We've been identifying sharemarket themes, taking a top-down approach to stock picking on the basis that if you get the themes right and apply a bit of a quality filter, the stocks will pick themselves.
We'll come to what you do after purchase, a lot of you probably think you're required to boringly update your fundamental analysis every day but we have a different approach. We'll cover that in later columns. For now let's recap on the sharemarket themes we've identified so far. They include:
■Making use of your own personal inside information: Quality sharemarket information that you didn't know you knew.
■The superannuation industry: Set to triple by 2020 and quintuple by 2030.
■Data centres: The IT dolphins are on their way out.
■Advertising spend: A good lead indicator of success.
■Persistent trends: The market only prices in the short term. What's trending now but will keep trending.
Let's keep going. Another theme that looks like it's here to stay is retirement stocks. Even the Treasury picked up on it as a thriving sector in the last budget. It's all thanks to the baby boomers.
Baby boomers are people born between 1946 and 1965 (born after the Second World War). In Australia that includes 5.5 million people, almost 25 per cent of the population. The first baby boomer is now 67, which means the first baby boomers retired in Australia just two years ago, meaning there are 18 years of baby boomers to follow.
If you are a baby boomer your best bet for a happy retirement of course is don't get old, keep working and stay healthy and, if not, book a cruise, join the grey nomads or be buried. Whatever you choose to do there is a host of industries waiting for your custom. They include healthcare, retirement living, the leisure industry and financial services including, once again, superannuation and, in particular, self-managed super fund industry.
None of this is new news, but in terms of long-term portfolio planning this is one theme that's going to persist beyond the next couple of years and although current forecasts take the next two years into account they haven't priced in the next 18 years that will underwrite the growth and lower the risk of investing in all companies exposed to these sectors.
We have already mentioned a few financial services stocks that should do well out of the growth in super. One of the obvious ones that had a great set of results recently is Challenger Group. There are lots more, from the fund managers to the wealth managers to the regional and major banks and insurance companies that have significant wealth management businesses.
That includes everything from Commonwealth Bank and AMP to Perpetual Trustees, Equity Trustees, Platinum Asset Management, IOOF and more. You might even hope some of the listed brokers do OK.
On the property front, there are several stocks that could claim exposure to the retirement-living theme. They include Stockland, FKP Property, Forest Place Group, Lifestyle Communities and Becton. Not sure you can throw caravan maker but mining-exposed Fleetwood into the same pool but it usually gets mentioned in the same breath. Maybe it should be slotted in with the leisure sector stocks. As usual this is not a recommendation, it's a look at what's in the pond.
On the healthcare front there is a host of stocks in the hospital and pathology areas to choose from. Unfortunately most look expensive, but then Ramsay Health Care looked expensive in 2010 when it had gone from $10 to $20. It's now $35.
Other retirement-themed stocks include funeral services, with InvoCare the most obvious. In 2006 it looked like it had done its dash, up from $2 to $4 in two years. It is now $11. It's still on 32 times with a 2.8 per cent yield but the risk is it'll still be on 32 times when it's $20. With a return on equity of 31 per cent, if it can maintain it, it could theoretically quintuple in six years if it didn't pay dividends, or in 10 years if it does.
But before you rush out looking to make a fortune let me note that investing in retirement means investing in gradual, if consistent, growth. It is also exposing yourself to "good" sectors and, as you'll find out, good things happen in good sectors. More themes next week.