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Don’t Get Left Behind: Adapting Your Portfolio to Demographic Shifts

Great Eastern | Image credit: greateasternlife.com
Great Eastern | Image credit: greateasternlife.com

Demographic changes are a global phenomenon.

As nations grapple with challenges like declining birth rates and ageing populations, investors’ portfolios will be affected.

Let’s explore various strategies to navigate these changes effectively.

Setting the context

Singapore is ageing fast and this is unsurprising to many.

The Lion City is expected to reach super-aged status by 2026, where the proportion of the population aged 65 and above will be above 21%.

This trend has been recognised by the government which foresees that healthcare will account for the bulk of increases in government social spending by 2030.

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However, Singapore is not alone in this demographic shift.

Many mature economies, including the USA, Germany, and Japan, are facing similar ageing trends.

Emerging economies such as China and Russia are also experiencing this phenomenon

Impact on businesses and industries

Investors must take into account the effects that an ageing population may have on their portfolios.

With retirees likely shifting investments into cash and a smaller workforce reducing overall demand for investments and goods, financial markets could face downward pressure.

One step to minimise this risk is to consider diversifying their equities portfolio across younger and more vibrant economies.

India and Indonesia are some examples that investors can consider.

However, it is essential to monitor population trends across major markets, as strategic policies such as immigration may significantly alter demographic structures.

With the silver tsunami approaching, investors should look at industries or companies specifically catering to the needs of the elderly.

Sectors such as healthcare and biopharmaceutical are expected to expand significantly to meet these increasing demands.

Opportunities in the Silver Economy

The silver economy encompasses all economic activities, products, and services tailored to older adults.

As the silver economy burgeons in mature economies, this brings forth the question: Which industries and companies are ideally positioned to thrive in this expanding market?

Healthcare Sector – Raffles Medical Group (SGX: BSL)

Raffles Medical Group (RMG) is Singapore’s largest homegrown private healthcare provider. With a network of four hospitals and over 100 multidisciplinary clinics, offering different types of medical services, RMG caters to the needs of 2.8 million Singaporeans annually.

In FY2023, RMG reported S$706.9 million in revenue and S$90.2 million in net profit.

Although this was a steep decline compared to the net profit of S$143.5 million reported in FY2022, the difference was attributed to the discontinuation of COVID-19 services.

RMG delivered a dividend of S$0.024 per share on the 13th of May 2024. RMG is a consistent dividend payer, making it an attractive stock for dividend investing.

The prospects for RMG remain bright as the group plans to expand across more cities and countries in Asia, such as the partnership to manage American International Hospital in Ho Chi Minh City in Vietnam.

RMG will also continue to scale up its operations to address the growing need for healthcare services in the region.

Do check our articles on RMG’s earnings and the healthcare sector for more information.

Insurance Sector – Great Eastern Holdings (SGX: G07)

Great Eastern Holdings (GEH) is one of Singapore’s most established life insurance groups.

GEH also has a huge presence across Asia Pacific, with operations in Malaysia, China, Brunei, Myanmar, and Indonesia.

GE provides a range of insurance products, covering critical illness, healthcare or personal accidents through its partnership with its parent company, Oversea-Chinese Banking Corporation (SGX: O39).

Looking at its first quarterly report of 2024 (1Q 2024), net sales grew by 34% year on year, while profits jumped by 26% year on year, from S$244 million to S$306.7 million.

Total assets under GEH have also steadily risen over the past four years, at a compound annual growth rate of 2.5%.

The company declared a dividend of S$0.40 per share that will be paid on the 17th of May.

Biopharmaceutical Sector – Eli Lilly and Co (NYSE: LLY)

Eli Lilly (EL) is the world’s largest pharmaceutical company, known for producing a broad spectrum of geriatric medicines. The company focuses on addressing various diseases, including cancer, diabetes, obesity and immune system disorders.

Revenue for 1Q 2024 increased 26% year on year from US$6.96 billion to US$8.77 billion. Net income was US$2.24 billion, a 67% surge from US$1.34 billion a year ago.

EL raised its full-year guidance by US$2 billion to the range of US$42.4 billion to US$43.6 billion, citing strong demand for key medicines for diabetes and cancer.

The business also generated a positive free cash flow of US$83.2 million in the latest quarter.

EL also recently declared a dividend for the second quarter of 2024 (2Q 2024) of US$1.30 per share.  This represents a 15% increase from the 2Q 2023 dividend of US$1.13.

Technology Sector – JD Health (SEHK: 6618)

JD Health (JDH) is the largest healthcare e-commerce platform in China, operating as a subsidiary of JD.com (NASDAQ: JD), one of China’s major e-commerce giants.

JDH uses its online platform to manage a comprehensive supply chain of pharmaceutical and healthcare products to ensure accessible, affordable and high-quality healthcare services and products.

The company reported a strong performance in FY2023.

Revenue jumped from 46.7 billion yuan to 53.5 billion yuan. Likewise, profits grew from 380 million yuan to 2.1 billion yuan. This also marks the second consecutive year of profitability since 2019.

Over the past fiscal year, the business generated a positive free cash flow of 4.54 billion yuan.

Recreational Sector – Royal Caribbean Cruises (NYSE: RCL)

Royal Caribbean Cruises (RCC) is the world’s second-largest cruise company, operating 65 ships under five brands in the cruise vacation industry.

Cruises are one of the most popular forms of tourism among seniors.

The allure stems from accessibility, comfort, and the provision of different amenities and destinations.

The company’s flagship brand, Royal Caribbean International, appeals to families, couples and singles in their 30s to 50s.

Demand for cruises remains high, resulting in robust outperformance in Q1 2024.

Total revenue stood at US$3.7 billion, a significant year on year increase from US$2.9 billion.

Net income was US$360 million, a huge improvement as compared to the previous year’s loss of US$48 million.

The company experienced its five best booking weeks in March this year, witnessing a new record in both rate and volume.

As demand remains strong, RCC has increased its 2024 earnings per share guidance to between US$10.70 and $10.90 per share.

If you’re nervous, confused, or worried about buying your first stock, then our latest beginner’s guide to investing can help. It’s easy to read yet packed with valuable insights. Download it for free today, and buy your first stock in the next few hours. Click here to get started.

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Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.

The post Don’t Get Left Behind: Adapting Your Portfolio to Demographic Shifts  appeared first on The Smart Investor.