Are You Profiting from Living Longer?

Subscribers to my investment newsletter, PowerTrend Profits, know I look at the intersection of economics, demographics, psychographics and more to zero in on profitable, long-term investments. As a part of my filtering process, I look for companies with strong earnings growth prospects, solid cash flow, pristine balance sheets and, if they have it, a rising dividend yield policy. That’s the financial side of the equation, but there is another aspect that I look for in PowerTrend candidates for my subscribers — pain points.

Pain points are those problems or vexing issues that a company or even a person may have to contend with in business or as part of his or her life. An example of a company’s pain point is a sudden increase in its cost structure. My subscribers have seen this happen with beef prices, which are up more than 50% during the last several quarters, and those subscribers have profited handsomely as we invested in the right protein alternative at the right time. I say protein alternative because pork and shrimp prices were climbing alongside beef prices. I mentioned “the right time” to reference the fact that they were advised of this opportunity back in early January, well before Wall Street started paying attention to the looming beef shortage.

One of the things I advise my PowerTrend Profits subscribers to do is to keep their eyes and ears open, because there are useful data points all around us each and every day. It seems like we hear more and more about one specific data point every few months — the aging of the population. According to a report from the Stanford Center on Longevity (SCL), in 1950 a 65-year-old man could expect to live to age 78, or an additional 13 years. By 2010, a man of the same age, 65, could expect to live to age 82, or 17 years longer. A woman age 65 in 1950 could expect to live another 15 years, to age 80, but by 2010, her life expectancy was 84.

There are a number of implications in that data, with some being more obvious than others. There is growing evidence that a significant portion of total healthcare costs is spent at or near the end of life. With the net population skewing older, it stands to reason healthcare should be a booming business during the coming decade or two. The number of years after retirement has also grown longer. In 1950, the average length of retirement was eight years for men, but given the combination of earlier retirement ages and longer life expectancies, that retirement length grew to 19 years by 2010. But with nearly a third, or 31%, of U.S. adults saying they have no savings or pension to help them afford retirement, according to the Federal Reserve Board, the need to invest — not just save — paints a favorable picture for shares of publicly traded investment management companies.

On the other side of the life and death equation, you can practically hear the long-term arguments for cemetery, internment, crematorium and other “death care” companies. As I am sure you are familiar with, death, burial and related services are always a painful and trying time. A cold-blooded person would say it’s a fact of life, but if I strap on my investor cap that looks for opportunities, death care stocks are in a secular growth trend given the population dynamics I described above. Moreover, death care stocks are among the less followed stocks on Wall Street, despite prospects for some companies to deliver double-digit percentage earnings growth while others offer near double-digit dividend yields. Underinvested sectors can offer opportunity if you pick the right stock or two — though not all companies are created equally, and there are valid reasons why some individual companies have little to no Wall Street research coverage. However, when entire sectors lack attention, it’s time to take a look.

It’s always amazing to me how so many investors simply follow what they are being told by the talking heads on cable TV rather than looking at the data and recognizing not only the changes that are going on around them, but the implications as well. I can tell you this — that is not the way I operate on behalf of my PowerTrend Profits subscribers, and, yes, I am in the process of drilling down on some of these opportunities. Come join us and find out which ones are worth buying.

In case you missed it, I encourage you to read my e-letter column from last week about how money awareness can aid your retirement. I also invite you to comment in the space provided below.