2012 Retirement Portfolio Planning: Stocks To Consider For Next Year

 |  Includes: COST, GPC, LUX, NVS, SYY
by: Mark W. Bertolin

One of the exercises I go through at the end of each year is planning for my next phase of investing. Nowhere is this more important than in a retirement account or investments used to fund retirement. This planning includes both the expense side and the income side. As I postulated in a former article the current environment for investing seems disconnected from company fundamentals and to a great degree technical analysis. All the problems in Europe, the U.S. debt crisis, and continued unrest in the Middle East seem to have hijacked the impact of earnings and company market growth.

Since the macro market pressures for 2012 look to be unchanged from 2011 now is the time to take a careful look at current holdings and start research on new holdings. I won’t pretend to be able to guess the market direction or impact from the multitude of macro events. Nor will I attempt to present these ideas as sure fire hits. I don’t believe that anyone or any investment firm possesses the ability to predict the future economy or hold any advantage in a vision of the future that is investable.

What should we use to guide our investment thesis? Is it hopeless? Are we just betting and trying to skew the odds in our favor? Just the opposite: I concentrate on trends in the market that appear to be unavoidable and investable, then I adjust my portfolio to take advantage of my assessment.

For 2012 I will focus on the aging population in the U.S. and implications for market shifts. This trend is unavoidable, it is fact and it will be guiding the market for the future. I use the 2010 census data to test my investment thesis for each company in my portfolio. This doesn’t mean that all my holdings must cater to the aging population but they need to coordinate with trends. If a company is not serving the trends of the population can they exceed your expectations? Yes, there are always micro markets that will do well and companies that can execute inside of population constraints. But using the census data as a backdrop provides my portfolio with a data-derived backbone.

To accomplish my objective I ask simple questions. Is the company I am researching serving a state with a growing population and if its regional like a utility? Does the product address the aging of America? Is the product or market dependent on government support or regulation? These along with rigorous research gives me a fighting chance to beat the market.

Census Summary Data


Percent of 2000

Percent of 2010

40 to 44 years



45 to 49 years



50 to 54 years



55 to 59 years



60 to 64 years



65 to 74 years



75 to 84 years



85 years and over



Click to enlarge

I calculated the table above from population count by age group. As you can see there are meaningful trends by age that as investors we would be wise to consider. A few of my market assumptions are below. I try to not over think this. Instead I look at those I know in those age ranges and make assumptions from there. Its not scientific but this exercise is about looking outside typical investment data as an attempt to exceed my return on investment.

Thesis Components

Declining population in the core earnings years of 40 to 49 will have a negative impact on housing, consumer discretionary and overall market growth. Fewer people are available to invest and drive the index upward.

Increasing population in the 50 to 65 range will drive changes in medical, housing and risk asset markets.

Stable populations in the 65 to over 85 range will not have meaningful ramifications now but as the 50 to 65 year groups continue to age it will dramatically change consumer behavior trends.

Older people need to buy less stuff.

Older people shift investment mix away from risk and toward income and asset preservation.

The portfolio changes I am researching now for 2012 should all benefit from population trends.

Novartis (NYSE:NVS): $54.94, Yield 4.2%

Novartis is a healthcare company focused on medicine, preventive vaccines and diagnostics. They have a substantial ophthalmology division which is closely aligned with the 55 and up age group and should increase in value.

Luxottica (NYSE:LUX): $27.76, Yield 2.12%

Luxoticca is a manufacturer and retailer of eye glasses and is based in Italy. They sell prescription frames, lenses and sun-wear in the mid and premium price range. People usually need to wear reading glasses starting when they are over 50. This coordinates with the age range growth as well as healthcare and fashion. They have a large retail footprint with multiple brands and price segments.

Sysco (NYSE:SYY): $27.56, Yield 3.7%

Sysco is a leader in the restaurant supply business and includes sales into hospitals, schools, hotels and other non-home food service sectors. We might not feel like we have enough need or money to buy that new house but going out to dinner is a feel good activity. This combined with the aging population and services to institutions should help Sysco grow into the future.

Genuine Parts (NYSE:GPC): $56.86, Yield 3.07%

Genuine Parts distributes replacement parts for cars, industrial replacement parts, office products and electrical materials. As greater numbers of Americans age, cars will be driven longer, which means they will be repaired more often. New cars are great but will an aging America keep those new car leases in their retirement budgets?

Costco (NASDAQ:COST): $83.26, Yield 1.13%

Costco is a wholesale membership retailer offering members low prices on limited selections of high quality brands and private label products. With each passing year our budget dollars need to be stretched further. With the Costco model product quality is high and prices are low. They have a pharmacy in most locations as well as groceries and gas, making Costco a possible core shopping location for everyone in the 40 and over range with diminishing reach into the 65 and older groups due to package size and accessibility.

Adding demographic research to investing combined with your thesis for behavior in each age group should help steer a portfolio to market beating gains. Combining dividend yield with companies well positioned to take advantage of demographic shifts gives my retirement some added opportunity to excel.

Disclosure: I am long COST, SYY, GPC.