Sunday, August 21, 2016

Beyond 'sin stocks'-companies whose business models depend on general bad health

While we all know about the classic 'sin stocks'(gambling, alcohol, tobacco, arms), not many would have thought of other stocks as benefiting from human vices/distress. However, if we look at what drives certain business models, we remove the blinkers and realize that certain stocks thrive on tragedy and on general economic distress.

  1. Healthcare/Hospitals-Correcting lifestyle diseases caused due to pollution. This especially applies to speciality clinics
  2. Pharma-Lifestyle diseases
  3. Snacks-Ready to eat/unhealthy-yet this appeals to obese people and 'salt sugar fat' unholy trinity helps to ensure this. 
  4. DG Set/Inverters-These are energy inefficient but as per Economic Survey estimate, quite prevalent due to poor grid power
  5. Real Estate in city centres: These survive due to long commutes and poor public transit-hence people prefer to stay in cities rather than in suburbs like what happens abroad
  6. Security Systems: Depend on penetration of crime. Zicom and Quickheal are examples of this
  7. Mobile broadband: Depend to a large extent on underpenetration of wired broadband. Otherwise, the natural choice for homes and offices is wifi/fixed line
  8. DTH: Depends on the cable operator not being present or not competing efficiently. However, this suffers from the tax arbitrage enjoyed by the (till now) unorganized LCO(Cable operator)
  9. Gyms/Fitness: Lifestyle diseases and obesity lead people to these options rather than the (simpler) morning walk.
  10. Skin cleansing: Companies like Kaya Clinics cite the increasing pollution and social pressure as reasons for people to take their treatments

I am not passing any judgement on these companies/sectors but am pointing out the scope of immense disruption here, if things change for the better.

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