One of the easier ways to invest is to focus on trends such as the ageing population tailwinds in Australia and other countries.
The number of people aged over 65 is expected to grow by 32% over the next 10 years and 56% over the next 20 years.
The life expectancy in almost every country is increasing. There are some businesses that are focused on servicing people in retirement.
Here are three shares that could profit from the ageing population tailwinds:
Challenger Ltd (ASX: CGF)
Challenger is Australia's leading annuity provider with a dominant market share. An annuity turns a retiree's capital into a guaranteed source of income. The financial services royal commission has caused a lot of disruption in the wealth industry and it will some time to work through, but there's light at the end of the tunnel for Challenger, particularly if the government introduces retirement income rules.
A lot of retirees don't want the risks of putting their money into the share market, so an annuity could be more attractive to them. In the latest quarter Challenger reported that FY20 first quarter total annuity sales, of $842 million, were up 14% compared to the fourth quarter of FY19. Total assets under management (AUM) grew by another 3% to $84 billion.
It's trading at 15x FY20's estimated earnings.
Class Ltd (ASX: CL1)
Class is mainly a provider of cloud accounting software self-managed superannuation fund (SMSFs). The SMSF division is providing Class with consistent earnings at a high profit margin and high retention rate– revenue growth is highly dependent on how many new SMSF accounts it wins each quarter.
However, Class is also diversifying with different offerings including Class Portfolio, and Class Trust which is currently in the pilot stage.
Just yesterday the company announced it is acquiring NowInfinity, a leading corporate compliance and documentation technology business which is expected to add to earnings in FY21. It will mean that Class can provide a broader set of products and services to customers.
It's trading at 35x FY20's estimated earnings.
Lifestyle Communities Limited (ASX: LIC)
Lifestyle is a retirement village business for people aged 50 and over. All of its locations are in Victoria, mostly in Melbourne or fairly close to it.
It has luxury facilities at each location and each resident provides a growing source of rental income to Lifestyle Communities. As the total number if homes grows, Lifestyle Communities will receive a growing stream of earnings – plus it makes profit from each house sale.
Apart from the sense of community and good facilities, living there is attractive because it's cheaper than properties in the local area.
Foolish takeaway
Each business has attractive long-term growth tailwinds. However, I'm cautious about Lifestyle Communities and Challenger because of the very low interest rates. I think Class could be a solid choice, at least for the medium-term, if it's successful in its diversification strategy.
