Broad trends are quite often easy to identify but what is much harder to do is identify specific industries and companies that are going to economically benefit from these trends and deliver compound annual returns for shareholders over the long term.
Genomics or heart disease?
A key insight from Insync's work on the ageing population is the projected rate of growth in the 70-75 age bracket. This is the fastest growing five-year age bracket for all people over the age of 55 for the next 15 years and beyond. The proportion of people of this age that develop heart related issues are astronomical.
In 2017, of all deaths for people over the age 70, 43% were caused by cardiovascular disease. This is 2.6x the number of the next largest cause of death which is cancer. A major issue for this age cohort is that many patients are unable to undergo open heart surgery as the risks are too high for many.
The Heart - an age-old problem where the demand is accelerating
The heart is a highly focused organ. It has just one job to do, and it does it supremely well. It beats. Slightly more than once every second; that's 100,000 times a day and as many as three and a half billion times in a lifetime. It rhythmically pulses to push blood through your body and recycle it. And these aren't gentle thrusts, they are jolts powerful enough to send blood spurting up to three meters if the aorta is severed.
Advances in medical procedures for the heart has been one of the success stories of modern medicine. The death rate from heart disease has fallen from almost 600 per 100,000 in 1950 to only 168 per 100,000 today. As recently as 2000, it was 257.6 per 100,000. Yet it is still the leading cause of death. In the United States for example, more than 80 million people suffer from cardiovascular disease.
The cost to the US alone of treating heart disease has been put as high as US$300 billion a year. If left unchecked cardiovascular disease costs are projected to exceed US$1 trillion by 2035 according to the American Heart Association.
The combination of a rapidly ageing population and the escalating burden on healthcare systems allow companies that are treating heart disease to be significant economic beneficiaries. A market that is already very large today will become significantly larger and at a faster rate in the decades to come.
In comparison to surgical procedures, TAVR has a higher survival rate (99%), lower rate of stroke, bleeding, and other complications. General anaesthesia is not necessary in the procedure and most patients leave after just an overnight stay. This provides a significant cost saving as hospital surgery, anaesthesia and costs of stay are significant burdens to healthcare systems.
It takes time for the right company to appear.
Like many new and exciting technologies, it has taken time. Over 15 years in fact, for the market to start adopting TAVR to a level where the companies pioneering the technology become highly profitable and industry leaders.
Insync's record of successfully investing in Megatrends matches a combination of high and accelerating adoption rates, with a leading player beginning to dominate in one of its primary business sectors. This results in businesses which are both highly profitable and can grow sustainably at high levels over extended periods of time.
Insync's investment focus is on both Megatrends and profitability
Many healthcare and innovation investors have focused on genomics and gene editing. After all, it's emerging and exciting- the possibilities are immense.
Insync however considers this technology to still be in the 'hype phase' of its investment cycle. The pathway to identify future profitable winners is still highly uncertain and that adds significant risks to investors. Investing in the innovative treatment of the heart is a more assured way to grow your wealth (and health).
Not all innovation however leads to profitable growth in a company. Having the right methods to then assess which company, if any, can harvest a Megatrend and possesses the right financial and market position is equally as important. Simply holding a 'sector bet' across many stocks (e.g., with a passive ETF) in a sector such as healthcare presents additional and heightened risks, that Insync investors do not have to bear.