by Alyssa Oursler | July 19, 2012 9:15 am
When you’re smack-dab in the hot part of earnings season, it’s easy to get bogged down with quarterly reports and stock fundamentals. But sometimes, it’s pays to take a step back from the flurry of numbers and estimates and just think — specifically, about the big picture.
For instance, ask yourself these questions: What’s the world going to be like in a couple decades? What things won’t change, and what things definitely will? What’s the forecast for the future? While they sound like nebulous questions, the answers have the potential to shape the markets for years to come.
Here are a few broader trends that look pretty certain — and how you can position your portfolio to profit:
The elderly population is increasing at a crazy rate — according to the Census Bureau, the percentage of Americans older than 65 will jump from 13% in 2009 to more than 20% in 2050. You can thank an ever-innovating medical world that will keep baby boomers alive longer and longer.
The investing strategy is pretty simple: Most of those aging boomers eventually will need some sort of care — from health to housing. Although the Affordable Care Act has put a cloud of uncertainty over the near-term future of health care, it’s hard to imagine names like Eli Lilly (NYSE:LLY) and Pfizer (NYSE:PFE) won’t be relevant. Those stocks also pay nice dividends, increasing their power as long-term investments.
And, sure, aging folks say they prefer to get old and gray at home, but a lot of times that just isn’t possible. Which brings us to companies in the likes of Sabra Health Care REIT (NASDAQ:SBRA) and Omega Healthcare Investors (NYSE:OHI): Each draw in 90% of their profits from nursing homes and other properties aimed at elderly tenants. And like the pharma stocks, they offer fat dividends — both around a 7% yield at this writing.
Depending on which study you’re reading, in the next 20 years, nearly half of the population will be obese — and health care costs for such a trend are expected to be around $550 billion.
Considering that obesity-related conditions such as heart disease, stroke, diabetes and several types of cancer are on the rise, you could go back to some of the health care stocks mentioned before.
But there could also be a growing demand for anti-obesity and diet pills. Arena Pharmaceuticals (NASDAQ:ARNA), for example, just got the first prescription weight-loss pill approved in more than 13 years. Vivus (NASDAQ:VVUS) followed up with its own green light, and Orexigen Therapeutics (NASDAQ:OREX) has a similar product in the works.
A 2009 OECD study shows the number of people who are just a bit overweight is decreasing — overweight people are either “getting fit and dropping back down into the healthy weight category, or graduating to full fledged obesity or even morbid obesity,” as HealthHabits.com puts it.
And to stay healthy, more than half of U.S. consumers now regularly use some sort of dietary supplement. In fact, domestic spending on health supplements alone in the U.S. reached $28 billion last year, up from $23 billion a year earlier.
If this trend continues as expected, supplements made by companies like GNC Holdings (NYSE:GNC), Vitamin Shoppe (NYSE:VSI) and Herbalife (NYSE:HLF) soon could be considered consumer staples.
Thanks to both births and immigration, the Hispanic population is the fastest-growing population in the U.S., jumping 43% in the past decade to surpass the 50 million mark in 2010. According to data from the Census Bureau, Latinos now account for about one in four people under age 18.
There are a few ways to look at this trend, but any company that targets such a demographic has potential in the long run. Media companies are a good example: Entravision Communications (NYSE:EVC) has great growth potential, owing 53 television stations and 48 radio stations that cater to Hispanic audiences. Also, privately held Univision Communications has teamed up with ABC News — which is owned by Walt Disney (NYSE:DIS) — to create a cable channel geared to Hispanics.
“Love” might not even be as strong enough word — How about “addiction”? Either way, what used to be a luxury now is an inherent part of life, and that won’t change anytime in the near future; smartphones and tablets aren’t going anywhere.
It’s hard to say what exact models will be popular in coming years, but Apple’s (NASDAQ:AAPL) recent patent grant definitely gives it a leg up — the company now owns the graphical interface for blogging, email, telephone, camera, video player, calendar, browser, widgets, search, notes, maps aaaaand a multi-touch interface.
Also, companies that manufacturer the actual parts for technology are in line with out love for gadgets. Intel (NASDAQ:INTC) and Samsung, for example, are both established and also are the leading players when it comes to the semiconductor market, ranking Nos. 1 and 2 in the world by sales, respectively. Their products are used in just about everything these days, and likely will be for years to come.
The nation has an aging infrastructure system that is — and will continue to be — in dire need of repair. According to TRIP, a nonprofit out of Washington, D.C., about a quarter of major U.S. urban roads are in sub-standard or poor condition and only a third are in good condition. Those numbers are only going to get worse with time, and don’t even begin to consider our bridges, water systems, power grids and so on.
Yes, infrastructure comes from the government. And while that might not sound promising in 2012 amid tight budgets, we can’t ignore roads and power grids forever.
So, stocks like AECOM Technology Corporation (NYSE:ACM) or Sterling Construction Company (NASDAQ:STRL) could be solid for the long (over)haul.
To end with an obvious one, human beings are filthy — we create lots of trash, and that’s not going to change anytime soon, either. In 2009, for example, Americans generated approximately 243 million tons of waste — over half of which was dumped.
Cue companies like Waste Management (NYSE:WM), which has an attractive 4% dividend yield, to clean up our mess. Plus, to play off of the growing health care and medical field mentioned earlier, other that could benefit include Stericycle (NASDAQ:SRCL), which is in the medical waste business.
As of writing this, Alyssa Oursler did not hold a position in any of the aforementioned securities.
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