Playing the Baby-Boomer Trade: JPM's Aging Population Index

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Includes: AET, AMMD, CBRL, CCL, CELG, CHS, CI, CNO, CWTR, HCP, HUM, KND, NHP, OCR, RCL, SMG, SUNH, TLB, UAM, VAR, WYN
by: FP Trading Desk

Baby Boomers may be a little further from retirement now that the stock market has tumbled, but they are still getting older.

In the United States, Baby Boomers are now all over the age of 44 and some are turning 62. They make up an estimated 25% of the population, with another 12.7% over the age of 65.

“Together, these two groups constitute the largest demographic group in the U.S.,” said J.P. Morgan strategist Marko Kolanovic. “Their income and consumption patterns are also significantly different from those of the average consumer.”

He highlighted several sectors that are exposed to this massive demographic trend, noting that consumer companies that target older households could see more growth than those who focus on the broader or younger population in the next few years.

Healthcare sub-sectors like biotechnology, heathcare equipment, facilities and services serve the needs of the aging population, as do consumer discretionary companies in the restaurant, hotel and cruise line business given their relatively older client base. Even materials companies could benefit given the interest retirees have in gardening.

J.P. Morgan has put together an Aging Population Index to track a basket of stocks that have meaningful exposure to this group in North America. It has outperformed the S&P 500 Index in six of the past eight years in both absolute and risk-adjusted terms.

The index currently consists of 21 stocks, with a sector breakdown of 48% healthcare, 33% consumer discretionary, 14% financials and 5% materials.

Celgene Corp. (NASDAQ:CELG) (drug therapy)
Humana Inc. (NYSE:HUM) (Medicare)
Carnival Corp. (NYSE:CCL) (cruise line)
Hcp Inc. (NYSE:HCP) (REIT)
Royal Caribbean Cruises Ltd. (NYSE:RCL) (cruise line)
Coventry Health Care Inc. (CVH) (pharmacy manager)
Varian Medical Systems Inc. (NYSE:VAR) (Cancer treatment)
Omnicare Inc. (NYSE:OCR) (pharmacy, services)
Nationwide Health Properties Inc. (NYSE:NHP) (housing and care facilities)
Wyndham Worldwide Corp. (NYSE:WYN) (hotels and time shares)
Chico’s FAS Inc. (NYSE:CHS) (clothing chain)
CBRL Group Inc. (NASDAQ:CBRL) (restaurants)
Talbots Inc. (NYSE:TLB) (clothing chain)
Conseco Inc. (NYSE:CNO) (equipment)
American Medical Systems Holdings Inc. (NASDAQ:AMMD) (healthcare products)
Scotts Miracle-Gro Co. (NYSE:SMG) (Gardening)
Kindred Healthcare Inc. (NYSE:KND) (long-term care)
HealthSpring Inc. (NYSE:HS) (health benefits)
Coldwater Creek Inc. (NASDAQ:CWTR) (clothing chain)
Universal American Corp. (NYSE:UAM) (health benefits)
Sun Healthcare Group Inc. (NYSE:SUN) (nursing homes)