Think Consumer: Green Living
Though outperforming over the past 2.5 years, our ThinkGreenLiving Index hasunderperformed the major indices during the first half of this year. We believethat this is due to green companies often being seen today as luxury or higherend, and such stocks have suffered in this weak consumer environment. Wealso believe, however, that the longer-term consumer trends are still shiftingtoward healthier lifestyles and that, down the road, this may be seen as a verygood time to buy many of the stocks in our Green Living universe.
KEY POINTS:
ThinkGreenLiving Index
Our GreenLiving Index is comprised of the top 50 stocks in our universe, basedon market cap, with the universe defined as any company that benefits fromconsumers wanting to live healthier and have more sustainable lifestyles;namely in the categories of Natural Products, Nutraceuticals, Active Lifestyle,Diet and Weight Loss, and Real Food Restaurants. We weight the index bymarket cap with a 5% cap and rebalance it every six months.
Some Interesting Anecdotes From The Quarter
Target and Barney's share eco-apparel line:Target introduced a line of eco-friendly clothing by designer Rogan Gregory,made from certified organic cotton and other natural fibers. The line was firstintroduced in select Barney's stores in early May, as a way to promote theTarget line. We believe this move was symbolic of the transition of "green"products from the "hippie" world, to the high-end luxury world, and now back tothe realm of the average consumer, as the demand for green productscontinues to grow.
Pizza Hut rolls out all natural pizza:In May, Pizza Hut introduced "The Natural", a pizza made with multigrain crust,organic tomatoes, and all natural cheese. The pizza sells for $11, about $1more than the traditional alternative. Though currently being sold in Denver,Dallas, and Seattle, the Natural is expected to be rolled out around the countryin 2009. We take this as a sign that demand for organic and natural productshas reached all parts of the country at many different economic levels.
Eco-friendly paint may be mandatory in some geographies:Many consumers are wary of the fumes coming off of a fresh paint job, andpregnant women have long been advised to steer clear of them. Volatileorganic compounds (VOCs) that are emitted from paint have been blamed forenvironmental as well as health problems. With the surge of zero-VOC paintsfrom private companies Yolo Colorhouse and Mythic, as well as a recentlow-VOC introduction from mainstay Benjamin Moore, consumers seem to berecognizing this need. New regulations may also help instigate this change. Forexample, beginning this month, house paints in Southern California must havea VOC content of 50g/L or less, versus the 250g/L federal regulation. We takethese moves as a sign that consumers are becoming increasingly concernedabout the quality of their environments, both inside and outside the home.
