The ageing demographics of Australia and other western countries can be an excellent source of growth if a business can take advantage of it.
One of the best ways to explain the potential of the ageing tailwind is that the number of people over 65 is expected to increase by 75% over the next 20 years and double over the next 30 years. Most companies on the ASX would love their potential customer base to double in 20 or 30 years’ time.
There isn’t one way, or a ‘right’ way, to play this theme. So here are four general ideas:
There is growing number of people who want to live with people who are at a similar life stage and have the same expectations of their living area.
Retirement villages have lots of amenities that a typical suburb doesn’t offer. The set up of the financial contracts also mean that the rental cost only takes up around 20% of the pension plus rental assistance – this is attractive in a country with extremely high real estate costs.
Some of the players in this area include Gateway Lifestyle Group (ASX: GTY), Lifestyle Communities Limited (ASX: LIC) and Aveo Group (ASX: AOG). I like Gateway because it has more sustainable fees, but Aveo could be trading at the best value compared to its assets.
The baby boomer generation has amassed an impressive amount of assets through savings and capital growth. This will likely continue with funds flowing into fund managers like Magellan Financial Group Ltd (ASX: MFG).
Some of those funds are then likely to be turned into annuities to safeguard the capital and generate income, thanks to Challenger Ltd (ASX: CGF).
The sad reality is that as we age we’re more likely to need some more of medical attention or assistance.
Companies that are most likely to benefit from the growing demand for healthcare services are hospital companies like Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO). Another company to benefit could be Paragon Care Ltd (ASX: PGC) if it can grow its client base.
Aged care providers
Eventually a certain percentage of the elderly population will need to be looked after in an aged care home. This sector has gone through a bit of a rough patch recently, but it appears the government (of either side) is going to be supportive again.
The ageing tailwind could be a treasure trove for some of the above companies. But, that’s no guarantee of success. As Japara and Ramsay have shown, share prices can fall even with long-term growth prospects.
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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited, JAPARA DEF SET, Paragon Care Limited, and Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended Paragon Care Limited and 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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