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Death is an ultimatum bestowed upon every being inhabiting the planet. Concluded with a heartfelt ceremony to remember and honor the lost allows for loved ones to find closure. A ceremony to observe is not exclusive to humans. Elephants march to pay respects to a carcass occupied by lions, dolphins protect their lost from researchers, and chimps carry their dead infants for months[1]. What is exclusive to society is a funeral service. Growing up in India, a Hindu funeral service usually involved a version dramatized by many famous Bollywood movies- men and women wearing white observing a body; followed by the men carrying the body to a designated wooden structure built on a riverbank for cremation. My first experience with an American funeral was pulling over to let a long line of cars pass by lead by a car called “Hearse.”  Funeral services are much different in America than in India, but what stood out were publicly traded companies operating in the DeathCare Industry ecosystem. 

The National Funeral Directors Association defines a funeral service as “rites conducted immediately before the disposition of the dead human body” [2]. The NFDA published the 2019 NFDA General Price List Study in December 2019, which showed that the Median Cost of a Funeral with Viewing and Burial was $7,640 and the Median Cost of an Adult Funeral with Viewing and Cremation (including Urn) was $6,645 [3]. According to the Center for Disease Control and Prevention Wonder Online Database, between 1999-2019, an average of 2.5 million Americans die every year from heart disease, Malignant neoplasm, Cerebrovascular diseases, and chronic diseases Lower Respiratory Diseases, and Accidents [4]

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In contrast to the rise in Total Revenue for Funeral Homes and Funeral Services from $10.29 billion in 1999 to $14.36 billion in 2019, it is clear why Funeral Homes and Funeral Services comprise a unique industry, referred to as DeathCare Industry.

According to the National Directory of Morticians Redbook, there are 19,136 funeral homes in the United States with 89.2% and 10.8% private and publicly owned companies, respectively [5]. That averages out to 382.72 funeral homes in each of the 50 states offering varied services, ranging from the luxurious to the simple. At the core of a funeral home is a Funeral Director, an individual tasked with assisting a family from the beginning to the end. The Funeral Director’s role can range from helping and organizing their client’s desires in performing appropriate ceremonies to executing mortuary responsibilities. Moreover, the Funeral Consumers Alliance says that in nine states, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan, Nebraska, New Jersey, and New York, one must hire a funeral director [6]. In the state of New Jersey, Senate Bill 976 Section 26:6-8 states that, “in the execution of a death certificate, the personal particulars shall be obtained by the funeral director from the person best qualified to supply them” [7]. The business of Funeral Homes is monitored in a regulatory way by the Federal Trade Commission.

On April 30, 1994, the Federal Trade Commission passed “The Funeral Rule,” requiring funeral homes to disclose itemized and accurate price information regarding the goods and services they provide while prohibiting misrepresentation, upselling, and establishing compulsory purchases to render services [8]. The commission provides an itemized checklist to help consumers make better decisions regarding purchasing the right service. Interestingly, the idea that a federal agency is interested in helping consumers make the right choice for an activity so personal and sanguine should raise eyebrows. Not as an example of overreach, but as a tale of vulnerability since, FTC reported in June 2020 that investigators, “working undercover in five states, found failures to disclose timely itemized pricing information, as required by the Funeral Rule, in 17 of the 90 funeral homes they have visited since 2018” [9]. The idea that there can be price wars for caskets or cremation urns is remarkable, but a quick look at any product category in www.memorials.com or comparing different prices at www.funeraolcity.com should provide food for thought.

Funerals span the spectrum between ceremony and sensationalism. Ceremony because of Wilfrid A. Pruyn whereas, Sensationalism due in part of Miriam Burbank. Understanding that every family has a personal privilege in providing an appropriate ceremony to honor their loved ones is fair and tangible. But finding it on the stock market is a remarkable testament to capitalism.

Enter Robert L. Waltrip, referred to as “The Merchant of Death” in June 1996 article in the Texas Monthly and Service Corporation International. The article refers to Mr. Waltrip as the Ray Kroc of the Funeral industry, as “like McDonald’s, SCI has fixed costs. Buying in quantity such commodities as coffins and embalming fluid allows the company to increase its profits” [10]. Service Corporation International (NYSE: SCI) has been a publicly traded company since 1981 and is part of the Standard and Poors Micap 400 Index. Carriage Services Inc (NYSE: CSV) is another death care industry participant but is not part of any specific index and is considerably smaller in Market Capitalization. The market cap of CSV was $697.39 million, compared to $9.39 billion for SCI. Much like the story of most successful franchises, the following quote from the Houston Press in February 1994 still holds – “SCI has grown from a single Heights Boulevard funeral home originally owned by Waltrip’s father to the world’s largest provider of “death care” services” [11]. Even though the tail-end of the ’90s brought a significant crash in stock price due to ballooning net debt, the stock has performed significantly better from its decline in 2000 and its IPO in 1981.

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From its low on March 16, 2020, the stock has returned approximately 17.18% compared to the index it is part of S&P 400 (tracked by SPDR® Portfolio S&P 400 Mid Cap ETF), which produced about 78.14%. [Result as of May 7, 2021]

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Comparing to the broader market using the SPDR® S&P 500 ETF Trust, SPY has returned approximately 56%, whereas CSV has returned about 129.62%. Understanding that SPY is not an equal-weighted index, it is encouraged to review the following chart. The chart compares SCI and CSV with the Invesco S&P 500® Equal-Weight ETF. RSP performance was 67.52% compared to the 56% from SPY.  [Result as of May 7, 2021]

In their latest Q1 2021 reports, SCI performed 106,410 funerals [12], whereas CSV reported 11,028 funeral contracts[13], which results in a year-over-year increase of 23.03% and 21.74%, respectively. Until modern medicine devises methods to eliminate death as a certain outcome, families will confront the possibility of hosting a ceremony to pay homage and celebrate their loved ones. Like many things, consumers’ preferences change over time. The National Funeral Directors Association in 2018 said, “the rate of cremation in all 50 states will exceed 50 percent, up from only 20 states over that threshold in 2016” [14]. Neither burial nor cremation by fire is environmentally friendly.

There is an increasing trend towards cremation, according to the Cremation Association of North America, and conscience devoted to applying environmentally friendly practices in almost all aspects of life. Funerals are no strangers to this pursuit as well. A method less mentioned is Alkaline Hydrolysis, where a corpse is submerged in a solution and dissolved, resulting in less environmental impact. Legal in 19 states [15], it will be interesting to see where the deathcare industry heads in the next 10-20 years. Bio Cremation®, a product offered by Matthews International Corp (NASDAQ: MATW), applies the principles of Alkaline Hydrolysis to render environmentally friendly results. Memorialization, the segment under which MATW reports Funeral-related products sales, experienced a 26.97% year over year compared to Q2 2020 [16].

Another publicly traded company would be Hillenbrand Inc (NYSE: HI). Batesville, the company’s Funeral Products and Services segment, registered a 19.60% net revenue increase compared to Q2 2020 [17].   The biggest takeaway from this exploration was much like how Hasbro Inc (NASDAQ: HAS) plays a part in the former stages of our life, a company like Service Corporation International (NYSE: SCI), Carriage Services Inc (NYSE: CSV), Matthews International Corp (NASDAQ: MATW), and, Hillenbrand Inc (NYSE: HI) play a role in the latter stages of our lives. To compose an appropriate hommage catering to the needs of every individual family is essential. To financially engineer profit through a solemn and some would add a comforting exercise is an act best described by Mr. Robert L. Waltrip himself, “People who don’t buy our stock just don’t like money” [18].

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Since March 16, 2020, Hillenbrand Inc (NYSE: HI) has returned 159.43%, whereas Matthews International Corp (NASDAQ: MATW) 88.28%. Hillenbrand Inc (NYSE: HI) has outperformed Apple, Facebook, Microsoft, and Amazon between March 16, 2020, to now, companies that are almost 500-600 bigger than Hillenbrand Inc in market capitalization. [Result as of May 7, 2021]

Author’s Note- The data shared in the essay is reflective of the results rendered till the date of publication. As of publication, I do not own shares of any of the stocks mentioned in the essay. Historical performance only serves as an indicator and teacher, not a predictor. The thoughts expressed are my personal opinions, and cannot be equated to personal advice. The essay was constructed for informational and educational purposes only. I encourage all readers to perform their own due diligence prior to investing.