Sideways Trading For Most Senior Care Stocks

June 29, 2009

June 29, 2009
As we approach the end of the second quarter, most of the seniors housing and care stocks are simply treading water, with investors waiting for the next bit of news, company specific or not. Most stocks were close to flat last week, but there were some exceptions. Late on Friday, a block of 2,195,000 shares of Five Star Quality Care traded at $1.64 per share, sending the shares down by nearly 21% for the week ended June 26.

Trading volume in Five Star is usually quite light, so this was a big trade and we have not yet discovered who the seller was. The other company with a big drop for the week was Brookdale Senior Living, which fell by 9.5% to close at $9.27 per share. And this was after selling 16 million shares at $10.75 per share early in June. The only stock to show some bounce was Capital Senior Living, up 18% for the week to $4.41 per share, but we did not hear any news that may have caused the jump.

In the skilled nursing side, the market was relatively calm and we don't think there will be much activity until there is more clarity with Medicare. The problem is, when is there ever any clarity with Medicare? And combined with Medicaid reimbursement problems at the state level, this uncertainty is what is keeping most investors away from the sector, where most stocks still look undervalued despite the health care reform discussions in Washington. Skilled nursing stocks may continue to trade sideways, but seniors housing stocks will be more heavily influenced by the second quarter results, especially occupancy and unit pricing.

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