February 3, 2009 2:25 am

A menu for when fat is an investing issue

Since October, whenever the market has gone down, I’ve felt an irresistible urge to eat.

I’ll consume an apricot Danish, or a corn muffin, or a hot dog, Pringles, Doritos, or anything with Cajun spices. If you have some corned beef hash when I’m in this state, please send it over. I’ll eat it all.

This is not a healthy lifestyle, and now that I’ve just breached the age of 41 I have to think about my metabolism and how it’s beginning to weaken. This happened to me once before, towards the tail end of the bear market of 2002.

During my entire adult life I’ve weighed my college weight except for that one time in 2002 when I gained about 20lb. I read all the diet books and nutrition sites but none of them made sense to me. So I came up with my own diet and it worked.

What follows is the “James Altucher FT Wealth Diet”. It took me about two months to lose the 20lb once I started using this plan. It consists of three meals a day: a breakfast, lunch and dinner.

Basically, you can eat any one thing you want for breakfast. It doesn’t matter what it is. So, for instance, good: a doughnut. Bad: scrambled eggs, bacon and homefries on one big plate. Good: a croissant. Bad: pancakes and sausages.

For lunch: eat whatever you want. It doesn’t matter. Use judicious portion control but don’t sweat it too much.

Dinner: this is critical – no white at night. No pasta and no dessert. Avoid pizza and other useless carbohydrates. Good: steak and broccoli. Bad: a side order of fries, regardless of what else you are eating. And, obviously, no snacking in between meals.

The important thing to understand about this diet is that it almost doesn’t matter what the individual meals are (although I think this diet is easy to follow and I know from experience that it works – for me). The key is the discipline of not snacking between meals. That’s the killer. But in order to have that discipline it helps to have some guidelines for what form the meals should take.

We’ve seen it all over the media: obesity is a national epidemic. About 60m Americans are considered obese and 9m are severely obese and those numbers are getting bigger every year. Because of obesity-related deaths and illnesses, the estimated costs on the US gross domestic product were close to $200bn in 2007.

Clearly a lot of money is going to be spent on this problem. But I don’t really like looking at the typical obesity-related plays. Those are too obvious, and they tend to do seasonally well in the first quarter of each year, but who knows about this year with all the other problems going on in the marketplace. Stocks such as Weightwatchers and Nutrisystem are just too obvious.

Here’s the way to play obesity. First off, the only thing that really works to fight severe obesity is gastric-bypass surgery. Since 1998, the number of such surgeries performed a year to combat severe obesity has risen from 13,000 to more than 200,000.

Without getting into details, the only pure play in this space is Synovus, which makes the staple-line reinforcement strips – called Peri-Strips – that are used when sewing up the stomach. Sales of these strips are increasing at 40 per cent a year regardless of the economy and most of that growth is fuelled by the growth in gastric-bypass surgery.

Another good backdoor play is Resmed , a company that makes masks that are used to detect sleep apnea. This is a common disorder in which a person has one or more pauses in breathing, or shallow breaths, while they sleep. The most common type of the ailment is obstructive sleep apnea, which happens more often in people who are overweight. Interestingly, the resulting oxygen deprivation that affects sleep apnea patients tends to prevent the breakdown of uric acid in the body.

This causes gout, which is a disease with no known cure and is also linked with obesity. GlaxoSmithKline, the healthcare company, makes Zylprim, which helps alleviate the symptoms of gout attacks. I think this is a good, long-term play that is not dependent on the economy.

Glaxo trades for less than 10 times forward earnings.

Living a healthy life is crucial to having a satisfying life and is more important than money in the bank.

When times are hard, it’s important to eat well, go to sleep early, and take care of your health.

This is, of course, so you can live to fight another day when times are once again good.

james@formulacapital.com

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