Investing in the Retirement Crisis

We tend to hear quite a bit about the aging of the population and the demands it will put on several health care verticals. There is little doubt in my mind the impact of that looming upside-down pyramid of the older-to-younger population will reverberate across our economy and stocks. As more of the population retires or ages, do we expect consumer spending to remain robust, or will spending as we know it shift more toward health care, as many suspect? Clearly the mainstream thought is that companies like Henry Schein (HSIC), DENTSPLY International (XRAY), Omega Healthcare Investors (OHI), Physicians Realty Trust (DOC) will benefit, and I don't disagree. Getting to that point, however, being able to retire is becoming an even greater challenge. I'm not going to repeat all the statistics about student debt, how big it is and the impact it's having. Instead, I'm going to share some of the statistics that show a different problem on the horizon -- under-saving toward retirement that has some calling for a U.S. retirement crisis. According to the Employment Benefit Research Institute's Retirement Readiness Ratings, 41%-43% of Americans are at risk of running out of money in retirement. Aon PLC's (AON) Real Deal study is the most pessimistic, concluding that only 30% of workers at large employers are on track to retire comfortably at age 65. Boston College's Center for Retirement Research has found that 53% of Americans are at risk of not being able to sustain their current standard of living in retirement. Fidelity Investments' Retirement Preparedness Measure found that 55% of Americans are in fair or poor condition when being able to cover essential living expenses in retirement. A paper from researchers at the RAND Corp. is slightly less pessimistic, finding that 29% of Americans age 66 to 69 aren't adequately prepared for retirement. More than half of all American households do not have enough put away for retirement, and the problem could get worse, because according to the U.S. Bureau of Labor Statistics, just 53% of the civilian workforce participates in or contributes to a retirement plan. While that sounds low, it's better than the 48% participation rate in private industry. When looking at problems and pain points, I tend to look at companies that address them and, better yet, can profit from them. Some may be tempted to look for quick fixes, like playing the lottery or packing up and heading to pull slots and shoot the dice at Wynn Resorts (WYNN), the Las Vegas Sands (LVS) or any one of the properties owned by Caesars Entertainment (CZR). I've been to those places and seen the sad sight of wheelchair-bound seniors pulling on a rope tied to the arm of a slot machine. Statistics would say some will go down that route, but for those looking to take charge of their personal financial situations, that means looking at companies from Ameriprise Financial (AMP) and Calamos Asset Management (CLMS) to Legg Mason (LM) and ETF house WisdomTree Investments (WETF). Another route would be to look at the online brokerage companies, such as TD Ameritrade (AMTD), E*Trade (ETFC) and Charles Schwab (SCHW). As I sit down and begin to do my homework on these, many of these and other related companies are within striking distance of their 52-week highs. The ones that aren't are Artisan Partners (APAM), Virtus Investment Partners (VRTS) and Waddell & Reed (WDR), but those companies are also expected to be in the basement when it comes to earnings growth in 2015. I'd rather keep my eyes on companies like Charles Schwab, Morgan Stanley (MS) and Federated Investors (FII) that are trading well below a PEG ratio of 1.0 on 2015 earnings as I do more work on the group. Stay tuned for more...

Investing in the Retirement Crisis

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