The Motley Fool

4 New Ways to Play the Ageing Demographic Theme

This week’s news of the Loblaw takeover of Shoppers Drug Mart (TSX:SC) has implications for Canadian investors on a number of levels.  You can get more on our takeover thoughts by checking out this recent post or this week’s edition of Take Stock.

One of the big repercussions for Canadian investors is that the whole thesis behind investing in Shoppers Drug Mart has changed.  This had been one of Canada’s great ways to play the dominant demographic theme of our day – the baby boom.  Simply, as this demographic ages, they’re going to need more health related products.  There is no Canadian entity better suited to supplying these products than Shoppers.  Loblaw clearly understands this.

Canadian investors looking for a pure-play on the ageing demographic must now change their tune.

Here are 4 ways that you can deploy your Shoppers’ proceeds and continue on with a similar exposure:

Walgreen’s (NYSE:WAG) – Why not do a little cross border shopping?  You can very easily hop from Canada’s leading drug store chain into the leading drug retailing chain south of the border.  With its $71 billion in annual revenues, Walgreen’s dwarfs Shoppers’ mere $11 billion or so and with an EV/EBITDA multiple of 10.6, the two trade at a similar valuation.

If however, you’d like to keep your money in the Canadian market, here are some other options….

Jean Coutu (TSX:PJC.A) – The Quebec based pharmacy has always been somewhat of an also ran relative to Shoppers in the eye of many market participants.  However, with Shoppers set to fade from the public markets, Canadian pharmacy investors now have but one place to turn.  The company recently offloaded a nearly $200 million stake in U.S. pharmacy Rite-Aid, a position that has been somewhat of an albatross over the years.  The stock however has responded to the lancing of Rite-Aid, as well as the Shoppers transaction, as it has climbed by more than 30% thus far in 2013 and trades with an EV/EBITDA multiple of 12.4, eclipsing both Shoppers and Walgreen’s current valuations.

Extendicare (TSX:EXE) and Chartwell Retirement Residences (TSX:CSH.UN) – moving away from the pharmaceutical theme, two other names that should benefit from an ageing demographic operate in the realm of seniors housing and care.  Both of these names appear to be playing in the right sandbox, and pay seemingly attractive yields of 7.1% for Extendicare and 5.3% for Chartwell, but you’ll want to do your homework on each before jumping in.  Over the past 5 years or so, though both have performed quite well in dividend adjusted terms, the road hasn’t exactly been a smooth one for shareholders in either company.

The Foolish Bottom Line

Over the long-term, investing in the baby-boomers has been a good way to make a lot of money.  It’s very clear where this population bubble is headed, and getting positioned a tad early could result in big rewards for investors.  For Canadian investors, even though Shoppers is about to disappear, other options still exist.

Shoppers was one of the 5 stocks suggested in our special FREE report “5 Stocks to Replace Your Canadian Index Fund”.  To download this report and learn about the remaining 4, simply click here now.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler doesn’t own shares in any of the companies mentioned at this time.  The Motley Fool doesn’t own shares in any of the companies mentioned.   

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.