What happened on November 9 was a bit of a shock, but in a good way. Senior care and REIT stocks soared after a year of forgettable foibles. The reason? Pfizer’s announcement that its COVID-19 vaccine was more than 90% effective, and that it could be available very soon, combined with the apparent end of the presidential election with Joe Biden the victor. We believe it was the end of the uncertainty on both accounts that pushed the market up.
For those not paying attention, the Dow Jones Industrial Average at one point during the day hit a record high of 29,933, up 5.68% from the previous close. It ended the day up 2.95%. But it was the senior care market and its related REITs that outperformed pretty much all other sectors.
At one point during the day, Brookdale Senior Living’s share price was up 49%, and closed the day up 40%. You usually don’t see a move like that unless there is a takeover announcement, which we at first suspected. To be fair, a huge percentage change is easier when your share price is between $3.00 and $4.00, but still, 40% is 40%. Other provider stocks jumped as well, with Five Star Senior Living +11.2%, Capital Senior Living +7.7% and National HealthCare Corporation +6.6%. Brookdale was the shocker, and it was followed by a more modest advance the following day.
The REITs also outperformed the overall market, with Welltower up 31.6% at one point, only to close the day with a 21.4% increase. It was followed by Ventas (+18.2%), Omega Healthcare Investors (+18.0%) Sabra Health Care REIT (+16.5%) and National Health Investors (+12.3%). And these increases came on a day when the 10-year Treasury rate jumped by more than 13 basis points to 0.95%, the highest it has been in more than seven months. Because of their high dividend yields, healthcare REITs used to trade more like bonds. No longer, and that is because of the RIDEA structures that became popular 10 years ago.
Anything that impacts the cash flow-generating ability of their senior living investments can sway the share prices, and much more so than interest rates. This time, with at least one vaccine perhaps around the corner, their operators can maybe start to look beyond the coronavirus and its devastating impact on census and cash flow. That got investors’ juices flowing.
While this is great news all around, it is not like no one thought a vaccine would not be available in the months ahead. And there is still the fact that the Pfizer vaccine needs to go through the FDA approval process, not to mention manufacturing tens of millions of doses, and then distributing them. Not to be Debbie Downer, but it appears investors got a little ahead of themselves. Unless, of course, it was all about the Biden election. But that does not explain the gap between the overall market increase and the increase of the senior care-oriented stocks. We will take the increase and not worry as to why.