Investments don't come much more reliable than the death-care industry. No matter what, people will continue to shuffle off the mortal coil, and bereaved loved ones will still pay handsomely to bid them farewell. But if you think the industry's completely free of surprises, think again.
In 2009, a weird statistical hiccup sent the funeral business scrambling for an explanation. North America's biggest death-care company, Service Corp. International (NYSE: SCI ) , reported 7% fewer funerals, a significant drop from the norm. The consultants hired to solve the mystery can only speculate at present that the Great Depression prompted fewer births between 1929 and 1936, and that medical advances are keeping us alive longer.
Beyond sudden and unexpected outbreaks of longevity, the funeral industry has plenty of challenges. Cremations have been growing in popularity, and they're less expensive than traditional burials. Companies such as Wal-Mart (NYSE: WMT ) and Costco (Nasdaq: COST ) have also found a new and potentially powerful revenue stream by selling inexpensive caskets online. (Lest anyone try to tell you otherwise, funeral homes are required to accept and work with third-party caskets.)
Still, the industry can make up for at least some of this lost revenue via additional products and services. If you'd like to invest in your own mortality, consider these businesses:
|
Company
|
CAPS Rating (out of 5)
|
Market Cap.
|
Div. Yield
|
P/E
|
|
Service Corp. International
|
***
|
$2.0 billion
|
2.0%
|
15
|
|
Hillenbrand (NYSE: HI )
|
*****
|
$1.2 billion
|
3.7%
|
12
|
|
Matthews International (Nasdaq: MATW )
|
*****
|
$970 million
|
0.8%
|
15
|
|
Stewart Enterprises (Nasdaq: STEI )
|
****
|
$460 million
|
2.3%
|
12
|
|
StoneMor Partners (Nasdaq: STON )
|
***
|
$320 million
|
9.6%
|
18
|
Data: Motley Fool CAPS, Yahoo! Finance.
The companies above operate funeral homes and cemeteries, and make and sell caskets and other death-care supplies. The death-care industry isn't the fastest-growing, but it is growing, and its steady stream of customers is unfortunately guaranteed. Matthews International and Service Corp. International have each been growing their revenue by about 5%, on average, over the past five years, and StoneMor by 15%.
Some of the industry's big players have been accelerating their growth by buying up smaller operators, in order to achieve efficiencies of scale. Service Corp. International has "rolled up" many small funeral homes; it recently operated over 1,400 of them, along with nearly 400 cemeteries.
If this morbid industry interests you, don't be afraid to dig deeper into its companies. (About six feet down ought to do it.) If you fear a market meltdown, this stable sector could help breathe life into your portfolio.
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