16 Ways to Trade the Baby Boomer Economy

01/07/2011 7:03 am EST

Focus: STOCKS

By the Staff at Kapitall.com.

Baby boomers have been a force to be reckoned with since they first came of age in the 1960’s, wielding tremendous political and economic power these past five decades. Those Americans born between 1946 and 1964 make up about 25% of the nation's population, an enormous voting and buying block. Which means that as they begin hitting retirement age over the next couple of years, we're all bound to feel the seismic shift.

Consider this: The number of people enrolled in Medicare will almost double between now and 2030, jumping from 47 million in 2010 to some 80 million, while Social Security enrollment will grow from 44 million to 73 million. So while the collective cost of retiree benefits in 2010 was 8.4% of GDP, this number will jump to 11.2% in 20 years time.

But our workforce won't be able to grow fast enough to produce the tax dollars needed to fund these benefits—and with no source of financing, the US budget deficit will skyrocket. And given Baby Boomers' considerable sway at the polls, benefit cuts are going to be a tough sell for either political party.

And look for Wall Street to start seeing the impact of a mass Baby Boomer retirement. The Boomers are richer than any group in history, accounting for 50% of all US discretionary income and 75% of drug spending.

Old Folks Rule

Add their segment of the population together with the number of Americans above the age of 65 and you've got the single largest demographic group in the US. And according to JPMorgan strategist Marko Kolanovic, "Their income and consumption patterns are also significantly different from those of the average consumer.” Orthopedics, emergency medical services, cruises, and anti-aging products are just a few of the products that could see upside from the aging Boomer trend.

So over the next few years, consumer companies targeting older households may see greater growth than those marketing their goods or services to a younger crowd. JPMorgan has compiled an “Aging Population Index” that tracks a selection of stocks with exposure to this group.

Given that this index has outperformed the S&P 500 Index in six of the past eight years, it may be worth having a look at them.

See Page 2 for a list of the stocks included in the JPMorgan Aging Population Index.

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1. American Medical Systems Holdings Inc. (AMMD)
Medical Appliances and Equipment  
Performance last year: -7.79%  

2. Carnival Corporation (CCL)
General Entertainment  
Performance last year: 51.24%

3. Celgene Corporation (CELG)
Biotechnology
Performance last year: 5.32%

4. Chico's FAS Inc. (CHS)
Apparel Stores  
Performance last year: -13.17%

5. CNO Financial Group, Inc. (CNO)
Accident & Health Insurance  
Performance last year: 39.61%

6. Coventry Health Care Inc. (CVH)
Health Care Plans  
Performance last year: 13.20%

7. HealthSpring Inc. (HS)
Health Care Plans  
Performance last year: 63.03%

8. Humana Inc. (HUM)
Health Care Plans  
Performance last year: 19.70%

9. Kindred Healthcare Inc. (KND)
Medical Instruments and Supplies  
Performance last year: 0.16%

10. Omnicare Inc. (OCR)
Drugs Wholesale  
Performance last year: 3.79%

11. Royal Caribbean Cruises Ltd. (RCL)
General Entertainment  
Performance last year: 93.78%

12. The Scotts Miracle-Gro Co. (SMG)
Agricultural Chemicals  
Performance last year:  29.15%

13. The Talbots Inc. (TLB)
Apparel Stores  
Performance last year: -24.28%

14. Universal American Corp (UAM)
Health Care Plans  
Performance last year: 67.83%

15. Varian Medical Systems Inc. (VAR)
Medical Appliances and Equipment  
Performance last year: 44.59%

16. Wyndham Worldwide Corporation (WYN)
Lodging  
Performance last year: 46.83%

Many of the above companies will continue to benefit from an aging baby boomer population.

By the Staff at Kapitall.com.

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