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INVESTMENTS Boomers' interests drive stock market



Published: Sat, February 12, 2005 @ 12:00 a.m.



With their buying power, baby boomers have proved time and time again they greatly affect the economy.

ASSOCIATED PRESS

When it comes to her dog, Karen Washburn is like a lot of people: Nothing is too good. When she goes out of town on business, Noah snuggles into his own suite at a pet hotel run by PETsMART Inc.

Washburn, who adopted her one-eyed basset hound four years ago, hasn't worried about the cost of pampering her pet, installing a custom doggy door at her Cary, N.C., home and indulging him with premium food and romps at doggy daycare.

"They give us so much, so why not? He deserves it," said Washburn, 51. "He is just the sweetest boy in the world."

Wall Street is betting on baby boomers like Washburn, who are just the sort of customers that PETsMART and many other companies are looking to cultivate. The post-war generation, born from 1946 to 1964, represents about 76 million people -- a huge block of consumers with unparalleled buying power. Now, as they lope into retirement, the spending habits of boomers are starting to change, and many investors are looking for ways to profit from the shift.

"This is a dominant group that still has huge buying power, and as they age they will continue to dominate trends, as they have throughout their entire lives," said Janet Engels, director of private client research with RBC Dain Rauscher. "It's just rethinking, what is this group all about? They are sophisticated buyers, they like bells and whistles, and they like to treat themselves well."

Affection for choices

Baby boomers are educated consumers who love having lots of choices. Lifestyle is everything for this group, whether they're shopping for pet care, a cruise ship vacation, financial advice, cosmetic surgery or a knee replacement. Industries that traditionally cater to older people, such as pharmaceutical companies, hospitals and assisted living facilities, will have a much larger customer base as boomers age.

Companies that specialize in orthopedic devices, such as Zimmer Holdings Inc. and Stryker Corp. are well-positioned, especially as they develop longer-lasting replacement parts that can be implanted in increasingly less-invasive procedures. Homebuilders developing communities for "active adults," such as Pulte Homes Inc. and WCI Communities Inc., are likely to have the demographic wind at their backs. And, for the famously self-absorbed "me generation," cosmetic products and surgery will play an important role in the decades ahead, which could spell strong sales for stocks like Estee Lauder Inc. and personal care specialist Procter & amp; Gamble Co., Engels said.

"No one ever wants to admit they're getting older, and this particular group has never wanted to get older," Engels said.

Statistics suggest most boomers are not prepared for retirement, a trend that some observers believe will benefit the financial services industry. Long-term care insurance and annuities may become more popular products, and financial planners will be much in demand as boomers try to catch up.

Helpful demographics

Demographics are likely to work in the favor of these industries in the decades ahead, said Mark D. Greenberg, portfolio manager of the AIM Leisure Fund (ILSAX), which profits from consumers' desire for expensive jewelry, exotic vacation and other extravagant pleasures.

"If something didn't have the long-term trend in its favor, I'm not saying I wouldn't buy the stock, but it's unlikely," Greenberg said. "There could be a time you want to buy a stock because somebody is doing a good job, or it's cheap ... but over the longer term, you like having the trend in your favor."

Some winners have emerged in the cruise business, Greenberg said, including leading operator Carnival Corp. He also likes Harrah's Entertainment Inc., the world's largest gaming company. In addition, he notes, the most forward-looking companies in these industries are quietly upgrading their facilities to meet the needs of an aging clientele. Greenberg has spotted special bins for diabetics to deposit insulin needles in casino restrooms, and found expanded medical services on a number of cruise ships.

"Everybody wants to go out and have fun, and casinos offer that for older people. Cruise lines certainly do it too," Greenberg said. "Depending on the individual, if you're in your 60s, 70s and 80s, you're more likely to go someplace where you can sit down with your friends as opposed to going on a hike or skiing."

Demographics also favor the likes of Liberty Media Corp. and Cablevision Systems Corp., which are among the Leisure Fund's top five holdings. Distillers, such as Allied Domecq PLC, may be better positioned than brewers in the decades ahead, since older people generally prefer spirits over beer. And the No. 1 jewelry buyer is a woman over the age of 45, who is usually buying it for herself, Greenberg said; sales of expensive watches for men are also brisk.

Specific markets

Other niche markets also stand to benefit, analysts say, not least among them companies that provide goods and services for the much-adored pets of empty nesters. PETsMART and PETCO Animal Supplies Inc. are fast becoming the Home Depot Inc. and Lowes Co. of the pet world, and VCA Antech Inc., which snagged the Nasdaq ticker symbol WOOF in 2001, has become the nation's largest chain of animal hospitals.

The desire to outfit pets in designer duds has become a big driver in the $34 billion-a-year pet product industry. Some of the trend is fueled by young childless professionals, but boomers also play a significant role, accounting for 46 percent of all dog owners, according to the American Pet Products Manufacturing Association.

"I can personally attest to this," said Bob Vetere, the industry group's chief operating officer, who admits to doting on his golden retriever, Dakota. "The kids have gotten older, they're out of the house. ... It's nice to have somebody to come home to who is wagging his tail and happy to see you. Of course, they don't care what they look like, they just want to be loved. But it's clear that these companies are realizing it's the humans who are doing the buying."




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