This week, we looked at three stocks in position to profit — in an under-the-radar way — from the coming shift in U.S. demographics and the developed world. These three companies sell to the needs of the 80 million baby boomers, more than 10,000 of whom are reaching the age of retirement every day.
The combined spending power of 80 million-plus retiring boomers will dramatically change demand across a variety of sectors, and while the market is focused on health care and housing, the smart money is getting ahead of the curve with other segments.
You need to invest in companies that provide basic needs to the demographic. My previous article looked at three companies that profit from companionship, leisure and a holistic approach to health care.
I’ve come across two companies that profit from one of the most basic human needs: security. These two companies are market leaders in their sector and have the potential to profit big, even without the oncoming wave of retirees and the promise of higher sales. These are my favorite ways to profit from the changing demographics because of the potential over the next decade.
Protection Against An Unlikely Threat
The first stock is a little controversial because it is about providing security not for the elderly, but from them.
Japan is further along than the United States in the graying of its population, so it’s helpful to study that country to preview possibilities for our own. In Japan, crimes committed by the elderly have doubled in the past decade, with shoplifters now more likely to be over 65 than in their teens. In 2012, shoplifting accounted for nearly 60% of the reported offenses by the elderly, and the number of unreported crimes may be higher.
Before I get a ton of hate mail, I am not saying that all elderly people are thieves. What I am saying is that 87% of retirees in the United States depend on Social Security as a major source of income and the program is not keeping up with living costs. The median income for people over 65 years old in 2010 was $25,704 for men and $15,072 for women, which is tough to live on.
With a growing national debt and spending cuts to social programs, the need for loss prevention and electronic security is going to get a boost over the next decade from more than just the elderly demographic.
Most of the company’s sales (65%) come from its diversified line of security and inventory management solutions that help retailers combat theft and increase inventory accuracy. The remaining revenue comes from radio-frequency identification (RFID) tags and label products. The company estimates the global market for inventory management and labeling solutions at more than $7 billion, with projected annual growth of 2% in developed markets and 7% in emerging markets.
But Checkpoint Systems, Inc. (NYSE:CKP) isn’t without its problems. The company reported a loss of 46 cents per share on a 10% decline in revenue last year, largely associated with continuing economic problems in Europe. As a result, the company is restructuring and reducing its headcount by 2,400.
Management expects revenue to be flat this year, but it also expects a profit of 71 cents a share on better expense management and other restructuring initiatives. Despite the rocky road, institutional ownership is extremely high at 96% of shares outstanding, and the stock has more than doubled over the past year.