Friday, November 23, 2012

Chump Portfolio Update - Friday, November 23

I ran a quick FAST Graph on my holdings to get a quick picture of valuation.  Here are the graphs:

I update the spreadsheet that goes with these holding later this weekend.  Happy Thanksgiving!

Wednesday, November 14, 2012

Health Care REITs - 11-14-2012

With the recent election results, it looks like Obamacare is here to stay, at least until the next presidential election.  Thus, I'll be making a few changes to my portfolio in the coming months.  A couple of recent articles on SA from Brad Thomas make the case for owning Health care REITs.

Link here:

and here:

So, using FAST Graphs, I took a quick look at the following:  HCP, HCN, OHI, VTR, HTA, SRZ and VTR.  Below are the summary graphs.

The pink line represents a "fair value" price based on income and cash flows.  Fair value for HCP is around $33/share.  Too expensive at a price in the mid 40's.

Fair value for HCN is $48.71, too expensive.

Fair value for VTR is around $41/share.  At $63+, too expensive.

Fair value for OHI is $29 based on income and cash flow, it appears to be undervalued at today's price below $22.  Note:  based on historical prices, Mr. Market has been paying 9 x FFO, or cash flow from operations.  This gives a price around $18.

HTA and SRZ are too new, and don't have any type of track record from which I can draw conclusions.

Thus, my favorite in the group is OHI.  Looking just a bit deeper, I see the following:

  • Focus on nursing homes.  This seems a safe growing segment.
  • The 7.9% yield is best of the bunch
  • Forward eps growth estimated to be 6% (based on 2 analysts covering)
  • Low growth, but good for this segment, and better than the competitors
  • Beta of .91, good to have in a flat or declining stock market
  • Health care real estate is nice recession proof hedge against a downturn in stocks

In summary - I'd like to add a REIT to the portfolio for diversification into real estate.  I sold NLY a month or so back when fed started QE infinite.  Health care, and long term care, seem like solid segments for investment as our boomer generation (me included) gets old and feeble. Obamacare should provide continued and increased funding for nursing homes in the long term.

I'm placing a limit order today for OHI below $22/share.  I'll start a position, say 33% of a "full" position, and look to add on further weakness in the coming months.