Baby boomers are a demographic bulge that continues to remodel society. This generation stretched the outer bounds as they entered elementary school, college, and the workforce. And they'll no doubt remold the face of retirement and old age as boomers' spending patterns change. How can savvy investors benefit from changes in boomers' behaviors?
Shake, rattle, and spend
There are 75 million baby boomers in America, and the number of senior citizens will more than double by 2050. Not only are boomers the fastest-growing age group, but also the largest buying group. In their early retirement years, baby boomers will spend money on discretionary goods and services. In late retirement years, boomers will shift their spending to essentials with the health-care sector positioned to benefit substantially.
Getting it together
Forty-four percent of baby boomers are not confident they'll have enough money to live comfortably in retirement. Sadly, many individuals neglect financial planning and investment management until they squarely face retirement. And if boomers haven't gotten their financial houses in order, brokerage firms like Charles Schwab (NYS: SCHW) stand to benefit.
Schwab has emerged from a rough patch of declining sales over the past several years. The stock has been beaten down by more than a quarter from its 52-week high. Meanwhile, the company posts respectable margins and fantastic return on investments and is seen growing at a 14% annual rate over the next five years. I also like that the stock pays a 1.8% dividend, and insiders hold 15% of outstanding shares.
Wanna extend your stay?
Many baby boomers spend their early retirement years taking advantage of the travel they skipped while building careers, raising families, and supporting college-aged kids. Hotelier InterContinental Hotels Group (NYS: IHG) stands to benefit. The hotel chain operates 4,400 hotels and plans to add 1,100 more.
Even though the company holds a greater percent of long-term debt than its competitors, its return on assets and return on investment are three to four times industry averages. While InterContinental also boasts revenue per employee that's 2.5 times the industry average, it posts net income per employee that's an amazing 10 times the average.
Temporarily down, but don't count boomers out
Arthritis and other degenerative joint disorders, which become more severe as people grow older, are the most common ailments that require knee and hip replacements. Enter MAKO Surgical (NAS: MAKO) , a medical device company that makes a minimally invasive robotic surgical system. MAKO benefits from a recurring revenue business derived from a "razors-and-blades" model. But this stock is not for the faint of heart.
The company has not turned a profit. But MAKO has zero long-term debt and has enjoyed a stellar five-year sales growth rate of 325%. Earnings are expected to grow 30% per year in the coming five years, compared to 18% for the medical appliance and equipment industry average. I think this company has spectacular growth potential fueled by boomers who want to stay active for as long as possible.
Pills, pills, everywhere are pills
Retail pharmacy giant CVS Caremark (NYS: CVS) is poised to profit from increased business due to aging boomers. Furthermore, the company recently secured millions of new prescriptions from a migration of Walgreen customers due to an expired contract with Express Scripts.
Look for business to grow as CVS benefits from the increasing Medicare Part D population. An added vote of confidence: Warren Buffett's Berkshire Hathaway backed up the truck earlier this year and bought even more shares of the company.
Golden girls and boys
Advances in medicine allow us to live longer, but this has increased our need for care when we're old and our bodies are worn out. Enter Manulife Financial (NYS: MFC) , a leading financial products and services company that offers long-term care insurance, which is continually highly rated by its consumers.
Manulife has a lot of cash on its balance sheet -- cash per share makes up more than half of its current stock price. The company appears undervalued as its PEG ratio is 0.88 compared to the entire life insurance industry average of 1.22. I also like that the company pays a dividend yield in excess of 4%.
Ponder for your portfolio
These already great companies are slated for even further growth fueled by the huge number of aging baby boomers. Research a few of these stocks for yourself, and consider if they make sense for your own portfolio.
Just as baby boomers will change the face of old age, my Foolish colleagues have found an exciting company that will change the face of business. To learn more about this one stock, feast your eyes on this free report.
At the time thisarticle was published Fool contributor Nicole Seghetti owns shares of CVS Caremark. She's not a baby boomer, but she has an old soul. The Motley Fool owns shares of MAKO Surgical. Motley Fool newsletter services have recommended buying shares of Schwab and MAKO Surgical. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.