Who would have thought that in the lazy, hazy days of August seniors housing stocks would have one of their best bull markets ever? Not us, even after the second quarter results were released a few weeks ago, with most companies beating earnings estimates and, more importantly, demonstrating that perhaps the occupancy drought has finally come to an end.

While the double-digit returns so far this month are still a bit below the incredible rally in April (which was the best month ever), as of late trading today Assisted Living Concepts (+48%), Brookdale Senior Living (+43%) and Emeritus Senior Living (+39%) posted the best returns so far in August. Only Sunrise Senior Living is down this month, but that is a unique case because of its financial distress. Emeritus had an increase in occupancy from both the first quarter of this year and the year-ago quarter, while Brookdale’s occupancy levels have slipped just a little, probably signaling a bottom for them, but the company posted solid margin increases. Assisted Living Concepts is the odd one, because even though there really hasn’t been much of an improvement in occupancy, investors seemed to focus on the decline in operating expenses, which boosted both margins and EBITDA a bit. There has been a lot of industry head-scratching, however, because making money at 65% occupancy is not easy to do, and some would say impossible to do without something being compromised. More on that in the September issue of The SeniorCare Investor. Some analysts believe some of these stocks will continue to rise, but after this sort of rally, many investors do like to take their profits.
On the skilled nursing side, investors are still waiting for clarity on Medicare and Medicaid reimbursement, and since that will be a long wait, and clarity is in the eye of the beholder, we don’t expect much movement either way. The one exception has been Advocat, which for some reason surged by nearly 80% so far in August. Granted, it is rising from a low base and has only risen by $2.40 per share this month, but the rise has been steady (price increases in 14 of the past 16 trading days), on its usual low trading volume. Something may be going on, but shareholders have been a mostly disgruntled lot for the past year or more, so who knows.