Service Corp International (SCI)

A stock that makes me go ewwwww





As one can tell from my personal investments in casinos, alcohol, and tobacco I am usually not averse to investing in areas that other investors find repulsive, but I think that I may have met my match. With its stock off 30% so far this year, a number of hedge funds have started building positions in Service Corp. (SCI). For those of you who are not familiar with the company, Yahoo! Finance describes it as "as a deathcare products and services provider." Basically they operate funeral homes. The thesis behind an investment in Service Corp. right now is that its business will grow significantly as Baby Boomers begin to die in greater numbers. After falling consistently for the past forty years, the National Funeral Directors Association estimates that the U.S. death rate will rise to 9.3 per thousand people in 2020 and 10.9 per thousand in 2040 (from a base of 8.1 per thousand in 2006).





This sounds like a very solid theory, in fact I am surprised that hedge funds would look for this sort of long-term investment (perhaps they're just waiting for the pop when others catch on to this trend) but even I would have a tough time rooting for people to kick the bucket so that the revenue of a company that I am invested in could grow. I remember when I first found out what Service Corp. did all the way back in college (yes I did actually attend and even graduate college and yes it was a long time ago). I was at a job fair my senior year, making the rounds and speaking with all the usual suspects in Richmond, Virginia including Circuit City, CarMax, Capital One (thank goodness I didn't end up at any of those places) when I cam to a company called Service Corp. I thought to myself, "Huh I've never heard of them before. I wonder what they do. So I picked up one of their brochures. Once I figured it out I was like "Oh, no thanks." and quickly walked away.





Another interesting thing that I picked up on from this article is that Service Corp. invests the money that it makes from selling funeral services and plots in advance (aka pre-need sales) in three trust funds which currently have in the vicinity of $3.5 billion in assets.





Service Corp. Lures Hedge Funds as Boomer Deaths Position Stock





http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ah3OdCdeceug





Deej