During the course of this pandemic, the entire stock market has been extremely volatile. The quick 35% plunge was followed by a nearly as quick return, with the NASDAQ hitting new highs this week. This happened despite more than 40 million people recently hitting the unemployment lines.
This week, however, we saw volatility reaching new highs in the senior living sector. As an example, Brookdale Senior Living hit a near-term low of $2.66 per share on May 13. By June 5, it jumped by 64% to $4.37 per share. Maybe the turnaround was coming around. But by June 11 (just four trading days later), it plunged by 35% to $2.82 per share. After all that volatility, between May 13 and June 11, the price increased by just 6%. Not a sign of a turnaround.
In a much shorter time frame, amid wider swings, Capital Senior Living hit a low of $0.56 per share on June 4. Just three trading days later, it more than tripled in price to $1.72 on extremely heavy volume. This got the tongues wagging that maybe, just maybe there was a buyer finally emerging to take the company private. Or maybe they were looking at a recapitalization, or maybe there was just some speculation going on, like there often is with a major senior living company that has become so financially small with a market cap of just $25 million.
This last one may have been the case, because two days after hitting $1.72, the shares had plunged by 53% to just $0.80 per share. Over that combined period, from June 4 to June 11, the share price did soar by 42%, but that was just an increase of 24 cents per share.
To be fair, yesterday’s market plunge of 6.79% for the Dow (down 1,862 points) was a major contributing factor to this recent volatility in both Brookdale and Capital Senior Living. We have seen this movie before. Investors get enticed with the low valuations, and it is always fun to buy 10,000 shares for $8,000. But only fun if it goes back up again. And it usually has.
