U.S. Immigration Could Spell Big Business

U.S. Immigration Could Spell Big Business

NEW YORK (Reuters) - The largest immigration boom in U.S. history is expected to lift earnings at companies from discount retailers to telecommunications providers, putting dollar signs in the eyes of investors looking to cash in on the wave of newcomers, mostly from Latin America and Asia.
Demographics is "one of the top five tools any macro analyst and investment manager should be following," said Robert Justich, senior managing director at Bear Stearns Asset Management. "And there has been no bigger demographic change than today's migration."
The future looks promising.
"If you are forecasting into the next two decades, you are looking at an economy with tremendous opportunities in the realm of immigrant-related activity," said Marcelo Suarez-Orozco, co-director of immigration studies at New York University. "Never have so many highly educated and highly skilled (people) come into the immigration flow."
The last big wave in immigration, from 1900 to 1910, was driven by Europeans. Although slightly higher on a percentage basis, the number of immigrants in the United States then was less than half of what it is today, according to the Center for Immigration Studies based in Washington D.C.
Census data from 2003 show nearly 12 percent of the U.S. population, or about 33.5 million people, are foreign-born, and demographers see an increase in coming years with both legal and illegal immigrants coming to the U.S. seeking greater economic opportunity or religious and political freedom.
The recent wave is more diverse in terms of countries of origin — from Mexico to India — and educational levels, said Suarez-Orozco.
The largest group comes from Latin America and tend to be younger and just starting families, he said.
That is certain to drive additional business for those who sell clothing, own apartment complexes and build homes.
Some retailers such as Sears, Roebuck & Co. and Kmart Holding Corp. are already building brand loyalty by targeting potential immigrants in their home countries, Suarez-Orozco said.
Mario Gabelli, fund manager of Gabelli Asset Management, pointed to Spanish-language broadcaster Grupo Televisa SA de CV and brewer Femsa as companies already reaping benefits by catering to the Hispanic market.
Drawing on the desire to stay connected, satellite companies and telecommunications companies benefit as well.
"The cost of communication has come down tremendously and people are communicating with their homeland like never before," said Bear Stearns' Justich, who recently released a paper about illegal immigrants and the underground labor force. "In any immigrant neighborhood, you will see vendors with calling cards and calling centers."
HOMEBUILDERS, BANKS TO STAY BUSY
Low interest rates are a big part of the reason for increased housing demand, but Justich also attributed some of that upside to increased migration.
Many expect the home buying spree to continue.
"Within three to five years of immigrating, they are looking to buy in the low-end entry home market, which will hold up the best," said Harry Dent, investment strategist and founder of Dallas-based H.S. Dent Foundation.
Saving for housing and education is a priority, but many immigrants also send money back to families, creating a major source of foreign exchange for some countries and generating business for financial services companies.
"Banks understand the size of the marketplace and how big the fees are in remittances," Justich said. "People were paying a lot for risk-free transactions and some of the larger financial institutions have come into it."
Growing faster than the average bank are niche banks like Cathay General Bancorp and East West Bancorp Inc. , which target specific populations, said Randy Watts, a small-cap growth fund manager at Boston Company Asset Management.
"If you look at the mean family income for Asian and Pacific Islanders, it is $78,800. That compares to $73,800 for Caucasians. In addition, 48 percent of Asian and Pacific Islanders have college degrees compared with 29 percent of Caucasians," Watts said.
That bodes well for investments in ethnic banks as well as education-related companies.
"Asian immigrants are conservative savers. Many open up passbook savings, which have a lower cost of deposit for banks, but they also are very entrepreneurial," Watts added.
While the current wave of immigrants is more divided than in the past when it comes to upward mobility, Suarez-Orozco said all still offer opportunities for Corporate America.
"Walk into one of these huge stores, like Wal-Mart, and you can see who the customers are; it's amazing how much Spanish and Chinese is spoken," Suarez-Orozco said. U.S. companies "are most definitely aware of the opportunity."