In terms of powerful, long-term global trends, it doesn’t get much bigger than the world’s ageing population. Over the last 50 years, life expectancy has risen by almost 20 years and it’s estimated that by 2050 there will be over 2bn people across the world aged 60 or older – more than twice the number of people of this age back in 2000.
Naturally, this demographic shift is going to provide a wide range of investment opportunities. With that in mind, today I’m looking at two stocks that potentially stand to benefit from the silver generation.
It’s no secret that as people get older, their need for healthcare increases. In the US, healthcare spending on the elderly is around three times that spent on the general working-age population. As such, I think global healthcare company GlaxoSmithKline (LSE: GSK) looks well placed to benefit from this fast-growing demographic.
GSK specialises in pharmaceutical medicines, vaccines and consumer healthcare products. Its goal is to be one of the world’s most innovative, best performing and trusted healthcare companies. With a market capitalisation of £74bn, the company is a big player in the healthcare sector, and one of the largest companies in the FTSE 100 index.
GSK shares appear to offer value right now. After a strong run between early February and late August, in which the stock climbed over 25%, the healthcare giant’s share price has pulled back below 1,500p recently. That leaves the stock trading on a forward-looking P/E ratio of 13.4 at present, which I think is a fair price to pay for a slice in this global business. Another appeal is the stock’s huge dividend yield. With the company expected to hand out 80p per share in dividends to investors this year, the prospective yield is a high 5.4%. GlaxoSmithKline isn’t the kind of the stock that will make you rich overnight, yet as a long-term play on the world’s ageing population, I think it has considerable potential.
Moving away from healthcare, other areas that could be set to benefit from an increase in retirees across the world include entertainment and gambling. One stock that looks interesting to me in this regard is small-cap Quixant (LSE: QXT).
Quixant designs and manufactures advanced hardware and software solutions for the global slot machine industry. The group shipped 52,000 gaming platforms in 2017, representing around 10% of the slot machines across the world that needed replacing. Based in the UK, but with operations across Australia, Germany, Italy, Japan, USA and Taiwan, the company has grown rapidly in recent years and long-term investors have been rewarded with 5-year share price growth of nearly 400%.
While half-year results released this morning were a little weaker than last year’s H1 results (revenue of $50.3m vs $56.9m, adjusted fully-diluted EPS of $0.0870/share vs $0.1169/share) due to an “unusually strong” first half of 2017, the company advised that it’s expecting a stronger performance in the second half of the year. It’s also on track to meet market consensus expectations for strong full-year revenue and profit growth. “The market across all our customers in gaming remains buoyant,” said CEO Jon Jayal.
Quixant shares currently trade on a forward P/E of 25.2. That’s a premium valuation, sure, but I don’t think that’s an unreasonable price to pay for the business considering its track record and ageing population-related growth prospects.
Do you want to retire early and give up the rat race to enjoy the rest of your life? Of course you do, and to help you accomplish this goal, the Motley Fool has put together this free report titled "The Foolish Guide To Financial Independence", which is packed full of wealth-creating tips as well as ideas for your money.
The report is entirely free and available for download today, so if you're interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?
Edward Sheldon owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.