Profit From the Retiree Rocket

by Ken Trester | September 18, 2012 8:35 am

With companies tripping over themselves to get into the wallets and pocketbooks of baby boomers, my focus is how to make money off of those firms targeting the boomers — a group that makes up more than a quarter of the U.S. population. According to estimates from Pew Research, 10,000 boomers turn 65 each day, which is expected to continue until 2030 or so.

One could argue that leisure products could benefit from the boom in retirees, and my scans revealed a couple of names in that space poised for near-term pops, including boat-maker Brunswick (NYSE:BC[1]), which is a strong buy.

Or maybe even airlines will get a boost as the recently-retired will travel more, and Delta Air Lines (NYSE:DAL[2]) is officially on a buy watch in my system.

Or perhaps retailers will benefit, as the over-65 set finds themselves filling their time with a little retail therapy. Costco (NASDAQ:COST[3]) and Amazon (NASDAQ:AMZN[4]) both are yielding short-term and long-term buy signals in my scans.

But undoubtedly, the best prospects for profiting from the baby boomers lie in the health care and related fields. Drug makers Bristol-Meyers Squibb (NYSE:BMY[5]) and Merck (NYSE:MRK[6]) are on my buy watch list, while Eli Lilly (NYSE:LLY[7]) is showcased as a “powerhouse” name.

Another strong contender is Medtronic (NYSE:MDT[8]), a medical appliances and equipment maker that specializes in cardiovascular technologies, including pacemakers, defibrillators and catheters.

Medtronic has risen with the rest of the market, but I see that it has another couple of dollars to climb in the near-term. As such, I’m recommending cheap, currently out-of-the-money call options to take advantage of a short-term jump.

Buy the MDT Nov 44 Calls at 65 cents or lower.

After entry, take profits if the stock price hits $44, at which point the calls should be at a money-doubling $1.40. Exit the trade if MDT stock closes below $41.50, at which point the option should be around 40 cents. So, you’re really only risking 25 cents for a shot at better-than-100% gains in a short time.

Now, a word of caution: The calls are currently trading about 10 cents higher than my ideal entry. I implore you not to pay more than 65 cents to get positioned because chasing trades will eat into your profits. Just set a limit order and be patient — and remember there are always new opportunities around the corner, especially if we’re looking to profit from the baby boomer bandwagon.

Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973.

Endnotes:
  1. BC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BC
  2. DAL: http://studio-5.financialcontent.com/investplace/quote?Symbol=DAL
  3. COST: http://studio-5.financialcontent.com/investplace/quote?Symbol=COST
  4. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  5. BMY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BMY
  6. MRK: http://studio-5.financialcontent.com/investplace/quote?Symbol=MRK
  7. LLY: http://studio-5.financialcontent.com/investplace/quote?Symbol=LLY
  8. MDT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MDT

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