Betting on Boomers for a Healthy Investment

At one point in my career, I used the services of an asset management group in Scotland. Its principals worked in a castle, all seated at one extremely long table. Computers were not allowed.

The group's analysts were meant to "get the gut feel" of an investment by analyzing its numbers manually. And it selected investments on a "theme" basis.

One "theme," for example, might be the global surge of immune-deficiency diseases and the mounting demand for curative drugs. Another might be the demographic spike of people in the 20-to-30 age bracket in Southeast Asia and the likely surge in demand for housing materials and concrete there.

The group's invest-by-theme strategies were sometimes debatable, but produced handsome results. I believe there is an important "investment theme" taking shape in the U.S. that also has great promise.

I'm referring to the fact that the American population will age mightily over the next two decades. The "graying of America" is a powerful investment theme that you can still capitalize on.

According to the U.S. Census, 77 million American "baby boomers" -- people born between 1946 and 1964 -- will turn 65 over the next 20 years. Right now, there are approximately 38 million Americans age 65 and over. By 2020 there will be 55 million people age 65 and over (and almost 100 million people age 55 and above). And one out of four of you reading this article will live to be 90.

Clearly, our population is aging and life spans are extending, which will affect investments in forceful ways.

Powerful changes are already taking place in the investment markets due to demographics. For example, we may be seeing more market volatility and the formation of more speculative "bubbles" -- such as the dot-com bubble, then the real estate bubble, and now the emerging-market and precious-metals bubbles -- because soon-to-retire boomers are becoming anxious about their savings and intensifying the scramble for windfall returns.

But the impact is just beginning. Aging demographics are bound to affect everything from the profits of insurance companies to the demand for mobile homes and golf clubs.

If you're a long-term investor, this may be an excellent time to invest in health-specific sectors likely to benefit from America's aging.

Stocks Set to 'Boomer'ang

Here are four pharmaceutical and health care stocks that have attractive earnings and quite low price-to-earnings ratios. (The financials are as of Thursday's opening.)

Poised for a Boomer Boost?
COMPANY	P/E	D/Y	PERFORMANCE
			YTD	12-MONTHS
Bayer AG (BAY)	16.6	1.75	12.1%	43.6%
Bristol-Myers Squibb (BMY)	15.7	4.87	13.6%	6.2%
Johnson & Johnson (JNJ)	16.6	2.12	1.1%	(4.3%)
Merck (MRK)	16.9	4.78	17.9%	26.0%
Source: Morningstar