A Portfolio For A Growing Population

Published in Investing on 28 February 2012

We look at how to profit from the UK's expanding population.

Since 2001, ONS figures show that 2.2 million more people have settled in the UK than have left the country -- and this trend looks set to continue. Its current forecast is for the population to increase from 62.3m in 2010 to 73.2m by 2035.

Not all of this increase will be down to immigration -- 56% of the increase will be due to births exceeding deaths.

Baby boom

The UK's birth rate has also risen in recent years, thanks in part to a higher birth rate among immigrants than among the native UK population.

I believe we should thank newcomers to the UK for helping to provide a new generation of young workers for the future, but this does mean that even if the government succeeds in slowing net migration, the population will continue to rise steadily for many more years.

Macro investing, Peter Lynch-style

Legendary investor Peter Lynch advised investors to "use what you already know" to select winning companies to invest in. As UK residents, we have an insider advantage when considering which companies will benefit from the UK's growing population.

In most cases, they are companies we see or deal with every week; companies who provide essential services to each of us and to the public-sector organisations we all deal with.

Ten population growth shares

Choosing good companies that deliver life's essentials is not as hard as you might think. All but one of the companies I've chosen is listed in the FTSE 100, and all have a long history of dividend payment and earnings growth.

Here are my 10 recommendations for a long-term population growth portfolio:

CompanyPrice-to-earnings ratioYield
Aviva (LSE: AV)6.86.8%
BT Group (LSE: BT)10.54%
Carillion (LSE: CLLN)8.64.6%
G4S (LSE: GFS)13.32.7%
GlaxoSmithKline (LSE: GSK)12.35.0%
Marks & Spencer (LSE: MKS)10.34.7%
National Grid (LSE: NG)12.55.6%
Royal Dutch Shell (LSE: RDSB)8.14.5%
Tesco (LSE: TSCO)8.94.5%
Vodafone (LSE: VOD)10.35.2%
Average:10.164.76%
FTSE 100 2012 Forecast:13.63.5%

Source: Digital Look

These big cap names are stalwarts of British life and yet collectively, they cost less and offer more income more than the FTSE 100 average.

Most of my choices are probably self-explanatory, but its worth noting that Warren Buffett owns 5% of Tesco, Aviva is in Stephen Bland's value portfolio, BT profits from both its customers and its competitors and the police outsource a lot of work to G4S.

Buy-and-forget portfolio

I reckon that this portfolio should deliver as the population grows and would also make a good foundation for a long-term buy-and-hold (and forget) portfolio.

It offers good growth potential and. at today's low price-to-earnings ratios, would deliver an inflation-beating income of 4.76%, assuming your money was evenly divided up between each company.

Of course, this portfolio could easily be tweaked to suit your preferences or predictions. Let me know what you think in the comments below.

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> The Motley Fool owns shares in GlaxoSmithKline and Tesco.

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Comments

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AleisterCrowley 28 Feb 2012 , 10:28am

forecast is for the population to increase from 62.3m in 2010 to 73.2m by 2035.

My idea of hell...
That's another TEN BIRMINGHAMS required in the next 23 years to house the surplus population. Even if the increase does improve the economy temporarily (by no means certain), the quality of life is going to be rock bottom. We'll be lucky to avoid severe civil unrest, or even civil war (see Yugoslavia, N Ireland etc) Hopefully the current shower will finally get a grip and manage the population down to a more sensible level in the long term.

jaizan 28 Feb 2012 , 11:50pm

Will the increasing birthrate be amongst broadly educated people who integrate and contribute to the wider society?

Or will it be amongst groups who have their own extremist agendas ?

tru2me 29 Feb 2012 , 1:48pm

Or will it be amongst groups who have their own extremist agendas ?

Good question jaizan.

Extremist agendas are such a global phenomenon now.
And the actions of such groups are not necessarily undertaken in their domiciled countries.

You could make an analogy with the recent Arab spring where the young were reporting events using the cameras on their mobiles.
Posting footage on You Tube.
Communicating with each other via Facebook.

Not saying these young North Africans are extremists although some maybe.
But are these not the same tools a modern extremist might use before pushing the button or pulling the trigger.

ANuvver 29 Feb 2012 , 8:55pm

AleisterCrowley:

One Birmingham is quite enough already...

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