Funeral industry showing life

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The future looks bright for long-term investors in the funeral industry.

As 79 million baby boomers turn 65 over the next 5–10 years, funeral homes undoubtedly will see an increase in volume, says John Ransom, who is the managing director of health-care research for financial-services company Raymond James.

Ransom likes Service Corporation International (NYSE: SCI; Price: $18.73), which announced its plan in May 2013 to acquire Stewart Enterprises. The acquisition, which would create a $3 billion company that has at least 1,600 funeral homes and 515 cemeteries, is expected to reduce overhead and increase profit by eliminating duplicative functions. Ransom also recommends SCI because of its stable cash flow.

He also likes StoneMor Partners (NYSE: STON; Price: $25.90) for its high yield and Carriage Services (NYSE: CSV; Price: $18.85) for its cash-flow valuation.