you will.
But the “other Buffett” deserves his kudos as well…
You likely already heard that Jimmy Buffett passed away over the weekend.
He was most famous for his iconic song “Margaritaville,” which will be proudly played in tiki bars and frat houses across the globe until the end of days.
But his music was about so much more than being an alcoholic, island-hopping degenerate (though let’s be clear, drunken island-hopping degeneracy was clearly a major part of the appeal).
“A Pirate Looks at Forty” is a contemplative look at middle age, and my personal favorite will always be “Changes in Latitudes, Changes in Attitudes.”
We’re not here to talk about music though. This is a financial newsletter, after all.
Where Did Jimmy Buffett’s Money Come From?
Jimmy Buffett was worth over $1 billion at the time of his death, putting him in truly elite company. Among living entertainers, only Jay-Z, Rihanna and Paul McCartney are believed to be wealthier.
Not even Taylor Swift, whose concert tour this year is shattering records, has that kind of money.
So where did Buffett’s money come from?
It wasn’t from music sales. I really like his catalog, but for the vast majority of listeners, he was a one-hit wonder with “Margaritaville.”
No, what made his fortune was turning that one hit into a brand.
There are Margaritaville-themed restaurants scattered across the globe. There are Margaritaville cruises and resorts, and even Margaritaville retirement communities!
Jimmy Buffett’s reputation as a businessman was such that he earned the respect and friendship of Warren Buffett. The two men aren’t related, but Warren once jokingly asked Jimmy to write him into his will.
Jimmy Buffett’s brand will live on for decades … perhaps centuries. I suspect that my future great-grandchildren will have some notion of what Margaritaville is or what it symbolizes.
I’ll be straight with you. It’s highly unlikely that you or I will ever be able to reproduce what Jimmy Buffett did. It’s not really a repeatable model — from jingle to million-dollar franchise.
But there are some lessons we can learn here:
To start, you have to get out there and hustle. While he built a reputation as a ne’er-do-well beach bum, Buffett was anything but. He built his empire one piece at a time by being willing to put in the sweat equity and by finding good partners.
But more specifically to our investment portfolios, Buffett shows the importance of branding.
McDonald’s makes mediocre hamburgers, but the golden arches are one of the most recognizable logos in the world. The McDonald’s brand is an intangible asset that you can’t really put a dollar amount on.
Mickey Mouse ears … the Apple logo … the Nike Swoosh … all of these brands command a premium.
And speaking of the Nike Swoosh, think about the career of Michael Jordan. He’s considered by most basketball fans to be the GOAT. (I still consider it a toss-up between Jordan, Kareem Abdul-Jabbar and Wilt Chamberlain, but that’s another story for another day.)
Jordan didn’t amass his estimated $2 billion fortune by dunking a basketball, however. He did it by building a brand — in partnership with Nike.
💡 Investing Tip: If you want to build a durable long-term portfolio, buy companies with strong brands when they’re on sale. It really is that simple.
It’s also something that my friend Charles Mizrahi knows a thing or two about. Learn more about the latest mega trend he’s investing in: the rising oil and gas industry, and his #1 oil stock pick.
Chief Editor, The Banyan Edge