The SeniorCare Investor: Top 2010 Senior Living Stocks--

A Fourth Quarter Rally Sends Most Shares Up For The Year

When looking at senior care stock returns in 2010, it is important to remember that 2009 was, at least for most companies and their shareholders, a banner year after the disaster in 2008.  In 2009, the share price increases on the assisted and independent living side of the business ranged from 27% to 226%, with a non-market cap weighted average of 104%.  It is hard to beat that in any following year, but the sector actually performed quite well again, partly benefitting from the general rise in the overall stock markets, but also from investors’ realization that senior living providers weathered the recession pretty well and “real estate” is not necessarily a bad word.  For two years in a row, all the seniors housing stocks posted price increases.

The top performer in 2010 was Five Star Quality Care (AMEX: FVE) with a price increase of 104%.  This comes on top of a 127% increase in 2009.  The company has struggled with a bit of an identity crisis in terms of its various operating components and its tight relationship with one of the REITs.  But the company has been trying to focus its growth on the private pay senior living business while ignoring suggestions to sell its small rehab hospital portfolio.  Following Five Star was Sunrise Senior Living (NYSE: SRZ) which appears to have escaped what many thought was near-certain death two years ago.  SRZ’s shares surged 69% in 2010, which followed a 92% jump in 2009.  Both Sunrise and Five Star have benefitted from starting at quite low share prices, which exaggerates their percentage gains compared with other companies.  Most of SRZ’s gain came in the fourth quarter as news emanating from Virginia just kept on getting better.  The company still is not out of the woods, but the clearing is in sight.

At the low end of the spectrum for the year were Emeritus Corporation (NYSE: ESC), up just 5% for the year, and Brookdale Senior Living (NYSE: BKD), up 18%. Brookdale jumped by 226% in 2009, while ESC increased by a more modest 87% in 2009, so the most recent year’s results need to be looked at in conjunction with the previous year.  Emeritus may get the biggest bump up in 2011 as its recent acquisitions stabilize and start to show some positive returns.  Investors may have some concern that the company has bitten off more than it can chew, but the momentum seems to be in its favor and we also believe they will be adding to their portfolio.

Right in the middle of the pack were Assisted Living Concepts (NYSE: ALC), up 23% (up 27% in 2009), and Capital Senior Living (NYSE: CSU), up 33% (up 68% in 2009).  We still have a hard time understanding why investors keep pushing ALC’s price up higher when occupancy remains at the bottom for the industry...Want to read more? Click here for a free trial and download the current issue today