Hedgeweek Comment: Happy demise
The era of the baby boomer - a loosely defined term, but usually understood to encompass those born during the post-World War II baby boom between 1946 and the early 1960s - is coming to an end. Since the late 1990s, there has been a growing debate about how this generation will manage the latter part of their lives, and some commentators argue that baby boomers are in a state of denial regarding their ageing and eventual death.
But one person's declining years are another's financial opportunity, and at least a couple of hedge funds are now focusing on opportunities related to the gradual departure of the baby boomer generation from this world by taking stakes in companies that operate funeral home and cemeteries, which can expect to see their business grow in the coming years and decades.
SAC Capital Advisors recently acquired a further 2 million shares in Houston-based Service Corporation International, the biggest funeral home, cremation and cemetery operator in the US, taking its stake to 2.2 per cent; it also holds 6.1 per cent of the company's biggest rival, Stewart Enterprises, which Service Corporation has just launched a USD1bn bid to acquire. Quantitative hedge fund firm AQS Capital Management is also reported to have increased its stake in Service Corporation.
The US mortality rate, which was 8.1 per thousand two years ago, is forecast to rise to 9.3 per thousand by 2020 and 10.9 per thousand in 2040, according to the National Funeral Directors Association. Service Corporation expects that the increased death rate of boomer generation members may begin to boost its business in as little as five years, and the expanding market can only help its share price.
James Love of BoomerDeathCounter.com calculates that a US baby boomer will die every 48.2 seconds during 2008. For those hedge funds that have bet on firms like Service Corporation, it's an ill wind...
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