Where will the next Apple will drop

Investors looking for the next Apple-like success story should look in sectors that will benefit from the world's rapidly-changing demographics, a fund manager says.

Monday, May 28th 2012, 6:00AM

by Niko Kloeten

Michael Walsh, interim chief executive of Australian fund management firm Hunter Hall, will be discussing the topic of demographics at next week's Perfecting Investment Portfolios event in Auckland.

"Demographics is one of the key drivers of markets but it doesn't get as much attention as other factors," he said. "It sneaks around behind the market but it's terribly important."

Walsh told Good Returns that most participants in investment markets know that Western countries have rapidly aging populations, while China's aging is even more pronounced due to its one-child policy.

However, he said the story is more nuanced than just people getting older. To paraphrase the drinking ads, it's not the aging; it's how we're aging.

"If you go back to the 19th century, people tended to die in a linear fashion. In other words, some people died when the were 30, then a few more when they were 40, then 50, 60, 70, etc.

"Now longevity is becoming more rectangular; a great proportion of people live to their 80s, while the proportion of people who die in their 40s and 50s is actually very low."

Advances in medical technology have played a big part in this change, and according to Walsh the demand for life-saving biotechnology will only increase as Western countries age and developing countries see their incomes continue to rise.

However, he said Hunter Hall's focus is on smaller, emerging players rather than the likes of GlaxoSmithKline and Roche.

"You've now got people saying 'if only I had bought Apple shares in 1994'. The fact of the matter is that people would have been better buying Apple than Microsoft in the 1990s."

Walsh said at their respective peaks the technology and finance sectors occupied 30% of the MSCI World Index and he said health stocks could soon take up a similar proportion of the index.

"If you believe healthcare has enormous growth potential the time to enter the market is now, not waiting for some of the bio-tech companies to get bigger and bigger and bigger."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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