Senior Care Stocks Remain in Doldrums

Seniors housing and care stocks remain in the dumps. There has been no Trump bump for them, as the rest of the market is up 16% since the beginning of this year. We should be only half as lucky.

One would think that the skilled nursing dominated companies would have been the hardest hit, given all the talk of Medicaid block grants and census declines. But through mid-October, two of them have actually posted gains so far. Diversicare Healthcare Services is up 11% and The Ensign Group has eked out a small 2.2% gain so far this year. Meanwhile, National HealthCare Corporation has dropped nearly 15% this year, and Genesis HealthCare has plunged more than 75% and has settled in around $1.00 per share, a level that scares most institutional investors away.

On the seniors housing side, it has not been the mixed bag seen by the SNF stocks. All three companies have dropped this year, on top of their price declines in 2016. Thinly traded Five Star Senior Living has plunged 44% through mid-October, and this despite the fact that a shareholder wanted to buy a decent percentage of the company for $3.50 per share. The board took a lower price from an existing board member. Oh well. But the value decline is significant and, while not warranted, there just does not seem to be any reason for investors to jump in, despite the fact that Five Star’s real estate alone is probably still worth double the current market value.

Talking about real estate versus stock value, both Brookdale Senior Living and Capital Senior Living own real estate that is still worth more than their current share values. That hasn’t helped, however, as Brookdale has declined by another 16% so far this year, and Capital Senior Living by 20%. Investors just see too many headwinds that continue to prevent operations from a rebound that everyone expected. And now, 2018 is looking like another tough year, so the turnaround has been pushed to 2019 and 2020. It’s tough on managements, but all they can do is focus on operations and hope another economic downturn does not rear its ugly head.

 

 

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