2 Stocks to Profit from the Exploding Global Middle Class

earth global warming concept

The human race is doing great. In fact, it’s thriving. Things have never been better. The world’s people are more prosperous, peaceful and healthier than ever before in history.

That may seem like an odd thing to hear. After all, almost everything we hear on the news is negative. Turn on the news and you’ll see nothing but misery. It’s a plethora of violent acts, natural disasters, sex scandals and other human horrors.

Where I live, the lead story on the local news is always violence in Queens. That’s been the lead story every night for the last 40 years. There could have been a pill invented for immortality, but it would have to wait. The lead story would be violence in Queens.

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It works. Guess what? People think the world stinks. A 2015 survey revealed that 65% of British people and 81% of French people believe the world is getting worse. Another recent study conducted across the world showed that the majority of those surveyed believe the world is in worse shape than it was 50 years ago.

But the real facts tell a much different story. The world is actually in much better shape than ever before, by just about every metric. Consider this:

  • Per-capita global income is at the highest level ever
  • Billions have been lifted out of poverty in the last 20 years
  • 300,000 more people gain access to electricity every single day
  • The percentage of people killed by war is near the lowest ever recorded
  • Global homicide rates are lower than ever
  • The global infant mortality rate has been cut in half since 1990

In addition, sanitation, standards of literacy, conditions for children, health, access to food, and the level of violence are better than at any time in the past and continue to improve. And global life expectancy is now 71 years, up from under 40 years in 1900. Sure, someone will get shot today. There will be a fire somewhere. But the world is becoming a much better place in which to be a human being.

The Exploding Global Middle Class

Since the end of the Cold War, billions of people have been lifted from poverty and the global middle class is growing at warp speed. Of course, the term middle class has a different meaning when talking about people rising out of abject poverty in emerging markets than it does in America. The general definition is wages of $11 to $110 per day. It may not sound like much but that is the level at which people have enough disposable income and are expected to buy things.

The number of middle class global citizens is projected to increase by billions over the next decade. The Brookings Institute estimates that somewhere around 2020, the majority of the world’s population will be middle class for the first time ever. It is estimated that globally the middle class will spend an additional $30 trillion per year by 2030.

That’s a huge market.

How can you make money from this megatrend? Any company that sells affordable products to this market, especially in Asia, which is expected to account for more than 80% of new middle class entrants, should benefit. Here are two.

Stocks to Profit from the Exploding Global Middle Class: Coca-Cola (KO)

The CEO of Coca-Cola said a few years back that new markets the size of the population of Manhattan (about 8 million) open up for the company’s products every single year. Coke is one of the world’s most iconic brands. It already has a huge presence in emerging markets and there is no other company with deeper pockets or more expertise to take advantage.

This is by far the largest nonalcoholic beverage company in the world. In addition to the soda it also has popular brands like Minute Maid, Dasani Water, Powerade and Georgia Coffee. It grew to where it is by being a brilliant marketer and a fierce competitor in the toughest market in the world. In emerging markets it’s like a wolf among sheep. Its products are exactly what people first start buying when they get a disposable income.

This blue chip stalwart pays a 3% dividend and is a Dividend Aristocrat that has raised the payout every year for the last 56 years. It has also grown the dividend by an average of about 7% per year over the last 10 years. When you take a company like Coca-Cola and add millions of people to its market every year you get one of the world’s most solid companies with growth as well.

Stocks to Profit from the Exploding Global Middle Class: Aircastle Limited (AYR)

It’s a funny thing. One of the first things people do when they get money is travel. Russian tourism exploded after the Soviet Union fell and prosperity started to increase. Global tourism is one of the fastest growing subsectors of the global economy. And it’s growing fastest in Asia, where China is expected to pass the U.S. as the largest aviation market in 2024 and India is expected to rise to the number three slot.

The number of air passengers globally is expected to double to around 10 billion between 2010 and 2025. Connecticut-based Aircastle Limited is one of the world’s largest aircraft leasing companies in the world. It acquires, leases, and sells commercial jet aircraft to airlines all over the world.

The airline business is a tough one and leasing makes a lot of sense. It enables companies to quickly address needs, requires a minimal cash outlay, enables companies to get better aircrafts and provides a hedge against ownership risk. Statistics prove the need to lease. In 1990, about 12% of the world’s fleet was leased. By 2010, that number grew to about 42%, and today it is around 50%.

Even in a lousy global economy the stock is up about 90% this year and sells at a reasonable valuation. It pays a healthy 5% yield and the dividend has grown over 12% per year over the last 10 years.

Tom Hutchinson

High Income and Peace of Mind

Tom Hutchinson, Chief Analyst of Cabot Dividend Investor, is a Wall Street veteran with extensive experience in multiple areas within the financial world. His advisory is geared to providing you both high income and peace of mind. If you’re retired or thinking about retirement, this advisory is designed for you.

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