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By the sheer force of its numbers, the baby boomer generation is a demographic bulge that continues to transform society. Its members stretched the outer bounds as they entered elementary school, college, and the workforce. And they'll no doubt remold the face of retirement and old age as their spending patterns change. How can investors benefit from changes in boomers' behaviors?
Gray-haireds helping companies see black
For the next two decades, roughly 10,000 people will reach age 65 every single day. The number of senior citizens will double by 2050. Not only are boomers the fastest-growing age group, but they're also the largest buying group. During their early retirement years, baby boomers will spend money on discretionary goods and financial services. In late retirement years, boomers will shift their spending to essentials, with the health care sector positioned to benefit substantially.
Here are five stocks poised to profit from an aging America.
1. BlackRock (NYSE: BLK )
Roughly 44% of baby boomers worry they won't have enough money to live comfortably in retirement. Investment management firms like BlackRock are well poised to help boomers fill in the gaps in their financial planning. BlackRock is fiercely competing in the now $2 trillion exchange-traded fund market. According to the company, "It took 19 years for ETFs to cross the $1 trillion mark in 2009. The next trillion, a doubling of assets under management, came in just four years." BlackRock's iShares are the world's largest family of ETFs. The company reported earnings growth of 24% in its most recent quarter compared to the same period in the previous year.
2. CVS Caremark (NYSE: CVS )
Look for business to grow as CVS Caremark benefits from the increasing Medicare Part D population. Last year the retail pharmacy giant secured millions of new prescriptions from a migration of Walgreen's customers due to an expired contract with Express Scripts. CVS Caremark's one-two punch combination of a retail pharmacy and a pharmacy benefits manager enhances its competitive edge. Warren Buffett's Berkshire Hathaway backed up the truck last year and bought more shares of the company.
3. Pfizer (NYSE: PFE )
The drugmaker is refocusing on its core pharmaceutical business by selling or spinning off some non-pharma divisions. For instance, Pfizer announced it'll sell 20% of its animal health division, Zoetis, which fellow Fool Sean Williams has dubbed "The Most Exciting IPO of the Year." Many investors feel this strategy will allow Pfizer's drug pipeline to have a greater impact on growth. The company has also spent a lot of money on share buybacks.
4. Health Care REIT (NYSE: HCN )
This company is a real estate investment trust focusing on senior housing properties, skilled nursing facilities, and medical office buildings, though its investment in skilled nursing facilities has declined in recent years. In fact, the percentage of company revenues affected by either Medicare or Medicaid reimbursements has declined.Private pay percentage of revenues is expected to top 80% by the end of 2013.
5. Genworth Financial (NYSE: GNW )
Advances in medicine allow us to live longer, but have increased our need for care when we're old and worn-out. Long-term care insurance industry pioneer, and the company behind AARP's long-term-care insurance offerings, Genworth plans to expand internationally and divest non-core assets. After the company recently announced it would shed its mortgage insurance business, the stock gained 13% that same week. Genworth has a lot of cash on its balance sheet and boasts a P/E ratio of 12, half the industry average. Hedge fund manager David Einhorn added Genworth to his Greenlight Capital fund last year.
Ponder for your portfolio
Fueled by the growing number of aging baby boomers, these five companies are slated for growth. If I were to invest in just one of these stocks now, it'd be Genworth. As it streamlines business and interest rates eventually rebound, I like the company's prospects for future growth. Research a few of these stocks for yourself, and consider whether they make sense for your own portfolio.
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