Demographic Warning: 3 Stocks to Offload Due to the U.S. Fertility Slump


  • Sinking U.S. fertility rates are likely to undermine the businesses of companies whose products are primarily used by children. Here are three stocks to sell amid this trend. 
  • Disney (DIS): Many of the company’s movies and its theme parks are targeted toward children. 
  • Hasbro (HAS): The toy maker’s revenue sank 10% in Q3 of 2023. 
  • Take-Two Interactive (TTWO): TTWO was recently downgraded by an investment bank which cited a lack of positive catalysts for the move. 
stocks to sell - Demographic Warning: 3 Stocks to Offload Due to the U.S. Fertility Slump

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In the 15 years between 2007 and 2022, U.S. fertility rates sank sharply. In fact, from 2007 to 2022, the birth rate tumbled nearly 23%. As of last year, “the average American woman (had) about 1.6 children, down from three in 1950, and significantly below the “replacement rate of 2.1 childrenVox reported. This has led to this list of stocks to sell.

For America, this problem will likely be somewhat alleviated by our current, high immigration rates. But many if not most people who come here from other countries are likely to have little if any appreciation for American movies, American toys, and American video games. As a result, many of their children will be unlikely to have as much affinity for these products as the offspring of parents who grew up here.

In light of this situation, I believe that the prime audience for these products within the U.S. is contracting every year. Here are three stocks to sell to avoid being hurt by this trend.

Disney (DIS)

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Historically, Disney (NYSE:DIS) has famously relied on children to consume many of its TV shows and movies. Moreover, parents with children make up a huge portion of the visitors to its iconic parks in Florida and California.

Consequently, Disney is likely being significantly hurt by America’s low fertility rates.

Exacerbating this problem, Disney alienated many conservative American families with its crusade against education legislation that Florida’s state Legislature passed in 2022.

Meanwhile, Disney’s financial results have also been greatly undermined by the trend of Americans giving up cable television. Because of the latter situation, the profits of the firm’s TV channels have generally declined in the past several years.

Finally, the firm, which has a robust movie studio business, has also been hurt by the reduced popularity of movie theaters since the pandemic. Of course, low American fertility rates will likely hurt the popularity of many of its movies that are targeted toward children.

Given all of these points, I certainly put Disney on my list of stocks to sell at this point.

Hasbro (HAS)

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Toy maker Hasbro (NASDAQ:HAS) appears to be feeling the impact of the negative demographic trends.

In the third quarter of 2023, its revenue tumbled 10.7% versus the same period a year earlier to $1.5 billion. Moreover, it generated an operating loss of $169.5 million, versus an operating profit of $194.3 million in Q3 of 2022.

On Jan. 2, investment bank DA Davidson downgraded its rating on HAS to “neutral” from “buy.” The bank says that Hasbro appeared to be unsure about when its toy business would begin expanding again, while its video-game business was facing tough comparisons this year.

DA Davidson warned that the firm’s free cash flow could come in below its dividend payments for a second straight year in 2024. Moreover, the bank thinks that the toy maker will be unable to meet its goal of lowering its debt-to-EBOTDA ratio to 2.5 unless it reduces its dividend. The bank slashed its price target on HAS stock to $53 from $60.

Take-Two Interactive (TTWO)

Image of two boys playing video games
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Traditionally, many if not most of the biggest fans of video games are young. Thus, many video game makers are likely to be hurt by America’s low fertility rates. U.S.-based Take-Two Interactive (NASDAQ:TTWO), which gets the lion’s share of its revenue from video games, will probably be in the latter category.

Further, on Feb. 5, investment bank MoffettNathanson cut its rating on TTWO to “neutral” from “buy.” The firm thinks that the shares are unlikely to be boosted by any news for the foreseeable future.

The firm’s Grand Theft Auto VI game, expected to be released soon, probably won’t boost TTWO stock much, while its other games also probably won’t impress investors a great deal, MoffettNathanson warned.

The bank noted that the valuation of TTWO stock has climbed even though analysts’ long-term estimates for the firm haven’t increased.

The enterprise/EBITDA ratio of TTWO is a rather high and unattractive 69.4.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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