Rapidly growing cities presents an enticing investment opportunity for a conglomerate that’s well positioned to cater to the health needs of growing populations…
According to the United Nations, more than 6 billion people will inhabit urban areas of the world by 2050.In 1950, that number stood at just 746 million.
54% of the current population of 7 billion now lives in cities, and come 2050, the percentage will exceed 66%.
Leading the migration charge is India and China, whom the UN predicts will see 404 million and 292 million urban inhabitants, respectively.
So who’s at the top of the list now?
The UN ranked the following cities:
1) Tokyo, Japan – 38 million
2) Delhi, India – 25 million
3) Shanghai, China – 23 million
4) Mexico City, Mexico – over 21 million
5) Sao Paulo, Brazil – ~21 million
6) Mumbai, India – ~21 million
7) Osaka, Japan – over 20 million
8) Beijing, China – under 20 million
9) New York-Newark – 18.5 million
10) Cairo, Egypt – ~18.5 million
The primary catalyst for a growing population is the slowdown in mortality rates as people are living longer than ever before.
Come 2050, seniors over the age of 60 will reach 21.1% of the global population, or approximately 2 billion.
It’s a demographic that companies can’t afford to ignore.
And without a doubt, the major beneficiary of the aging market is healthcare.
Helping to prolong the lives of people are major advancements in medicine and technology, which are being used to eradicate infectious diseases, especially in developing nations.
That’s why it comes as no surprise that many of the countries that the UN’s list represent have seen their population’s life expectancy rise over the decades.
However, rapid urbanization has led to the proliferation of lifestyle diseases.
In India, for example, health risks such as tobacco smoking, high blood pressure and other metabolic risk factors, dietary risk factors, and alcohol use are on the rise.
Where fatal diseases like dengue fever and malaria have become less destructive than they have in the past, they are quickly being replaced by nagging health problems which ” cause a lot of pain, impair our mobility, and prevent us from seeing, hearing, and thinking clearly,” said Dr Christopher Murray, a director at the Institute of Health Metrics and Evaluation.
With this dilemma comes a greater need for more preventative care, such as nutrition, pain-relief, and other personal health products.
Fortunately, one company has the means to supply accessible solutions that cater to a majority of these lifestyle diseases.
Top Healthcare Stock To Buy Today:
When it comes to a global reach, few companies are as entrenched as Johnson & Johnson (NYSE:JNJ).
It’s difficult to define the scope of Johnson & Johnson’s health business, because it is so wide-ranging.
At the consumer level, JNJ sells everything from eye drops to mouthwash, painkillers to bandages. But they also have major pharmaceutical and medical device divisions.
By having all of these products under one umbrella, which is rather unique to the industry nowadays, it provides JNJ with strong portfolio diversification.
When one brand falters, there are plenty of others to prop it up.
According to Forbes, this consistency explains why JNJ has grown after-tax profit (NOPAT) by 10% compounded annually for the past 15 years. Its NOPAT has not declined in any year over that timeframe.
In the spring of this year, that diversity gave JNJ a return on invested capital (ROIC) of 15% — higher than all other major competitors such as Bristol-Myers Squibb (NYSE:BMY) at 10%, Pfizer (NYSE:PFE) at 5%, or Medtronic (NYSE:MDT) at 13%.
As mentioned, the world population is growing and JNJ earned over 53% of its revenue outside of the US for the last 6 months.
They’re also aging, and this has been reflected in sales growth for JNJ’s orthopedics products as well as its pharmaceuticals.
In terms of valuation, investors would say that its PE ratio of 19 is rather high compared to PFE’s 15 or MDT’s 17.
However, it’s difficult to ignore the health giant’s balance sheet which shows an impressive $28 billion in cash — more than enough to pay off its debts and pension liabilities.
Forbes predict earlier this year that if the company can grow its NOPAT by just 6% compounded annually over the next 15 years, it would give the stock a valuation of around $145 per share, nearly 50% higher than its current price.
It’s been a record rally for JNJ in the last two years, so some near-term volatility could be on the horizon.
But following its Q2 earnings report, the Company increased its earning guidance for FY 2014 to $5.85 – $5.92 per share.
As far as blue chips are concerned, JNJ is as solid as they come.
By the time the urban population swells in 2050, JNJ will be right there – profiting every step of the way.