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Stocks for an Aging World

  1. Stocks for an Aging World
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    Stocks for an Aging World

    When it comes to investing, there are few trends you can safely bet will endure. The demographics of aging are an exception: The United Nations estimates that there will be two billion people aged 60 or older by 2050, making up 22 percent of the world's population. That's up from 737 million—11 percent of the global number—in 2009.

    The fastest-growing aging populations are located in more-developed countries, where older adults already make up 21 percent of the population, heading to 33 percent by 2050. A similar dynamic is unfolding in emerging market nations: China, with its strict efforts to limit population growth, is expected to contain 440 million adults 60 and over by 2050, up from 160 million in 2009.

    Bloomberg Businessweek asked fund managers which of their stock holdings they expect will benefit from the world's aging process. Their choices range from utilities in Atlanta to financial services providers in Japan and on to pharmaceutical distributors in China.
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  2. 1. Fresenius Medical Care
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    1. Fresenius Medical Care

    Recommended by: James Moffett, lead manager for the Scout International Fund (UMBWX) and the Scout International Discovery Fund (UMBDX)

    "Unfortunately, as people get older they tend to get diabetes," a condition that can hurt the kidneys, Moffett says. With 2010 sales of $12.1 billion, Fresenius Medical Care (FME:GR) is the world's largest provider of kidney dialysis services and products. Moffett cites the German company's steady growth in sales—and especially profits, with net income more than doubling since 2005.
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  3. 2. Shandong Weigao Group Medical Polymer
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    2. Shandong Weigao Group Medical Polymer

    Recommended by: Alexander Walsh, manager of the Harding, Loevner International Equity (HLMNX) and Harding, Loevner Global Equity (HLMGX) funds

    As its population ages, China is boosting spending on health care in general, especially in rural areas. Those trends should help Shandong Weigao (1066:HK), a provider of medical equipment to the Chinese market, Walsh says. The company had sales of $346 million in 2010 and makes more than 110 kinds of products, including syringes, blood bags, and heart stents.
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  4. 3. Kimberly-Clark
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    3. Kimberly-Clark

    Recommended by: Daniel Peris, manager of the Federated Strategic Value Dividend Fund (SVAAX) and the Federated International Strategic Value Dividend Fund (IVFAX)

    Older people spend a larger share of income on "the basics of everyday life," Peris says. Those necessities are specialties of Kimberly-Clark (KMB), the Dallas-based company that makes such household items as tissues and paper towels, as well as medical supplies that include surgical gowns. Last year almost half of its $19.7 billion in sales came from outside North America.
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  5. 4. Teva Pharmaceutical Industries
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    4. Teva Pharmaceutical Industries

    Recommended by: William Fries, manager of the Thornburg International Value Fund (TGVAX)

    As an older population demands more medical care, Fries expects governments and other providers to cut costs by turning to generic drugs. Teva Pharmaceutical Industries (TEVA) is a leader in the generic drug business, with $16.1 billion in sales last year. The Israeli company is expected to benefit as popular drugs lose their patents over the next several years, he says.
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  6. 5. Nestle
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    5. Nestle

    Recommended by: David Winters, manager of the Wintergreen Fund (WGRNX)

    "When people have money, they want to eat better," says Winters. "And when they get older, that becomes even more important." Nestle (NESN:VX), the global food company with $100.6 billion in 2010 sales, is focusing on coming up with new, more nutritional foods that appeal to older people, Winters says.
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  7. 6. Sonova Holding
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    6. Sonova Holding

    Recommended by: Alexander Walsh, manager of the Harding, Loevner International Equity (HLMNX) and Harding, Loevner Global Equity (HLMGX) funds

    Sonova Holding (PHBN:GR) is a leader in the manufacture and sale of hearing aids. As people live longer, hearing loss is more common. Walsh says the Switzerland-based company is benefiting from smaller, less-visible hearing aid models that reduce the stigma of wearing them. Sonova had $1.4 billion in sales in fiscal 2010, up 20 percent from 2009.
    Phonak
  8. 7. Essilor International
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    7. Essilor International

    Recommended by: James Moffett, lead manager for the Scout International Fund (UMBWX) and the Scout International Discovery Fund (UMBDX)

    Essilor International (EI:FP) is one of the world's largest manufacturers of eyeglass lenses, with brands that include Ormex, Transitions, and Airwear. Particularly appealing to older customers is its Varilux progressive lenses, which are designed to replace bifocals, says Moffett. Essilor saw sales rise 19 percent last year, to $5.2 billion, with more than 80 percent of its sales and employees located outside its home market of France.
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  9. 8. Southern Company
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    8. Southern Company

    Recommended by: Daniel Peris, manager of the Federated Strategic Value Dividend Fund (SVAAX) and the Federated International Strategic Value Dividend Fund (IVFAX)

    Peris's holdings include Southern Co. (SO), a public utility based in Atlanta, along with utilities Dominion Resources (D) of Richmond, Va., and Duke Energy (DUK), based in Charlotte, N.C. These power providers will benefit from the movement of older Americans to the U.S. southeast. In addition, the stocks attract older investors interested in dividend income, says Peris. Southern has a 4.8 percent dividend yield, Dominion 4.5 percent, and Duke 5.4 percent.
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  10. 9. Brookfield Asset Management
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    9. Brookfield Asset Management

    Recommended by: Paul Blankenhagen, manager of the Principal Diversified International fund (PIIJX)

    As the population ages, institutional and individual investors will seek out conservative investments that generate consistent income, figures Blankenhagen. Brookfield Asset Management (BAM) specializes in owning and managing income-generating properties, including infrastructure and energy projects and commercial real estate such as stakes in London's Canary Wharf (pictured) and the World Financial Center in New York. The Toronto-based company reported 2010 revenue of $13.6 billion.
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  11. 10. Novo Nordisk
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    10. Novo Nordisk

    Recommended by: William Fries, manager of the Thornburg International Value Fund (TGVAX)

    Novo Nordisk (NVO) is a pharmaceutical company specializing in products for treatment of diabetes, including insulin. It's a growing business, as people age and as more countries start adopting Western diets that contribute to diabetes, says Fries, who also praises the Danish company's products in development. Sales rose 19 percent last year to $10.8 billion.
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  12. 11. Carnival
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    11. Carnival

    Recommended by: Alexander Walsh, manager of the Harding, Loevner International Equity (HLMNX) and Harding, Loevner Global Equity (HLMGX) funds

    Cruises are an appealing vacation for older people and a cruise company such as Carnival (CCL) draws an advantage by offering trips for various income levels under brands that include Cunard, Holland America, and Princess Cruises. Carnival, headquartered in Miami, saw revenues rise 7.5 percent, to $14.5 billion, in its 2010 fiscal year.
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  13. 12. Aflac
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    12. Aflac

    Recommended by: James Moffett, lead manager for the Scout International Fund (UMBWX) and the Scout International Discovery Fund (UMBDX)

    Companies that provide financial services to an aging population are one way to profit from the global aging trend. Moffett likes Aflac (AFL), the supplemental insurance company. It may be headquartered in Columbus, Ga., but 76 percent of last year's $21 billion in revenue came from Japan, the country with the oldest population in the world. According to the United Nations, 30 percent of Japan's population was over 60 in 2009.
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  14. 13. AstraZeneca
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    13. AstraZeneca

    Recommended by: Daniel Peris, manager of the Federated Strategic Value Dividend Fund (SVAAX) and the Federated International Strategic Value Dividend Fund (IVFAX)

    Demographic trends will give a boost to pharmaceutical companies as more older people mean more demand for drug treatments. That's why Peris owns AstraZeneca (AZN), based in London, as well as other large drug companies GlaxoSmithKline (GSK) and Bristol-Myers Squibb (BMY). He says their hefty dividends—with yields ranging from 5 percent to 8 percent—"appear to be safe."
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  15. 14. Unicharm Corporation
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    14. Unicharm Corporation

    Recommended by: Alexander Walsh, manager of the Harding, Loevner International Equity (HLMNX) and Harding, Loevner Global Equity (HLMGX) funds

    Unicharm Corporation (8113:JP) makes diapers and other sanitary and baby products for the Asian market. With $3.8 billion in sales in the past year, the company has benefited from Chinese parents switching their babies from cloth to disposable diapers. Walsh says another strong growth area for this Tokyo-based company is selling adult diapers to the growing number of elderly people in Japan.
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  16. 15. Sinopharm Group
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    15. Sinopharm Group

    Recommended by: William Fries, manager of the Thornburg International Value Fund (TGVAX)

    Shanghai-based Sinopharm (1099:HK) is buying up smaller rivals to create a large pharmaceutical distributor in China. Fries says these acquisitions position the company to benefit from both China's aging population's need for health care and the country's higher standard of living. Sinopharm reported $10.2 billion in revenue in 2010, up 47 percent from the previous year.
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