By: Jeff Reeves | UsaToday.com
Identifying the best investment opportunities is easy in hindsight. After all, even a novice investor can understand now why there was so much potential in Walmart way back in the 1990s, or Apple in the early 2000s.
Picking investments that have a bright future now, however, is a much harder task.
But while there are no sure things on Wall Street, the good news is that there are signs all around us pointing to potential investment opportunities — particularly in regard to America’s growing population of Baby Boomers who are at or near retirement.
“The Boomers as a generation were the single most important economic force of the past 70 years,” says Charles Sizemore, chief investment officer of Sizemore Capital Management in Dallas. “Their birth brought with it the great suburbanization of America; their working years brought the biggest boom in U.S. history; and their aging and retirement now presents us with unprecedented challenges.”
Indeed, the numbers are staggering. There were 44.7 million Americans older than 65 in 2013, and they made up 14.1% of the total population. By 2040, their numbers will almost double to 81.2 million Americans over 65, making up 20% of the population.
As this powerful demographic shift reshapes America’s society and economy, “fantastic investment opportunities” will be created, Sizemore says.
Key opportunities to watch
One of the biggest potential investment opportunities related to the aging Baby Boomer population is health care, says Dan Wiener, editor of TheIndependent Adviser for Vanguard Investors and chief executive of money management firm Adviser Investments.
“The Baby Boomers are the first generation that is not going to go softly into the night of their retirement,” Wiener says. “They are going to continue running and skiing and biking and dancing well into their 80s, and as such their demands on the health care system will be huge — from drugs to devices to the care itself. The industry is poised on a big jump in growth as the Boomers age.”
Sizemore agrees, but he cautions that it’s hard to know which companies will have the treatments that work and which ones will fall behind. To him, the biggest opportunity in health care is in medical real estate — namely, the companies that operate nursing homes or take rent from doctors’ offices.
This focus is a “safer and more predictable investment in the Boomers,” given that real estate investment trusts and other similar operations have predictable cash flow and the long-term potential to deliver consistent income via dividends.
Another interesting opportunity is to consider which retailers hold the most power with the Baby Boomer generation, because many of their shopping habits are unlikely to change dramatically now that they have had decades getting comfortable with their routines and favorite brands.
Louis Navellier, chairman and founder of Navellier Associates in Reno, says that many of his firm’s clients are interested in investing in companies such as grocery store chain Kroger, discounter Costco and Home Depot precisely because of their personal shopping tastes.
“I think Boomers like to buy companies that they shop at and utilize,” Navellier says.
And if they continue to feel good about the brand, both as shoppers and as investors, this could provide positive results over the long term.
Of course, it’s worth noting that things can and do change on Wall Street — even for these opportunities that seem like they are inevitable success stories. That means staying diversified, as well as thinking about investments like these as only part of a broader retirement strategy, Sizemore says.
“Even with good demographic tailwinds, a company can hit bumps in the road, of course,” he says. “So just as you would with any stock in your portfolio, make sure you keep your positions at a prudent size.”