Death Industry Revival Expected in 2013

“Nothing can be said to be certain except death and taxes,” said Benjamin Franklin. And with death being a certainty, one would expect that the business of death should always make money.

Of course, how much money is dependent on numerous factors, among which the most important would be how many people are dying. In short: demographics.

While the U.S. population grew by about 17 million people during the first six years of this decade, the number of people dying every year remained relatively static at roughly 2.4 million per year. In fact, in 2006, the U.S. death rate hit an all time low of 776 deaths per 100,000 population, according to the U.S. Centers for Disease Control. U.S. government data for that year, which is the most recent available, also showed that the U.S. life expectancy at birth reached a record high of 78.1 years.

Barring any cataclysmic disasters or high mortality pandemic disease outbreaks, the annual number of U.S. deaths will likely remain static for at least the next three years, reflecting the declining number of Silent Generation births between 1925 and 1935. In 2013, the number of Americans turning the key life expectancy age of 78 will start to increase, and then rapidly accelerate beginning in 2018, to reflect the steady increase in Silent Generation births beginning in 1940, that turned into a flood with the Baby Boomers starting in 1945.

Despite strong consolidation efforts in the 1990s, the U.S. funeral industry remains highly fragmented with the top 50 companies holding only about 30% of the market. In fact, the majority of U.S. companies still operate as a single funeral home, earning annual revenues of about $1 million. These smaller operations are able to successfully compete with the larger national companies because business is fiercely local. The primary advantage held by the larger companies is their ability to share resources, such as vehicles, personnel and marketing costs.

Companies in the business sell products, such as caskets, burial vaults, burial garments, memorial guest books, flowers, memorial stones, burial rights, cremation urns and related merchandise. Services can include body preparation, transportation, facility rental, the opening and closing of burial plots and cremation. Caskets are generally the biggest single-item cost of a funeral service.

The largest publicly traded U.S. funeral industry companies include Service Corporation International (SCI), Carriage Services Inc. (CSV), Stewart Enterprises (STEI), and StoneMor Partners L.P. (STON). The share prices of these companies, excepting StoneMor Partners which was founded in 1999, all showed significant growth in the 1990s (though far beyond the slow yet steady increase in U.S. deaths during that period), but essentially plummeted at the end of the decade and have been struggling ever since.

The sector has recovered strongly since the March lows, when these companies were priced for extinction. Since the March lows StoneMor is up about 78%, Service Corporation about 165%, Stewart Enterprises about 180% and Carriage Services more than 200%. The sector’s strong recovery has left many valuations stretched along with highly leveraged balance sheets. Therefore, we would strongly advise taking profits as we believe the sector is not set to return to a consistent growth track until 2013 when the number of deaths should turn upwards dramatically.


Disclosure: No Positions

Comments

[logicalthought:]

So, I guess what you're basically saying is that for the next three years, these funeral home stocks are "dead money".

Oct 23 11:26 PM

[richpee:]

This article points out some interesting facts to consider about the future benefits of dying in the next few years. Most importantly not to be political in any manner, but the current administration's hell bent attitude towards raising taxation to the highest levels ever seem in America's economic history would provide most Baby Boomers a good exit time before they were "taxed to death".
Or finding themselves actually able to die cheaper than to live the normal life style they were accustomed to, and pay the higher increased tax rate. This is probably the only way to beat the "taxes and Death" syndrome you speak herein too.

But you have to remember that people are dying to get into the cemeteries and that's possibly a good way to capitalized on a currently discounted funeral plot while real estate market is at it's low ebb. In years to come we 've all heard that they aren't making any more ground..dirt..real estate. It's here to stay as they say. SO check your local newspapers and look for adds like," To young to die I need money the Democratic are killing me but won't let me die. (They need my tax money)..selling cemetery lots dirt cheap!"

But beware of those people/business selling casket at discount wholesale prices on the internet you get what you pay for. Recent surveys of the deposited sublimed interned bodies have all stated the liners were cheap, uncomfortable and lumpy and hard to sleep on Plus they all leaked water after 30 days when the warranty was over with!

My last bit of advice is go into your local funeral homes and inspect their office, chapels etc and find out their connection if they are local or a franchise operation or a national firm. See for yourself if you'd be comfortable with these people..they will be the last ones to let you down!

Oct 24 09:22 AM

[logicalthought:]

>>richpee wrote: "they will be the last ones to let you down!"<<

Or the last investment that burns you!

Oct 24 09:48 AM

[Paul H. M.:]

Looks like we have a bitter McCain supporter.

He lost! Move on! The best man won!


On Oct 24 09:22 AM richpee wrote:

> This article points out some interesting facts to consider about
> the future benefits of dying in the next few years. Most importantly
> not to be political in any manner, but the current administration's
> hell bent attitude towards raising taxation to the highest levels
> ever seem in America's economic history would provide most Baby Boomers
> a good exit time before they were "taxed to death".
> Or finding themselves actually able to die cheaper than to live the
> normal life style they were accustomed to, and pay the higher increased
> tax rate. This is probably the only way to beat the "taxes and Death"
> syndrome you speak herein too.
>
> But you have to remember that people are dying to get into the cemeteries
> and that's possibly a good way to capitalized on a currently discounted
> funeral plot while real estate market is at it's low ebb. In years
> to come we 've all heard that they aren't making any more ground..dirt..real
> estate. It's here to stay as they say. SO check your local newspapers
> and look for adds like," To young to die I need money the Democratic
> are killing me but won't let me die. (They need my tax money)..selling
> cemetery lots dirt cheap!"
>
> But beware of those people/business selling casket at discount wholesale
> prices on the internet you get what you pay for. Recent surveys of
> the deposited sublimed interned bodies have all stated the liners
> were cheap, uncomfortable and lumpy and hard to sleep on Plus they
> all leaked water after 30 days when the warranty was over with!<br/>
>
> My last bit of advice is go into your local funeral homes and inspect
> their office, chapels etc and find out their connection if they are
> local or a franchise operation or a national firm. See for yourself
> if you'd be comfortable with these people..they will be the last
> ones to let you down!

Oct 24 12:06 PM

[themoneylad...:]

Smart Move: Foreign Currency Investments

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Now, the most important thing to remember is that investing in a foreign currency must never be considered in isolation. Consider its impact on your entire portfolio. For example, let’s say you have $20,000 in U.S. investments and you read an article that is very positive on Brazil so you go and invest $5000 in Brazil. You now have 20% of your overall investments only in Brazil which is a lot, even if you do have most of your investments in domestic currency. Ask yourself if you want to be so exposed to a single country.

A currency will do well versus the dollar for two reasons:
(1) The American economy is not doing well, so the dollar weakens. This is true at the moment.
(2) The foreign economy is doing well, so the foreign currency strengthens.

All non-dollar currencies share the first reason to some extent, so focus on the second reason. Look for currencies of countries that have low government debt, growing economies, younger population, stable politics, well-run or reforming legal systems and robust capital markets. China, Korea and India exhibit these signs. Countries that produce commodities like oil, copper etc. are also attractive as the world comes out of recession. Australia, Canada and Brazil are examples.

Again, all investing decisions must be made after considering the entirety of your financial situation.

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Oct 24 05:34 PM