Play the Rising Population With These Companies
Justin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Here is a statistic for you - the human population is rising by 200,000 people per day. For a lot of companies, that means 200,000 new potential customers. You can use this to your advantage when looking for companies to invest in for the long term.
Some industries will directly benefit from a growing population. Let's look at some sectors tied directly to the human population, and some good plays that represent them.
Everybody has "gotta" eat
Whole Foods Market (NASDAQ: WFM)
Food is one of the basic needs of society, and will correlate directly with a swelling population. Whole Foods is an organic and natural foods supermarket chain. It operates in the US, Canada, and UK.
Source: Yahoo! Finance
- P/E: 40.4
- Dividend Yield: 0.71%
Whole Foods is the market leader of a macro-economic shift that is still in its early stages. The US (and society in general) is starting to become more aware of the expanding problem that is obesity. Organic and natural foods have become more popular in recent years.
Whole Foods has the retail organic food market cornered quite well. There are no peers that stand on equal footing with Whole Foods. On top of that, Whole Foods is growing fast. It has a 5-year sales growth rate of about 12%. This will pick up as Whole Foods keeps expanding and adding stores. Management sees potential to triple the amount of locations currently in the United States.
Whole Foods is healthy financially as well. It has essentially no debt (total debt/equity ratio of 0), and is putting most of its earnings back into the company. Whole Foods is an enticing option that will grow with the popularity of healthy foods in the coming years.
Everybody has "gotta" stay healthy
Johnson & Johnson (NYSE: JNJ)
Johnson & Johnson is a health care conglomerate that sells products globally through its main business segments - Pharmaceutics, Medical Devices/Diagnostics, and Consumer Products.
Source: Yahoo! Finance
- P/E: 20.6
- Dividend Yield: 2.84%
Johnson & Johnson is a major player in all of the industries it competes in. Its medical device/diagnostics division was the market leader last year. Johnson and Johnson also has a very strong pharmaceutical division with numerous products in its pipeline.
Johnson & Johnson will see more opportunity as the baby boomers start to retire. It is estimated that for the next 17 years, 10,000 people will turn 65 per day. That means every segment of Johnson & Johnson will see more traffic.
In fact, Johnson & Johnson recently reported its latest quarter where its sales saw a 8.5% increase from last year. This has resulted in an earnings per share growth of 13.8%. It is currently seeing double digit growth in emerging markets year to date.
With Johnson & Johnson you have an investor's dream. It combines two opposite "styles" of earning power. First, you have steady global leading consumer brands such as Tylenol and Motrin providing consistency and slow growth. In the other corner, you have the pharmaceutical and device segments hitting "home runs" that, while inconsistent, can give Johnson & Johnson that spark.
Everybody has "gotta" have electricity, travel, heat....
ExxonMobil (NYSE: XOM)
ExxonMobil is the largest fully integrated oil company in the world.
Source: Yahoo! Finance
- P/E: 9.64
- Dividend Yield: 2.70%
Oil is still the "blood" that flows through society and keeps it going. It likely will for the foreseeable future. Similar to how oil stabilizes society, Exxon can stabilize your portfolio.
Exxon is known to be a "slow mover," but what is wrong with that when you are as big as Exxon is? It is able to generate enough cash flow to buy back $5 billion in stock per quarter and give shareholders an annual dividend increase like clockwork. Exxon simply makes you money as you let it do its thing in your portfolio over the years.
Exxon saw a slight production decrease in its last earnings call, but that is but a blip and shouldn't be cause for concern. Exxon has the resources to be on top of the latest exploration technology and work areas. It carries almost no debt with a debt/equity ratio of 0.1.
When you invest for the long term, you have to keep inflation in mind. Inflation eats into your gains, thus decreasing your future "buying power." With Exxon's profits partially (indirectly) tied to oil prices (a commodity), you get a hedge against inflation. This a nice bonus for owning Exxon.
The bottom line
These three companies all stand to profit over the long term as our world becomes more and more populated. All three have low debt loads, growing profits, and fit a need that correlates directly to the population. You can park these in your account, and check on them in 10 years. You will likely be very happy with your results.
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Justin Pope has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and Whole Foods Market. The Motley Fool owns shares of Johnson & Johnson and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!