Many pundits point to the fact that the developed world's population is ageing and this will have economic consequences: less people of working age supporting the retired; increased health cost burdens etc. The story line is pessimistic - less consumption, slower growing economies, stagnation, deflation.
Of course the press love an end of the world story (e.g bird flu, SARS, Aids, Y2K bug, Global Warming, Ebola) but could there be a silver lining to the ageing demographic? Certainly the older are fitter and many outside manual jobs happily work longer. The current over 65s are better off than their parents were (and their children may be) so perhaps their consumption will add to the economy (not least because they have time to spend).
A more interesting question is which companies will profit from the increasingly numerous and wealthy over 65s? The themes might be healthcare, leisure and money management.
Leisure is tough area (competitive, "bums on seats" and labour intensive) so I don't invest there.
Money managment might suggest investing in an asset manager (as unlike those reading this post, many people don't want to do it themselves). I quite like ADN (Aberdeen Asset Management) - no gearing, yields 4%, dividend has grown by 11% a year over the last five years, price to cash flow of 13. Solid management with good Asian expertise. Other Financials might be possible but one is enough.
Healthcare puts up some high quality businesses that I like:
Novo Nordisk (Denmark) is market leader in insulin and other diabetes and obesity products. Their underlying market grows at 7% year after year. They have a 30% net margin (after tax and R&D). No debt. Not cheap at an historic PE of 28 and prospective of 25 but an investment five years ago on a similar PE would have returned fourfold.
Fresenius (Germany) has two main businesses: operating hospitals and operating dialysis centres. Neither of these is a shrinking market. The long term stability of their revenues means they can gear up (80%) which increases return on equity to 13%. The share price has trended up at around 10% per annum over the last five years plus a modest yield. Never going to be a ten bagger but better than a bank deposit.
I would have added Shire who have an interesting business model (rare diseases) and a better balance sheet than big Pharma. I sold them after the AbbieVie bid as I didn't…
