These stocks should do well because people live longer.
With the S&P 500 index and many of its components near all-time highs, it’s difficult to identify stocks with obvious upside in the near term. However, by considering secular market trends, investors can find particular markets with long-term growth potential. One of these secular trends is the aging of the global consumer base. The median global age today is 29.6, but Bank of America predicts it will be 36 by 2050 as baby boomers enjoy an extended lifespan. Here are eight stocks that Bank of America says will benefit from the so-called silver economy.
UnitedHealth Group (ticker: UNH)
UnitedHealth is the world’s largest managed care organization, with major operations in both the U.S. and global markets. In terms of product lines, geography and customer base, United is also the most diversified managed care organization on Wall Street. According to Bank of America analyst Kevin Fischbeck, United has some positive momentum headed into 2019, including expansions and new clients. United has also had tremendous success converting retirees to Medicare Advantage, where United has a leading 31.5 percent market share. Bank of America has a “buy” rating and $290 price target for UNH stock.
Capital Senior Living Corp. (CSU)
Capital Senior Living operates more than 125 senior adult residential communities throughout the U.S., housing more than 16,500 people. In addition to independent residency, Capital Senior Living provides home care and assisted living services. Analyst Joanna Gajuk says because nearly all of Capital Senior Living’s revenue comes from private payments, the company is insulated from potential government policy risk. Capital Senior Living owns roughly 65 percent of its property assets, which provides downside protection for the stock. Bank of America has a “neutral” rating and $10 price target for CSU stock.
Boyd Gaming Corp. (BYD)
The casinos operated by Boyd Gaming are popular destinations for retirees. While gambling hubs like Macau and the Las Vegas strip are attracting plenty of younger gamblers, older gamblers tend to gravitate more to downtown Las Vegas and regional casinos throughout the U.S. Boyd operates three casinos in downtown Las Vegas and 21 other casinos in other states including Illinois, Indiana and Mississippi. Analyst Shaun Kelley says Boyd is growing revenue, boosting margins and keeping an eye out for merger opportunities. Bank of America has a “buy” rating and $45 price target for BYD stock.
Lincoln National Corp. (LNC)
As Americans age, making sure their family is provided for once they are gone becomes an important consideration. In addition to being a diversified life insurance provider, Lincoln National has a range of offerings that appeal to older customers, including annuities, retirement products and financial services. Analyst Jay Cohen says the company demonstrated strong earnings growth and exceptional capital management. In the most recent quarter, Lincoln National reported its highest annuity sales in three years. Bank of America has a “buy” rating and $79 price target for LNC stock.
Apple (AAPL)
While a technology company like Apple may not seem like an obvious beneficiary of an aging population, the inevitable integration of technology into the health care field puts wearable devices such as the Apple Watch front and center. There’s no question Apple wants to make the Apple Watch a must-have health care monitoring system for older Americans. Analyst Wamsi Mohan says the market for the Apple Watch and developer tools such as HealthKit will take time to mature. In the meantime, Bank of America has a “buy” rating and $250 price target for AAPL stock.
Best Buy Co. (BBY)
If technology is going to become increasingly important in elder health care, elderly technology users are certainly going to need assistance. Best Buy recently acquired GreatCall, a leading provider of connected health and emergency services for seniors. GreatCall has a paying subscriber base of roughly 900,000 customers. Analyst Curtis Nagle says GreatCall has expertise in catering to older customers. GreatCall and Best Buy’s other senior service, Assured Living, will be key components of the company’s push to focus on service offerings. Bank of America has a “buy” rating and $90 price target for BBY stock.
Estee Lauder Companies (EL)
Technavio says an aging population is one of several factors that will drive long-term growth in the skin care market. Estee Lauder is a leader in skin care, makeup, fragrance and hair care. Analyst Olivia Tong says Estee Lauder’s exposure to a high-end customer base will help drive double-digit long-term earnings growth. Estee Lauder management says it expects to expand operating margins by 0.5 percent annually, and Tong says the company has a powerful growth engine in place. Bank of America has a “buy” rating and $170 price target for EL stock.
Johnson & Johnson (JNJ)
Johnson & Johnson has a three-pronged approach to the health care needs of an aging population. Not only is JNJ the largest company in the health care market in terms of valuation, it is diversified into consumer health care, medical devices and pharmaceuticals. All three segments should benefit from the increasing demands of the silver economy. Analyst Bob Hopkins says JNJ stock is trading near 20-year relative valuation lows. The company’s size and relatively stable business provide downside protection, but they could also limit near-term upside. Bank of America has a “neutral” rating and $150 price target for JNJ stock.
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8 Stocks to Buy for the Aging Economy originally appeared on usnews.com
