Corporate America is obsessed with Millennials. But many health care companies are focused on their parents.
As Baby Boomers get older, they are going to require more visits to the doctor. There's no way around that.
There already have been several mergers in the industry that are largely a play on this demographic trend. Expect many other big health care firms to try and profit from the graying of America too.
Health insurer Humana (HUM) may be looking to cash in. It's a big provider of Medicare Advantage and Part D plans, a business that is expected to grow dramatically as more Boomers near retirement.
Humana has reportedly hired Goldman Sachs to shop it around to potential buyers and its stock surged 20% Friday on those reports.
Shares have been flat since then. But the fact that they have not gone down since Friday appears to be a sign that investors believe Humana will eventually get bought.
Cigna (CI) or Aetna (AET) could be interested in getting more exposure to this part of the market.
Related: Thanks. Obamacare! Health insurer stocks have soared
The Affordable Care Act, or Obamacare, has helped the sector too.
The ACA may be politically polarizing, but there's no denying that increasing insurance coverage for Americans -- especially older ones -- has boosted sales and profits for the nation's giant health care companies.
Drug store chains are also jumping in for a piece of the action.
CVS (CVS)announced last month that it was buying Omnicare (OCR), a company that specializes in distributing medication to nursing homes and assisted living centers, for $12.7 billion.
Related: Obamacare sticker shock: Big rate hikes proposed for 2016
CVS CEO Larry Merlo specifically cited the "broader population of seniors and chronic care patients" that Omnicare targets as a key draw.
And CVS competitor Rite Aid (RAD) did a similar deal in February, buying pharmacy benefits management firm EnvisionRx for $2 billion.
More mergers are likely. And they probably won't just involve insurers and drug distributors.
Related: Health spending on the rise
Pharmaceutical companies, medical device makers and biotechs will probably look for ways to strike deals too. Many already have.
According to Thomson Reuters, health care mergers were at a record pace through mid-May. More than $240 billion's worth of deals have been announced so far.
It's no wonder health care stocks have been such phenomenal performers lately.
The Health Care Select Sector SPDR (XLV) exchange-traded fund, which owns industry leaders Johnson & Johnson (JNJ), Pfizer (PFE), Gilead Sciences (GILD), UnitedHealth (UNH) and Medtronic (MDT), is up 9% this year.
The ETF has soared 155% over the past five years, easily topping the S&P 500's gain.
And this trend could go on for decades.
The United States Census Bureau wrote in a report last year that by 2029, all of the Baby Boomers will be over the age of 65. That works out to more than 20% of the U.S. population.
