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Service Corporation Stock: A Deadly Serious Investment
Stock Analysis & Ideas

Service Corporation Stock: A Deadly Serious Investment

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Faced with a potential global recession, investors’ options for viable opportunities are dwindling. However, those who don’t mind cynicism can consider Service Corporation, a final arrangements provider.

Although the euphemistically termed deathcare industry is hardly a pleasant dinner table conversation, it’s an important one to be had. No matter who you are, what you believe in, or how much money you have, the Grim Reaper comes for all of us. Therefore, Service Corporation (SCI) enjoys the best investment narrative of all: inevitability. I am bullish on SCI stock.

Peruse business headlines right now, and it’s a near-guaranteed certainty that you will encounter articles about a possible incoming recession. As a result, many financial analysts are guiding their readership toward various ideas that can help them navigate treacherous economic waters.

Under these circumstances, investors may be best served if they focus on permanently relevant business models, and deathcare couldn’t be more pertinent if it tried.

Respectfully setting aside various theological discussions, everyone who has ever lived has died. That right there is the fundamental driver for SCI stock. Not only that, the intensity of this narrative aligns with basic economic principles.

Whether living or not, people must reside somewhere. With land being a limited resource, at some point, prices for final arrangements will soar based on shifting supply-demand dynamics.

In fact, multiple publications have warned that urban cemeteries are running out of space. Moreover, BBC News reported a few years ago that the world is running out of burial space.

Admittedly, it’s a macabre (some might say tasteless) investment thesis. Nevertheless, the harsh reality is that SCI stock is sitting on an unprecedented demand driver.

Service Corporation May Outperform

On TipRanks, SCI has an 8 out of 10 Smart Score rating. This indicates moderate potential for the stock to outperform the broader market.

SCI Stock and the Death Boom

In future history books, 2019 may go down in time as a significant milestone. Not only was it the last year before the horrific COVID-19 pandemic, but it was also the year that millennials overtook baby boomers as the largest living adult generation.

Nevertheless, that it took so long for younger demographics to overtake the boomers demonstrates what Pew Research Center labeled as their outsized presence compared to other generations. In 1999, boomers reached their peak population figure at 78.8 million people. At the time, they represented over 28% of the total U.S. population.

However, using simple logical deduction, what goes up must come down. What historically represented the biggest boom in live births will invariably translate to the biggest boom in final arrangements. With the aforementioned factor of limited cemetery space, demand for traditional burials will surely skyrocket.

Further, immigration patterns will eventually play a meaningful role for companies like Service Corporation. Without diving into the specifics, certain religions have specific protocols for final arrangements which don’t align with space-saving measures like cremation.

Again, various factors are converging “positively” for the deathcare industry.

Cynicism Galore

While SCI stock is a cynical investment from various angles, that people die is not part of a ghoulish thesis. Again, barring certain religious belief systems, everybody who has lived has died. Service Corporation’s cynicism and its ilk come alive through the potentially upcoming recession.

According to various studies, significant economic downturns correlate with higher mortality rates. It’s not an unusual thesis as, psychologically, many people’s sense of identity and worth is tied to their occupation. As you know, one of the first questions asked during initial social introductions is what a person does. Therefore, the inability to answer that question (because of layoffs) tends to increase deaths of despair.

Further, as the COVID-19 crisis confirmed, just being socially isolated can lead to detrimental health risks, such as unwanted weight gain. If left unaddressed, the increase in sedentary lifestyles stemming from recessions – let alone depressions – can lead to chronic diseases such as diabetes. Naturally, these poor health outcomes would increase the probability of higher mortality rates, thus cynically boosting SCI stock.

Wall Street’s Take on SCI Stock

Turning to Wall Street, SCI is a Moderate Buy based on just one Buy rating. Service Corporation’s price target is $74, implying 4.8% upside potential.

A Mostly Credible Narrative

To be completely transparent, an economic recession doesn’t necessarily spell doom for people (and thus a boom for SCI stock). For instance, fewer people having jobs translates to fewer people on the road, thus eliminating traffic fatalities, and fewer operating cars also means better air quality, thus improving life expectancies.

Nevertheless, as the opioid crisis in America has demonstrated, despair is rising. Therefore, the cynical argument for SCI stock remains largely robust. However, irrespective of the unpleasant factors surrounding the deathcare industry, they don’t change demographic realities.

It just comes down to basic scientific principles. Mass in a controlled environment is neither created nor destroyed. That means whoever is born into this world will eventually occupy this world permanently. Until this narrative changes, SCI stock is an investment you can believe in.

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