The proportion of the world's population over 60 is likely to reach 22% by 2050, up from just 12% in 2015. This will cause challenges, but also opportunities, for both society and the global economy.
Last week we looked at some of these and how it could impact stock markets. This week we're sharing three share ideas that could prosper in this changing landscape.
Investing in individual companies isn't right for everyone. That's because it's higher risk, your investment depends on the fate of that company. If that company fails, you risk losing your whole investment. If you cannot afford to lose your investment, investing in a single company might not be right for you. You should make sure you understand the companies you're investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
This article isn't personal advice. If you're not sure an investment is right for you, seek advice. Investments, and any income from them, will rise and fall in value, so you could get back less than you invest.
Aviva – strong growth in retirement products
Aviva is best known as an insurance provider. Its sheer scale helped it establish a highly cash generative business.
This underpins a dividend yield of over 7% based on Aviva's recently reiterated dividend guidance for 2023, following a strong close to 2022. It also plans to start repurchasing shares in 2023. But remember, there are no guarantees of any shareholder distributions.
While shareholder returns have been a welcome boost for investors, we'd like to see surplus cash being funneled to the business on a wider scale.
Aviva has some other strings to its bow, namely equity release and annuities. But these are a relatively small parts of the business for now.
Aviva's bulk annuity business, where the group takes on final salary commitments from pension funds, has grown rapidly. These contracts feed significant quantities of new assets into the business which can be managed by Aviva Investors – increasing scale and profitability. However, each new contract requires underwriting with some of Aviva's own capital, making expansion expensive.
As the number of people approaching retirement each year increases, and the burdens on pension schemes increase, we would expect this part of the business to continue to enjoy strong demand.
But with one in six Britons over 55 still having no private pension savings, many people are having to look at other options to fund their lifestyles as they get older. Interestingly, this age group also owns just under two thirds of the UK's housing wealth.
Aviva is well positioned as one of the leading equity release providers in the UK. It offers products which charge customers interest for releasing value early from their properties, while being able to keep their homes. And despite interest rates trending upwards, demand for this service has remained strong.
Aviva's strong brand and revenue diversity could make it an attractive option in the sector. However, it's not immune to wider pressures in the industry, and there could be more headwinds emerging if a recession starts to bite.
One of HL's Independent Non-Executive Directors is also a Non-Executive Director at Aviva plc.
Find out more about Aviva shares, including how to invest
Biogen – groundbreaking treatment for Alzheimer's disease
An ageing global population means more demand for healthcare. In the UK, almost 3% of the population are expected to have developed dementia by 2050. And with Alzheimer's accounting for just under two thirds of these cases, it's clear we need a solution.
Biogen hit the headlines last month when it received accelerated approval of its LEQEMBI™ treatment. The group hopes this will be the first globally approved treatment to slow the progression of Alzheimer's disease.
Some analysts expect peak annual sales of the drug as high as $15.7bn by 2035. But bear in mind, Biogen will have to share any future LEQEMBI™ profits with its development partners on the project.
The development of LEQEMBI™ has given the market reason to get excited, which means Biogen's valuation is relatively demanding compared to its peer group. This increases the risk of ups and downs.
There are currently over 100 drugs being developed for Alzheimer's disease, so the threat of competition is very real. Biogen's previous attempt to launch an Alzheimer's drug was disappointing, and there's no certainty that LEQEMBI™ will be more successful.
Sales of Biogen's existing products, dominated by treatments for Multiple Sclerosis, are in decline. Until evidence of revenue growth emerges, the chances of a further re-rating for the shares are likely to be driven by the commercialisation of LEQEMBI™, and execution of the clinical pipeline.
Biogen has a diverse neuroscience focused pipeline, comprising 29 clinical programs. Candidates of note include zuranolone for major depressive disorder and postpartum depression. And in the coming months, a decision by the FDA is expected over the approval of a drug called tofersen. The drug is used to treat amyotrophic lateral sclerosis (ALS), a rare neurodegenerative disease for which there are limited treatment options.
So while many investors are banking on LEQEMBI™ becoming a blockbuster, Biogen is more than a one trick pony. Remember though, drug discovery and indeed commercialisation is a high-risk activity.
To buy US shares you must first complete and return a US government W-8BEN form.
Find out more about Biogen shares, including how to invest
Primary Health Properties (PHP) – a play on the need to overhaul GP services
At the last count, Primary Health Properties owned 524 local healthcare facilities of which most are purpose-built GP surgeries in the UK and Republic of Ireland. These facilities often combine GP services with community nursing services and pharmacies – helping to deliver a better and more efficient service to patients.
The group benefits from having NHS backing for most of its rents, which offers a certain degree of safety to revenues. Coupled with an average remaining lease length of 11.4 years, the group has a relatively clear view of revenue into the future.
As a REIT (Real Estate Investment Trust), the company is primarily focused on returning rental income to shareholders through dividends – the shares currently have a prospective yield of 5.9%. Remember though, yields are variable and not a reliable guide to future income.
Long-standing CEO, Harry Hyman, is set to step down at the end of this year. So that means the responsibility for continuing an impressive track record of dividend growth will belong to an as yet unnamed successor.
The valuation, which has come under pressure of late, now stands at less than the company's net asset value, or the value of all its tangible assets less all its liabilities. This could present an interesting opportunity for investors.
Healthcare is never far from the political spotlight, and this often brings risks with it. But the ageing population is just one factor increasing pressure on healthcare services. And there's little doubt that further investment is needed in local facilities, which are increasingly being called upon to relieve the pressure on hospitals and emergency services.
If community health premises are to be expanded and modernised appropriately, rental yields might need to rise in order to keep the attention of developers. This could drive higher profitability for PHP as it seeks to roll out its pipeline of 70 property acquisitions and development projects. As with any investment though, there are no guarantees.
Find out more about Primary Health Properties shares, including how to invest
Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not a reliable indicator of future income. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
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Derren leads our Equity Research team with more than 15 years of experience in his field. Thriving in a passionate environment, Derren finds motivation in intellectual challenges and exploring diverse ideas within his writing.