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Hillenbrand Customers: Dying to Buy

January 21, 2009 | About:
Crass jokes and mortuary humor aside, the search for “recession proof” industries continues. The recent favorite has fallen back to the ultimate recession proof industry: death. Funeral services like casket-maker Hillenbrand (HI) provides are products that will always be in demand.

While life expectancies have been climbing over the past few decades, they’ll never climb high enough to put off the inevitable. The death rate for the U.S. has been relatively stable over the years. We lose about 8.27 people for every thousand a year. That’s a market of 2.5 million people who needed some sort of funeral services.

As the baby boomers age, the amount of Americans over age 65 will grow larger and so will the “target demographic” for funeral services.

Companies like Matthews International (MATW), which also sells funeral products like mausoleums and Service Corporation International (SCI), which runs a large network of cemeteries and funeral homes, should both do very well.

Death, as a business, goes back millennia. And with a few exceptions, namely plague disease and war, the death rate is as steady as a clock. In times of uncertainty and troubling economic conditions, that kind of steadiness is worth investigating.

By Investment U Research Team

www.investmentu.com

About the author:

INVESTMENTU
Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th-century Franciscan friar, William of Ockham. We utilize this straightforward approach to value over 5500 securities, with key emphasis given to the study of individual securities' price-to-sales, price-to-cash earnings and other historical valuation ranges. Please visit www.ockhamresearch.com for more information.

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Rating: 2.3/5 (4 votes)

Comments

kuuks
Kuuks - 5 years ago
It's pretty pointless looking to invest in recession-proof industries when you're well into a recession as most recession-proof companies have barely declined in value and are hence less attractive than companies in seemingly distressed industries.

That said, HI did go below $15 at which point I bought it for my marketocracy portfolio. I've said in earlier threads that they have a fantastic moat in premium caskets where they can keep costs phenomenally low and still charge high prices for their top quality products. The industry is consolidating, caskets are losing market share to cremations making entry less attractive, HI is making few and very smart acquisitions and indsiders are buying.
fk
Fk - 5 years ago
Death is certainly something we can count on with absolute certainty, but buying of caskets is dependent on much more than that. People's religious views and spiritual orientation probably matter more on this investment idea. In a Buddhist country, cremation would the norm.

In the U.S., I believe the theistic religions are losing ground. The trend seems to be more people being atheist or agnostic. Do you have any statistics on casket buying habits of u.s. over the past 10 years?

kuuks
Kuuks - 5 years ago
Lol Fk, I can't say I know of any atheistic religions. However, I do understand what you're trying to say and the general consensus in the deathcare industry is that there is a slow, secular decline in casket burials relative to cremation. While HI has expressed interest in entering the market for cremations, it's in no hurry. This part of the deathcare industry, therefore, resembles the tobacco industry where Altria and others were successful in gaining market share as consolidators in a declining industry and performing spectacularly this decade. HI also resembles MO in that pending litigation against itself and other major players in the deathcare industry has kept its price down since the spinoff.

While I don't like to base stock arguments on VIC writeups, I do highly recommend the HI writeup. Also, the 10K by HI is very informative.

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