Demographic Investing

I wish I could boil it down to a nifty list of "The Top 10 Demographic Trends to Supercharge Your Portfolio". Alas, such attempts made by populist business publications do one thing: they use sound ideas, only smattered with gimmickry, to sell magazines. Real 'trends' are often over-priced, as the saying goes, if it's in the news, it's already priced in. So do yourself a favor, ignore the next cover of Fortune and BusinessWeek.

This is not to say long term demographic trends don't matter. The key is what to avoid. As Keynes poignantly stated: “The difficulty lies not so much in developing new ideas as in escaping from old ones.” Avoid the trendy demographic stocks trading at 40x earnings. However, Warren Buffett has used reasonably priced, out-of-favor companies with idiosyncratic risk, to make deft long-term demographic bets (think of human thirst and the psychological power of Coke; men's shaving habits and Gillette; aging and his recent purchase of stock in GlaxoSmithKline).

On to an interesting trend. The increase in Hispanic/Latinos is a demographic worth mentioning which includes the following characteristics: high birth rate; relatively young; increasing economic clout; less likely to use formal banking; and, while not working extremely hard, enjoys lots of Spanish television. If you want lists, Texas has been less impacted by housing. Here are Texas banks with strong Hispanic/Latino population exposure: SBIB, PRSP, CFR. Check 'em out. Another compelling company to research is Televisa (TV). TV trades at 8x Ebitda, has a reasonably clean balance sheet and generates a lovely 28% return on equity. The women on the telenovelas aren't too bad either.