NEW YORK (Reuters) - The Greek debt crisis has brought to light the strain that an aging populace will put on public coffers, yet few investors have examined demographics to see which countries or industries may prosper in the future.
The United Nations has warned for years that the world is growing older and how it will impact public policy. The International Monetary Fund urged Greece to adopt fiscal reforms, including measures to deal with a rapidly aging population, in its annual review of the country in August.
For investors, the key is whether a country has a favorable ratio of workers to the elderly, said Bob Turner, chairman and chief investment officer at Turner Investment Partners, a firm in Berwyn, Pennsylvania, with $17.5 billion under management.
The reason is that when nations have more working-age adults than seniors, economies tend to grow at above-average rates. When the opposite occurs, government budgets and economic growth tend to be severely constrained.
An examination of past investment opportunities will show that demographics had a big role, Turner told Reuters in an interview.
“It’s more than just the population is getting old,” he said. “You need to look at that number in the work force because that ultimately is the biggest shaper of demographics, and then of course birth rates and immigration play pretty heavily into that also.”
Aging is most advanced in Europe, where the number of people aged 60 or over surpassed the number of children more than a decade ago, a historical first.
The U.N. expects Japan and virtually all of Europe to decrease in population over the first half of this century. In Italy, the number of elderly -- those 65 or older -- will almost double to more than one-third of the population by 2050. In Japan that number will almost double to about 32 percent.
However, relatively high ratios of workers to seniors and relatively high population growth give Argentina, Australia, Canada, India, Malaysia and the United States perhaps the best long-term economic potential, according to Turner.
The United States is likely to benefit from a rising birth rate when the progeny of the baby boomers, the “echo boomers,” start having their own children in sizable numbers in a few years, Turner wrote in a position paper on demographics.
A new baby boom could benefit consumer electronics, wireless communications, Internet services, apparel, banking, insurance, investment management and even housing, still in the throes of its worst crisis since the Great Depression.
While some 3 million homes are in foreclosure, “at some point there is going to be pent-up demand,” Turner said. “As things continue to improve, this is a group of stocks that literally could see their stock price explode to the upside.”
Consumer electronics is another baby boom play, and also a play on the demographics of emerging economies.
“As the adage goes, if there’s going to be a war, go with the people who are supplying the arms. Don’t get involved with shooting each other,” Turner said.
Apple Inc AAPL.O remains a Turner favorite after six years, and he also likes chipmaker Broadcom Corp BRCM.O and NetLogic Microsystems Inc NETL.O, a maker of networking chips used to enhance Internet speeds.
Of course, the biggest growth market across the world is likely to be the maladies of the elderly: heart disease, cancer, dementia, lung disease, stroke and arthritis. Drugs, medical devices and healthcare will be in demand, Turner said.
Intuitive Surgical Inc ISRG.O, maker of the da Vinci robotic operating system, is Turner's favorite health stock.
Reporting by Herbert Lash; Editing by Dan Grebler
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