Seniors Housing Stocks Tumble (Again) - January 2009

January 21, 2009

January 21, 2009
On a day that many Americans were celebrating the inauguration of our 44th president, investors took the stock market down yet again. While the Dow was down 4.0% and the broader S&P 500 tumbled by 5.3%, seniors housing stocks suffered losses two to three times as large. The broader market decline had everything to do with the banking and credit crisis and nothing to do with President Obama, and the only reason why we believe seniors housing stocks took it on the chin is because their share prices are so low even a small dollar decline is magnified into a disproportional percentage drop.

Emeritus Senior Living was the biggest loser on the day, plunging by 15.3%, followed by Assisted Living Concepts (-14.4%), Capital Senior Living (-11.7%), Sunrise Senior Living (-10.2%) and Brookdale Senior Living (-9.4%). The only stock to rise was Five Star Quality Care, which jumped by 14.3%, but this represented just a 20-cent increase in the share price (see what I mean). After a brief spurt towards the end of 2008, Sunrise has been steadily dropping, indicating that investors remain pessimistic that management will be able to find new sources of capital or work out a deal with their lenders before a January 31 deadline. 

Meanwhile, although M&A activity in 2008 hit a low last seen in 2002, the largest deal in 15 months closed last week and may bode well for the rest of the year as opportunities begin to spring up. We expect to have details on this transaction in the February issue.

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