Portfolio managers are talking about the baby boomer generation -- a lot. It's reached the point that virtually every analyst has a "demographic play" based on that soon-to-be retiring army of 76 million Americans born between 1946 and 1964.
With so many ideas floating around about the best way to make money off the baby boomers -- we're talking stocks not inheritance here -- it's tough to narrow the selection down to just a few core holdings.
In order to make things easier,
polled a number of portfolio managers about their top picks. We also asked for a name or two that might not be on everybody's radar.
So here they are, the stocks investors should hope to buy before they -- the baby boomers -- get old.
Retail: Boomer Consumers
Despite television advertisers' fixation on the
generation, it's the
Dick Van Dyke Show
generation that spends the real money.
The American Association of Retired Persons most recent data shows that in 2001, people age 45 and over were responsible for 52% of all consumer spending in the U.S., up from 47% in the 1984 survey. In dollar terms, that's $2.28 trillion.
So where do the analysts think that boomer money is headed?
It might not all be headed into those little blue boxes, but one name that kept shining through was high-end retailer
Tiffany & Co.
"Baby boomers have the discretionary income to finally afford to treat themselves right," says Kim Scott, portfolio manager at Waddell & Reed. "And Tiffany's is definitely a place where they can do that."
Two names that are far more downscale than Tiffany's but equally as popular among money managers are
( HDI) and
Kenneth Dupre, an analyst at Muhlenkamp & Co., says Winnebago might not be as large as fellow recreational vehicle manufacturer
, but it is the leader in quality and name recognition. And with world events keeping more travelers at home, he sees more boomers hitting U.S. highways instead of European beaches.
One boomer consumer name off the beaten path -- and far from any open road -- was retailer
. According to Scott, "Chico's provides fashionable clothes with a comfortable fit for the aging female baby boomer that might have let her waistline expand a bit. And they have a great loyalty program called the Passport program which keeps consumers coming back."
Leisure: Casinos and Cruises
Famed Fidelity investor Peter Lynch would have been proud of the multitude of analysts who named casino and gaming stocks as their top demographic play. When asked "Why casinos?," nearly all the analysts replied, "Because that's where the boomers are."
"Demographics is driving the casino industry. Boomers not only have tremendous disposable income but they have a lot of time to spend it," says Dan Ahrens, portfolio manager of the Vice Fund.
Ahrens' top choice of
( HET) was popular among analysts because of the company's widespread operations outside the gambling meccas of Las Vegas and Atlantic City. Harrah's riverboat casinos in states such as Illinois, Mississippi and Missouri make them accessible for senior bus trips, and like Chico's, Harrah's cultivates repeat business through a strong customer loyalty program.
Two other gaming companies, slot machine manufacturer
International Game Technology
and lottery technology supplier
( GTK), were also mentioned by several analysts as a "pure play" on the gaming industry without the headache of owning a hotel stock.
Riverboat casinos are not the only maritime hot spots, according to the analysts surveyed. Luxury ocean liners were also widely mentioned as a prime boomer destination. And in the well-consolidated cruise ship category, two names kept coming into port:
Royal Caribbean Cruises
Drugs/Medical Devices: Bionic Boomers
All those high-speed Harley rides and Las Vegas gambling junkets cause a great deal of wear and tear on the aging boomer body. That's why analysts are bullish on companies that focus on putting broken boomers back together again.
Case in point, the analyst love affair with prosthetics makers
"Surgeries are not invasive anymore," said Chris Bonavico, portfolio manager at Transamerica. "Baby boomers can get new knees in a few days and be back on the tennis court or golf course in a few weeks. It's become an elective surgery with a rapid recovery."
But that's only the body work according to the analysts. What about keeping the senses sharp?
Dental, eye and skin care are also big boomer businesses. And portfolio managers say investors should consider taking a bite out of dental equipment suppliers
before it's too late.
Waddell & Reed's Scott also recommends ophthalmic drugmakers
( ACL). Allergan not only develops drugs to fight cataracts and dry eyes, it also manufactures Botox, which helps boomers in their fight against wrinkles.
And once those smooth-skinned boomers have replaced all the necessary spare parts and are ready to hit the town?
is still the top large-cap pharma choice among portfolio managers, even in the face of competition from other erectile dysfunction drugs.
"When Cialis and Levitra came out, it increased attention to the market," says Robert Millen, co-manager of the Jensen Portfolio.
Probably more important to Pfizer, says Millen, is its cholesterol-reducing drug Lipitor, which he expects to be the world's first $10 billion drug next year.
Pfizer was definitely a consensus choice among analysts, but two off-the-beaten-path picks were submitted by Gene Henssler, chief investment officer for the Henssler Equity Fund.
Henssler points to the parents of the baby boomer generation as an area for growth. He recommends
, which provides pharmacy services to long-term care institutions and assisted living facilities, and
( LNCR), which delivers oxygen and respiratory therapy to patients at home.
Housing: Old Boomers at Home
Finally, where will Boomers be living when they are not spending the night in their Winnebago?
In a home adjoining a golf course in an "active adult community" developed and built by either
, say the analysts. And probably located in a nice sunny state like Arizona or Florida.
Sam Lieber, president of Alpine Mutual Funds, prefers Pulte to Toll because of its lower multiple, but his favorite play when it comes to boomers and real estate is
Nationwide Health Properties
( NHP) (NHP). NHP is a real estate investment trust (REIT) that generates income by leasing health-care-related facilities out to operators who, in turn, run them.
Lieber says NHP might sound a bit unexciting but that it has a "nice yield and modest growth."
What do you expect? Retirement can't be all motorcycle rides, cruises and blackjack.