Opinion: Target investments to boomer interests

The “Sell in May and Go Away” expression in my May column didn’t pan out, a further example of how unaccommodating the markets can be.

You may recall that I wrote that the saying had a better correlation with the European markets than with ours. Guess what? It didn’t apply to either, at least not in the performance of the Europe 350 Index or our S&P 500, both of which had positive returns for that period.

Aphorisms, clichés, maxims – it’s getting to the point that they are all suspect. Or are they there just to provide support for investors’ opinions and hopes? Will we learn anything? Will historic statistics prove valid for the period we are in now? The three-month period starting in November and extending through January has (here we go again) historically been the best for market performance.

Could it be because that period starts from a lower level as a consequence of October’s hammering the market so badly over the years? Whether deserved or not, October, which gave us the crash of 1929 and the smash of 1987, looms large and dark in the minds of many investors – even though most did not actually experience either of those turbulent periods.

The problem with relying on history is that, although it may repeat itself, it simply won’t always do so when we count on it. My advice? Treat it as entertainment. Enjoy the cleverness and imagination shown in many of the sayings generated on Wall Street, but rely on your own research.

Here’s one area in which statistics should be considered in your research on investment opportunities. It is estimated by demographers that beginning in January of next year, every six seconds for the next 19 years there will be a boomer turning 60.

Think about that. What does it mean for investors? Where are the boomers going to be spending their money? A good starting point if you are in this category is to ask yourself how you spend your money or intend to spend it.

As society has grown more mobile, fewer families have remained in the same region, one of the results of which has been a growing tendency for retirees to seek out different locations for their retirement years.

One home builder’s study indicates that 59 percent of boomers move when they retire. Thus, we have already seen an increasing demand for active adult communities, especially in the sunnier climes of Arizona, Texas, Florida and California.

Now the industry is developing such communities in states not traditionally thought of as retirement areas in order to address that segment of the retiree market that doesn’t want to leave the region in which they live. Our favorite among the developers of these communities is Pulte Homes (PHM), which through its Del Webb division leads the industry in this particular market segment.

And these boomers have plans to travel more, with an emphasis on seeing more of the United States. That should bode well for hospitality industry companies such as Marriott and La Quinta. Witness also the preference for flying with a dependable airline (no worries about a bankruptcy) where Southwest is setting the standard for value, as evidenced by its increasing load factor and profitability while the legacy airlines are suffering.

A growing industry that reflects boomers’ love of travel and their deep pockets is that of recreational vehicles, more commonly referred to as RVs, those often more-expensive-than-a-small-house behemoths that are ubiquitous on the highways when the seasons change. One company we particularly like in this industry is Thor, a maker of buses and both towable and motorized RVs.

Although we may crab about the costs of health care, we have to recognize that we are all living longer because of medical and pharmaceutical advances, and that trend is going to continue. Think about companies that provide treatments and products for age-related diseases with a solid research and development pipeline. Among the stocks we would look at in these areas are Amgen, Lilly, and DaVita.

The issues mentioned in this column are meant to be a starting point. They are not recommended for every portfolio, nor are they the only stocks within their industries that should be considered.

Do your homework, run your screens, and think long-term as you make your selections. Remember, the one-every-six-seconds boomer explosion is expected to last 19 years, so don’t be looking for short-term trades.

And please note our disclosure: the issues discussed may be currently held or on our to-be-purchased list for clients or principals of Saint Louis Investment Advisors.

Clark Davis is a 37-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money-management company.