Which Stocks Have the Biggest Exposure to Aging Baby Boomers?

Baby boomers have been a force to be reckoned with since they first came of age in the 1960s, wielding tremendous political and economic power these past five decades. Those Americans born between 1946 and 1964 make up about 25% of the nation's population, an enormous voting and buying block. Which means that as they begin hitting retirement age over the next couple of years, we're all bound to feel the seismic shift.

Consider this: The number of people enrolled in Medicare will almost double between now and 2030, jumping from 47 million in 2010 to some 80 million, while Social Security enrollment will grow from 44 million to 73 million. So while the collective cost of retiree benefits in 2010 was 8.4% of GDP, this number will jump to 1.2% in 20 years' time.

But our workforce won't be able to grow fast enough to produce the tax dollars needed to fund these benefits -- and with no source of financing, the U.S. budget deficit will skyrocket. And given Baby Boomers' considerable sway at the polls, benefit cuts are going to be a tough sell for either political party.

And look for Wall Street to start seeing the impact of a mass Baby Boomer retirement. The Boomers are richer than any group in history, accounting for 50% of all U.S. discretionary income, and 75% of drug spending.

Add their segment of the population together with the number of Americans above the age of 65, and you've got the single largest demographic group in the U.S. And according to J.P. Morgan strategist Marko Kolanovic, "their income and consumption patterns are also significantly different from those of the average consumer." Orthopedics, emergency medical services, cruises and anti-aging products are just a few of the products that could see upside from the aging Boomer trend.

So over the next few years, consumer companies targeting older households may see greater growth than those marketing their goods or services to a younger crowd. J.P. Morgan has compiled an Aging Population Index that tracks a selection of stocks with exposure to this group.

Given that this index has outperformed the S&P 500 Index in six of the past eight years, it may be worth having a look at them. (Click here to access free, interactive tools to analyze these ideas.)

Here is a list of the stocks included in the J.P. Morgan Aging Population Index:

Company

Industry

Performance Over Last Year

American Medical Systems Holdings (Nasdaq: AMMD  )

Medical Appliances & Equipment

-7.79%

Carnival (NYSE: CCL  )

General Entertainment

51.24%

Celgene (Nasdaq: CELG  )

Biotechnology

5.32%

Chico's (NYSE: CHS  )

Apparel Stores

-13.17%

CNO Financial Group (NYSE: CNO  )

Accident & Health Insurance

39.61%

Coventry Health Care (NYSE: CVH  )

Health Care Plans

13.20%

HealthSpring (NYSE: HS  )

Health Care Plans

63.03%

Humana (NYSE: HUM  )

Health Care Plans

19.70%

Kindred Healthcare (NYSE: KND  )

Medical Instruments & Supplies

0.16%

Omnicare (NYSE: OCR  )

Drugs Wholesale

3.79%

Royal Caribbean Cruises (NYSE: RCL  )

General Entertainment

93.78%

The Scotts Miracle-Gro Co. (NYSE: SMG  )

Agricultural Chemicals

29.15%

The Talbots Co. (NYSE: TLB  )

Apparel Stores

-24.28%

Universal American (NYSE: UAM  )

Health Care Plans

67.83%

Varian Medical Systems (NYSE: VAR  )

Medical Appliances & Equipment

44.59%

Wyndham Worldwide (NYSE: WYN  )

Lodging

46.83%

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.         


Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

Coventry Health Care is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 07, 2011, at 4:07 PM, berryls wrote:

    Yeah - because the boomers have always done exactly what the generations before them did...

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