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3 shares to profit from rich baby boomers

It’s funny how different countries can have different issues that the population argue about. In the UK a lot of people would call it ‘class war’ between the rich and the poor. In Australia it’s a fairly similar discussion, except the camps are usually baby boomers and younger people.

Baby boomers have done very well for themselves over the last couple of decades with asset prices rising to all-time highs and interest rates at extreme lows. Baby boomers are now a big cohort with a lot of wealth.

Just because you aren’t a rich baby boomer doesn’t mean you can’t profit from some of their choices. For example:

Class Ltd (ASX: CL1)

Class provides cloud accounting software for self-managed superannuation fund (SMSF) administrators. SMSFs are very likely to be owned by baby boomers and you need a hefty super balance to think about setting up a SMSF.

Class is growing the number of SMSF accounts and it is also growing Class Portfolio, which is a product for non-SMSF portfolios.

I have been turned off Class shares a bit over the last year, and the share price has fallen too. However, that fall could now represent a good value way to profit from people with big portfolios.

It’s currently trading at 33x FY17’s earnings.

Challenger Ltd (ASX: CGF)

Challenger is Australia’s leading annuity provider. Statisticians believe that the number of people over the age of 65 will increase by 75% over the next two decades. For Challenger, this should hopefully mean a growing pool of money going into annuities.

For a retiree to take up an annuity they need to have a decent amount of capital to begin with. Challenger has a growing pool of retirement assets on its balance sheet, it could be a really good way to profit from a baby boomer’s nest egg.

Challenger is currently trading at 17x FY19’s estimated earnings.

Ramsay Health Care Limited (ASX: RHC)

As we age we are more likely to need to visit the hospital due to illness and injury. The baby boomer generation may be used to having good quality service for the last couple of decades, so they may want to stay in high-quality private hospitals such as those offered by Ramsay.

More elderly people should mean more hospital visits. Ramsay is trying to capitalise on the growing demand by expanding existing hospitals and building new ones.

Ramsay is currently trading at 20x FY19’s estimated earnings.

Foolish takeaway

I’m not sure about Class as a market-beating idea at the moment. SMSFs may start to fall out of popularity with all of the changes that are happening to the rules. However, both Ramsay and Challenger could generate good long-term returns for investors due to the ageing tailwind.

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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited and Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia owns shares of Class Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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