Health Care REITs Climb

July 27, 2009

Monday, July 27, 2009
Three weeks ago we mentioned that Rob Mains increased his recommendations for several health care REITs because of a yield discrepancy that historically indicated they would outperform other equity REITs by a two-to-one margin.  We think investors agreed with his analysis.  Since then, every health care REIT in our universe has increased in value anywhere from 4.9% to 22.7%, with an average increase of 13.3%.  Two smaller REITs, LTC Properties and Care Investment Trust, jumped by more than 20% each.  The three largest cap health care REITs - HCP, Inc., Ventas and Health Care REIT - all surged by 16.4%, 12.5% and 15.6%, respectively, in the last three weeks.  Obviously, they were helped by the market surge above 9,000 for the first time since January, but investors probably understood the value relationship when health care REIT yields became so attractively high.


In the skilled nursing sector, all the stocks are up so far this month before second quarter earnings come out.  Do investors believe there will be a positive surprise, or do they see the Democrats’ squabbling over health care reform to mean that Medicare and Medicaid may not get the cuts that have been put on the table?  Perhaps a little bit of both.


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