Jim Cramer has been on the lookout for non-Trump bull markets, and recently he realized that one has been hiding in plain sight: the dental industry.
"The dental stocks have been quietly riding three big secular trends — an aging population, the need for most cosmetic dentistry in the age of the selfie, and the rise of the middle class in emerging markets," the "Mad Money" host said.
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Cramer attributed the sector's strength in part to the United States, which accounts for a third of global spending on dentistry.
With almost 75 million baby boomers reaching the age where they need to start paying up for healthy teeth, the growth of U.S. dental spending is set to rise to 5 percent this year, from 3.7 percent in 2016.
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Yet baby boomers are not the only ones to thank for enriching dental service providers. Cramer tapped selfie culture as another major contributor.
"With the rise of Instagram and Snapchat and selfie culture in general, people want to have the best possible smile they can, which means more adults are getting braces," he said.
Dentistry is also picking up around the world, as smaller countries develop and build their middle class communities.
"Having healthy, non-crooked teeth is a pretty universal sign of prosperity, so as more and more people in developing countries join the middle class we see rising demand for dental services," Cramer said.
And where there are strong secular trends like these, there are also beneficiaries. Cramer's top dental plays — Align Technology, Henry Schein, and Dentsply Sirona — have all outperformed major averages so far this year.
Align makes high-end invisible braces and mobile scanning technology for dentists, a model in line with the cosmetic trend backed by selfie culture. Cramer said the company's February earnings report proved there was a lot to like.
"The company refuted rumors of weak dental customer traffic that we'd been hearing leading up to the quarter by delivering strong sales and giving us robust earnings guidance for the next quarter," Cramer said. "Meanwhile, Align trained more than 2000 international doctors on their systems and processes, a 73% increase versus the previous quarter, which explains why their international business is on fire."
Not only that, but the company is a routine innovator, recently introducing a device to help sleep apnea patients.
Henry Schien is a dental and veterinary supplies distributor that also beat earnings expectations for its latest quarter, has a burgeoning international business, and is making scanning and software products to help dentists practice better.
Cramer's final pick, Dentsply Sirona, is the weakest of the three based on its February earnings report, but the "Mad Money" host argued that the world's largest dental supplies manufacturer seems to be plagued with one-time issues.
"Dentsply Sirona indicated that part of the softness is because it's taking a hit from changing its go-to-market strategy — sort of a short term pain, long term gain scenario," Cramer said. "Meanwhile, Dentsply Sirona continues to expand internationally, with 9.4 percent growth in the rest of the world, and the dental equipment maker is taking share all over the place."
Cramer said the stocks of all three are trading sideways because they are pricey. Align, for example, trades at 32 times 2018 earnings estimates. Still, Cramer has faith in the secular trends fueling the dental rally.
"That's why Align Technology, Henry Schein and Dentsply Sirona have been beating the averages, and I think they'll continue to do so," Cramer said.
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