Arena Pharmaceuticals, Inc. (ARNA), VIVUS, Inc. (VVUS): Investing in the War Against Obesity

Whole Foods. (NASDAQ:WFM) enjoys a leadership position in the organic and natural foods industry, and the company is also one of the best managed grocery retailers in the U.S. with profit margins substantially above those of the competition.

Whole Foods. (NASDAQ:WFM) has been remarkably successful in riding the healthy eating trend over the last years, and the company still has plenty of opportunities for expansion both in the U.S. and abroad. Management is forecasting sales growth in the range of 12% to 14% for 2014 on the back of 6.5%-8% comparable store sales growth and 8%-9% square footage expansion, so momentum is still strong for this organic food leader.

Nike Inc (NYSE:NKE) is a global powerhouse in the athletic footwear and apparel business, and the company owns the most recognized brand in the industry, which allows it to obtain superior pricing power and above-average profitability for shareholders. Product innovation, powerful marketing campaigns, and a wide distribution network have been the company’s success drivers over the last decades.

The company reported a 7% increase in revenues from continuing operations in the last quarter, and sales excluding currency charges grew at a 9% versus the same quarter in the previous year. Future orders were up 8% in the quarter, so Nike Inc (NYSE:NKE) is performing strongly and is well positioned to continue benefiting from healthier living habits around the world.

Bottom line
There are different approaches to investing in the war against obesity. Biotech companies like VIVUS, Inc. (NASDAQ:VVUS) and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) offer explosive upside potential if they manage to succeed with their obesity drugs, but the risks can be too high for many investors. These are high-risk, high-reward situations.

Companies like Nike Inc (NYSE:NKE) and Whole Foods. (NASDAQ:WFM), on the other hand, offer much more visibility and the opportunity to invest in high-quality businesses supported by strong secular tailwinds. They don’t have the same kind of explosive potential as small biotech companies, but they provide quality and reliability instead.

The article Investing in the War Against Obesity originally appeared on Fool.com is written by Andrés Cardenal.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Nike and Whole Foods Market (NASDAQ:WFM). The Motley Fool owns shares of Nike and Whole Foods Market.

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