Because hey, they’re probably going to take your job. Might as well make some money off them before they gang up and crush all of your non-sexual dreams.
Ah, millennials. Depending on your perspective, they’re either the generation that will destroy the planet for good or save it from blowing up real good like the Death Star. They’re more coddled than your average four-year old, insisting on plenty of off time to take pictures of restaurant meals and travel to some obscure corner of the planet. The more out of the way the better. “Oh, you went to Madagascar? You haven’t LIVED until you’ve been to Mauritius!”
Millennials aren’t going away, and they’re probably not adopt the practices of baby boomers en masse once they start settling down an having kids. They’ll still use the internet as their primary entertainment vehicle. The freedom of the gig economy will still probably appeal to many of them. Travel will still be important; and most will choose to rent rather than buying a house, especially in overpriced Canadian housing markets.
These people will drive economic growth and decisions for decades to come. Here’s how you can invest in millennials, one of the biggest trends to come out of the investing world since the invention of the dividend.
The first way to invest in millennials is by investing in the future of travel.
The internet is filled with blogs that glorify the world of long-term travel. Approximately 95% of the people reading this who are under 30 dream of travelling the world. Whenever some hack writer like me wants to make a joke about millennials, they insert some crap about a clearly made-up country like Mauritius.
Hell, even YOUR HERO Nelson went and traveled to South Korea for a year. I’m terrible. I know.
But investing in travel is tricky. The airline business sucks more than that weird kid from high school’s Facebook statuses. It has huge operating leverage, which makes it really difficult to eke out a profit when times are bad. Fixed costs are everything, and customers will choose the lowest-priced carrier as long as it doesn’t crash into the side of a mountain. And most have unions that fight change harder than your average senior citizen.
Warren Buffett recently invested in the airline business (it was probably one of his key lieutenants, actually), but I think that was a well-calculated move to troll all y’all.
Even investing in hotels could end up being problematic. Like a lot of companies that are heavy on real estate, the average hotel operator ends up with a lot of debt on its balance sheet. If Airbnb really catches on and takes a meaningful amount of business from the sector, occupancy could go down far enough to make defaulting on that debt a possibility.
And you can’t invest in Airbnb or Uber or anything like that, because a) they’re not publicly traded and b) even if they were, they’d trade at 1932854928 times earnings. Just kidding. They wouldn’t have earnings. ALL ABOUT THE GROWTH, BABY.
The answer is restaurants. The restaurant business itself is a killer. But there’s a lot to like about investing in a franchise with a bazillion locations. Whenever I go into a McDonalds or a Wendys or a Pizza Pizza, it’s filled with millennials.
Disclosure: I own Pizza Pizza shares.
The second way to invest in millennials is to put your capital behind a co-working space, that place where freelancers go after they get so sick of staring at that same “hang in there kitty” poster that they want to slit their own wrists.
There are no publicly traded co-working space companies that I know of, so you’ve really only got one option. Start your own.
Getting into the business is easy. You can be up and going with less than $10,000 of your own money. Go to a medium-sized city (because all the big ones are already saturated), rent some space, find a bunch of used desks and chairs you can buy, and you’re in business.
I kinda want to start a co-working space in my mostly unused office, but my landlords aren’t really in favor of it and I just don’t think my community is big enough.
Millennials want to live in Canada’s largest cities. But real estate prices are out of control. So many are making the prudent choice to rent instead of buy.
Thus, the trend becomes clear. Investing in REITs is a way to invest in millennials.
Specifically, let’s look at apartment REITs. Canada’s three largest apartment REITs are Boardwalk REIT (TSX:BEI.UN), Canadian Apartment Properties REIT (TSX:CAR.UN) and Northview Apartment REIT (TSX:NVU.UN). Northview is probably my favorite because it focuses on smaller communities (which tend to have higher cap rates) and its dividend is close to double its rivals’.
But Northview has lots of exposure to markets that are oil-heavy, and it has a lot of debt. And if you’re looking for millennial exposure, markets like Airdrie, Alberta and Fort St. John, BC, probably aren’t your first choice. Both Boardwalk and Canadian Apartments mostly own buildings in larger centers.
Wrapping it up
Personally, I would never directly invest in millennials. I look at demographic trends as the cherry on top. If everything else about an investment is decent, the trend can be your friend. Just don’t base your whole investment decision on it.