One of the tipster sheets that I keep up with has recently put me onto Invocare. His arguments are compelling. One could almost say they are life-and-death arguments.
- In times of high volatility (like now) the prudent investor flies to defensive stocks.
- As a defensive industry, nothing beats death!
- There is an inelasticity of demand in that industry, which, translated out of economist-speak means that people don’t buy more funerals in boom times, and fewer funerals in times of recession (unlike, say BMWs or luxury yachts).
- Funeral operators tend to hold their value, being an un-trendy investment at the best of times.
- Management confirms healthy performance (if not healthy customers, I suppose).
- Other mid-cap stocks are facing rising costs of raw materials in times of inflation like now. This is not necessarily the case in the funeral industry. Presumably the cost of their raw materials is fixed!
- Growth by acquisition, for example the recent hostile takeover of the Singapore Casket Company.
- Invocare has latent pricing power, given it’s dominant market position. Presumably it’s a sellers market when you have a dead body on your hands.
- The pre-needs operation, where people pay for funerals before they die, is a higher margin business, as the money is invested in a fund with higher returns that the expected growth in earnings from the core business.
I’d like to thank this equities analyst, he is delivering on his fiduciary obligations to put his readers onto the best opportunities in the market, without fear or favour. He played a straight bat, and accurately reported what the numbers were telling him. For some reason I found the whole concept hilarious. My sense of humour always was in questionable taste.