Investing in the World’s Most Unstoppable TrendCompanies / Sector Analysis Feb 17, 2013 - 05:45 PM GMT
Matthew Carr writes: There is an industry that’s outperformed nearly any you could imagine.
Gold… Left in the dust.
Oil… Not even close.
Natural gas… Nope.
Silver… Yup, beat that too.
It’s an industry we’ll all eventually need, every person on this planet.
You are going to die.
Even worse, everyone you love – your friends and family – are going to die too.
It may be by natural causes. It may be by a natural disaster. It may be by something tragic – a drunk driver, a random act of violence or a horrible accident.
Whatever the case may be, it’s inevitable. Life is momentary. Death is infinite.
In the United States, on average, 2.5 million people die each year. But this is about to pick up as the Baby Boomers say their last farewells. And by 2040, the number of people dying each year in the United States will practically double from the level it’s at now.
Death is a commodity. It even has its own seasonal uptick as the storm and flu seasons run amok across the United States. And it’s a business – one that has a constant market. A market that is constantly growing.
Despite appearances, the vast majority of funerals – or celebrations of life, as they’re now called – in this country aren’t handled by small, little family-owned and -operated businesses. They’re handled by large, publicly traded companies.
And shareholders are reaping exceptional rewards.
My Funeral Services Index, made up of the four largest funeral services and cemetery operators in the country, has obliterated the performance of almost any other industry.
During the last 13 months – since January 2012 – this index is up 64.30%, including dividends.
Over the last five years, the return is an astronomical 307.32%!
The only thing that can come close is the performance of silver. The iShares Silver Trust (NYSE: SLV) is up 170.82% since 2009.
So, let’s meet the companies in my Funeral Services Index…
#1.Carriage Services (NYSE: CSV)
Over the last 13 months, the return on Carriage Services is 155.73%, including dividends. Since January 2009, the gain is a funeral services industry best of 625.12%.
Carriage Services operates in two segments – Funeral Home Operations and Cemetery Operations.
CSV is in the micro-cap range, with a market cap of $260.4 million. But revenue for CSV has steadily been ticking higher. Since 2009, annual sales have increased from $177.6 million to $204.3 million in 2012. During that span, earnings per share increased from $0.40 in 2009 to $0.84 in 2012.
#2. Stewart Enterprises Inc. (Nasdaq: STEI)
STEI is a little larger than CSV, with a market cap of $662.5 million. Over the last year, the return on Stewart Enterprises is a respectable 40.05%, including dividends. Since January 2009, the gain is 186.75%.
The company owns 217 funeral homes and 140 cemeteries in the United States and Puerto Rico.
Revenue, like CSV’s, is steadily ticking higher over the last several years, rising from $499 million in 2009 to $527.9 million in 2012. It also increased its dividend 50% in 2012.
#3. Stonemor Partners LP (NYSE: STON)
The $1 billion market cap Stonemor hasn’t had as great of a run as CSV during the last year. But because of its hefty dividend, the return is 20.66%. And over the last five years, that dividend has helped bolster the return to 199.27%.
Stonemor is a much larger funeral services conglomerate – the second largest in the country – owning and operating 274 cemeteries and 69 funeral homes in the United States and Puerto Rico.
But the company offers an enticing 9.4% dividend yield.
The company’s revenue since 2009 is seeing one of the higher growth rates, increasing from $181.2 million to $245.6 million in 2012, with its dividend rising from $2.22 per share in 2009 to $2.36 per share in 2012.
In the first nine months of 2012, funeral home revenue increased 24.6%, while pre-need cemetery contracts increased 10.7%.
#4. Service Corporation International (NYSE: SCI)
The largest of the funeral service operators, with a market cap of $3.2 billion. Like CSV, it operates in two segments – Funeral and Cemetery Operations – owning 1,432 funeral service locations and 374 cemeteries in the United States.
Over the last year, the return on SCI is a decent 40.75%, including dividends. And shares are just off their 52-week high.
Since January 2009, the return on Service Corp. is – like the rest of the Funeral Services Index members – an eye-opening 218.11%.
Being considerably larger than its competitors, SCI’s revenue isn’t increasing as rapidly. But as with the rest of the industry, it’s seeing steady growth. In 2009, sales for SCI were $2.1 billion, and rose in 2012 to $2.4 billion.
The company also increased its dividend 50%, from $0.16 per share annually in 2010, to $0.24 per share in 2012.
We can’t escape it. Death is eventually going to get us all. At least until we find a cure for it or there’s a real-life outbreak like in The Walking Dead. The funeral services industry is consumer-driven, just like any other service sector.
So, you can embrace it and profit from it. Or choose to pretend it’s not a reality…
Editor’s Note: Matthew Carr’s “Doomsday Preppers’ Portfolio,” originally published in Investment U last August, has returned 27.84% to date.
by Matthew Carr, Investment U Research
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