The Obesity Epidemic
The Anti-Obesity Stock
Exactly one month from today we'll be celebrating the 236th birthday of the United States.
But what about today? Isn't June 4 special in any way? Of course is it.
June 4, 1615 saw forces under the shogun Tokugawa Ieyasu take Osaka Castle in Japan in The Siege of Osaka.
June 4, 1760 saw New England planters seize land in Nova Scotia, Canada from the Acadians in The Great Upheaval.
June 4, 1792 saw Captain George Vancouver claim Puget Sound for the Kingdom of Great Britain.
June 4, 1794 saw British troops capture Port-au-Prince in Haiti.
June 4, 1859 saw the French army, under Louis-Napoleon, defeat the Austrian army in the Battle of Magenta in the Italian Independence wars.
June 4, 1862 saw Confederate troops evacuate Fort Pillow on the Mississippi River, enabling Union troops to take Memphis, Tennessee in the American Civil War
June 4, 1878 saw the Ottoman Empire cede Cyprus to the United Kingdom.
June 4, 1916 saw Russia open the Brusilov Offensive with an artillery barrage of Austro-Hungarian lines in Galicia in World War I.
June 4, 1928 saw President Zhang Zuolin of the Republic of China assassinated by Japanese agents.
June 4, 1939 saw the MS St. Louis, a ship carrying 963 Jewish refugees, denied permission to land in Florida after already being turned away from Cuba while trying to escape the Holocaust.
June 4, 1942 saw the start of The Battle of Midway in World War II.
June 4, 1943 saw a military coup against the president of Argentina, Ramon Castillo.
June 4, 1944 saw Rome fall to the Allies, the first Axis capital to fall in World War II.
June 4, 1979 saw Flight Lieutenant Jerry Rawlings take power in Ghana after a military coup in which General Fred Akuffo was overthrown.
June 4, 1989 saw the Tiananmen Square protests violently ended in Beijing by the People's Liberation Army.
June 4, 2001 saw Gyanendra, the last King of Nepal, ascend to the throne after the massacre in the Royal Palace.
You'll have noticed, of course, that these events tend to revolve around war and other conflicts involving territory and power. And conflict is still with us today.
June 4, 2012 brings us growing troubles in Syria, as well as persistent problems in Afghanistan, Colombia, Egypt, Mexico, Pakistan, Somalia, Sudan, Yemen and more.
Which leads me to ask, "Will wars never end?"
The evidence of history says no.
On the other hand, I do detect a trend that gives reason for optimism.
I see that the leading economies of the world, which engaged in two devastating "world wars" in the past century, have been fairly peaceful since--at least on their own soil.
These countries have grown rich, they have stable governments and they have strong militaries.
In fact, these countries are so rich, and their militaries have such surplus of money and manpower, that they've been deployed to do battle in other countries, where conflicts do exist.
Those troubled countries, by contrast, are less developed, their standards of living are still relatively low and their governments (being either too weak or too strong) fail to represent the best interests of the majority of the people.
Optimistically, as these less-developed countries become richer, they will overcome their problems and eventually move into the ranks of stable, developed countries that fight no wars on their own soil.
As time passes, therefore, we should expect more and more stable, developed countries and fewer struggling, unstable countries.
But there is a pessimistic view, and it's this. There's a risk that as memories of the destruction caused by the 20th century's wars fade, future generations will fail to remember the lessons learned in those wars, and take up arms once again, to fight for land, power and natural resources.
So here's another question. Is there anything we can do that would reduce the probabilities of armed conflict in general in the years ahead?
My biggest idea is to elect female leaders, because women are naturally less disposed to fighting and more disposed to building relationships.
Any other ideas?
Moving on to investing.The market today stinks.
If you're a growth-oriented investor, cash is king.
But that doesn't mean you should ignore the market. In fact, times like this provide an opportunity to discover potential leaders of the next big advance, mainly by noticing which stocks are still being supported--or even better, which stocks are breaking out to new highs.
(Mike Cintolo, editor of Cabot Market Letter, wrote a great piece on this topic in last week's issue titled "Eggs and Tennis Balls." For more, click here.)
On my own Watch List of still-strong stocks (which has been getting smaller and smaller), one standout is Vivus (VVUS), which I last mentioned here on March 1, when it was trading at 22. It's now above 23, which is great, considering the rotten action of the broad market.
So what does Vivus have?
An anti-obesity pill!
It's called Qnexa.
It's designed to be taken once a day.
And it's not on the market yet--but it might be soon.
Now, I'm the last guy on earth who thinks a pill is the answer to America's obesity epidemic. I find it quite easy to say no to unhealthy food, and find it sad that so many people don't. But I try to be a realist, and I know the profit motive means that an anti-obesity pill could be a huge moneymaker.
So I'm interested.
Admittedly, back in March, just after the stock had shot up from 12 to 24 after outside advisers voted 20-2 in favor of the FDA's approving Qnexa, I recommended that you treat this stock cautiously, noting the following risks.
Vivus has been around for a decade, yet has never made a profit.
Half of Qnexa is phentermine, which gained notoriety as half of the Fen-Phen diet pill, which was pulled from the market because of its links to heart disease.
And VVUS (the stock) lacks deep institutional support, which means if FDA approval is not achieved, the stock could fall faster than an anvil following Wily Coyote off a cliff.
Yet the stock is still holding up! And I never argue with a stock.
Furthermore, this past week brought a news event that sheds a little more light on the determination of people in power to address the obesity epidemic--Mayor Bloomberg's ban on the selling of large soft drinks in New York City restaurants, movie theaters, stadiums and street carts.
I'm not wild about the infringement (admittedly minor) of a personal freedom, but I do think Bloomberg's action will help. Most important, it tells me how serious Bloomberg (and by extension others) is about this very costly public health problem. And I know the FDA people can't be immune to those influences.
So I'm a little more interested in Vivus than previously.
For the record, the FDA is expected to vote on Qnexa on July 17. Interestingly, it will vote on a competing drug--Lorcaserin, developed by Arena (ARNA)--on June 27.
I'm going to keep watching; someday, you may even see Vivus in the newsletter I edit, Cabot Stock of the Month. For more information, click here now.
Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory