Navellier’s “Obamacare” Care Package — Hospital Owner to Double?

WP Greet Box icon
Welcome! If you are new to Stock Gumshoe, grab a free membership here and join us to get our free newsletter alerts with new teaser answers and debunkings. Thanks!
Not new? Please log in at top right of this page

“I’m glad to say that no matter how you feel about Obamacare, you can make money from one of my favorite little-known companies.

“Look, I’ve studied this Obamacare law since it was first signed into effect. I’ve examined every angle on it I could.

“And after months of painstaking research, turning it inside and out, I’ve found an overlooked flaw… a flaw that one company is already blowing wide open to make millions — perhaps billions from.”

Those tempting words come from Louis Navellier today, who’s pushing his Emerging Growth newsletter with a pitch that he can turn Obamacare into a “Care package” for your portfolio, doubling your money every year for the rest of the decade.

Who wouldn’t want that, right?

The pitch is that many hospitals are going to need a big cash infusion to upgrade in preparation for Obamacare … and that this teased company, which naturally is “top secret” unless you sign up for Navellier’s $995 newsletter, will be in the prime position to take advantage. Here’s how he describes it:

Irregulars Quick Take
Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? log in at top right)
“… the company in the driver’s seat is actually buying hospitals… and leasing them back to their former owners….

“Now, if a hospital doesn’t meet the targets for things like acceptances and admittances, or minimize denials of care — whatever the regulatory flavor-of-the-week is, the Feds could slash the amount of money the hospital gets paid under Obamacare.

“To comply to these more onerous regulations, many hospitals will need a quick cash infusion to buy better diagnostic equipment. Hire better personnel. Give better care.

“Like I said — all these improvements take money. So it’s either come up with the cash, or go out of business.

“And a quick way a hospital can raise cash — is to start selling assets….

“Like parking garages. Or its cafeterias. Or they can sell the entire hospital, and lease it back from its new owners.

“That’s where this company comes in… the one that buys hospitals and leases them back to their former owners.”

OK, so these kinds of sale-leaseback arrangements are pretty common across industries, whether it’s for an oil tanker or an office building or, apparently, a hospital. Lots of organizations would rather have cash today than carry a big, valuable asset on their books. So what else do we learn about this company that specializes in sale-leasebacks for hospitals?

We don’t get a lot of clues, but we do get this:

“… this company I’ve found for you and me already owns over 80 facilities nationwide, worth over $2 billion. And they’re growing so fast they’re nearly doubling every year.

“Now, there are 4,985 hospitals in America (as of 2010). The current 80 they own are just a tiny fraction of where they can be next year… and the year after that… for the rest of the decade!

“You can see the growth and the profits from this company are a tiny fraction of what they’ll be soon…

“They’re currently paying a juicy yield of nearly 6%… and with their stock price on track to double every year, an early investment in this stock NOW could be the most explosive pick for your portfolio in a decade!”

So who is Navellier teasing here? The Mighty, Mighty Thinkolator tells us that it is: Medical Properties Trust (MPW).

This is a Healthcare REIT that has been doing extraordinarily well, and has indeed doubled over roughly the past year (depending on the dates you choose). It recently dipped a bit to around $14, at which point it did have a yield of about 6%, but since then (that was when all interest rate-sensitive stocks dipped) it has come back up to $15 or so, and yields more like 5.2%. The dividend has not risen over the past five years (it was cut during the 2008 financial crisis), but has held steady over that time.

This is the most hospital-focused of the healthcare REITs, with a large portion (more than 95%) of their portfolio in acute care, long term acute care, or rehab hospitals, areas where competition may be lessened and where they say returns are greatest (most healthcare REITS are more focused on medical office buildings, ancillary hospital “campus” buildings, nursing homes and the like — there are a lot more of those kinds of facilities than there are hospitals). If you’re interested in the sector in general, you can see a pretty good list of the stocks here from the Dividend Detective — there were probably only four or five of these specialized REITs five years ago, but several new ones have come public or been spun off in recent years.

Why should you choose this particular REIT in the healthcare sector? Well, I’ve never looked at them before today but they do make a good case for themselves — you can see their recent presentation to an investor conference here. They do own roughly 80 facilities with an asset value of a bit over $2 billion, so that matches the tease … and like most healthcare REITs they should be fairly steady, and have few surprises — they have strong tenants, they say, with solid performance that should allow them to pay their bills, and they have no big debt maturities or lease expirations in the next few years. They’re also pretty well protected against inflation, with escalator clauses built into essentially all of their leases that tie annual increases to CPI inflation.

When it comes to valuation, they trade at a substantial premium to book value, which is common for the sector, and, also fairly average for the sector, they trade at about 12-13X expected FFO for next year (FFO is what REITs typically use instead of “earnings” — it’s more like cash flow, ignoring the non-cash impact of depreciation on their assets). I’d expect them to be interest-rate sensitive like any other REIT, and it’s certainly possible that healthcare regulation could hurt them — but since they generally own urban and suburban hospitals that sound like they’re pretty busy the regulatory downside might be limited.

That’s about all I can tell you after a quick look at MPW this morning — I’ve considered healthcare REITs several times in the past but never bought them, often because they looked pretty expensive as they became “hot” stocks for individual investors in recent years, but this one actually looks like it might have a stronger growth platform than many, and I do generally like the hospital focus. If you’ve got an opinion on the sector or this stock, feel free to let it loose with a comment below. Thanks!


-----------advertisement-------------
I don't endorse products or newsletters -- but there is one service that I really do use ...AND it's free. Nice, right?

It's Personal Capital -- they've got half a million people using it already, and I use it to understand all of my personal accounts, from mortgages to investments, and keep track of them and help me visualize how I'm diversifying and whether I'm meeting my financial goals. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.

---------------------------------------------

Print this

Email This Email This

14 Responses to Navellier’s “Obamacare” Care Package — Hospital Owner to Double?


  1. I love the paragraph that says: “To comply to these more onerous regulations, many hospitals will need a quick cash infusion to buy better diagnostic equipment. Hire better personnel. Give better care.” We should sure call them “onerous regulations” if they lead to better equipment, better staff, and better care! — I know nothing about MPW, but it sounds interesting.

    Like(0)

  2. I am a long time Board member for a large suburban Hospital and in my opinion MPW has a questionable strategy. Virtually all hospitals are in the process of forming something called an ACO (Accountable Care Organization). This new organization will not use today’s fee for service model but will get a certain dollar amount from insurers both private and governmental for each “covered person” in the group. Yes Hospitals will have to do better on various quality measures or face possible fines but this model will encourage providers to lower admissions to hospitals in favor of preventative care. As a result most if not all Hospitals are planning on fewer admissions in the future.

    Like(0)

  3. I have held NHI for many years. It has a better track record than MPW. It looks like MPW is a little cheaper now and may grow faster.

    Like(0)

  4. I will accept the fact of more consolidation within HC REITS. Interest rates somewhat steady. Therefore, I have done my dd and am a buyer. Article for your irregulars review.

    Billions Pour Into Healthcare REITs

    Submitted by Derek J. Doke CCIM on Sat, 05/25/2013 – 13:35

    Reprint: Healthcare Real Estate Insights; Author: Murray W. Wolf; Date: May 22, 2013

    It looks as if the good run for healthcare-focused real estate investment trusts is not coming to an end anytime soon. As of April 12, all of the US equity REITs – not just healthcare – had raised $18.3 billion in new equity and debt, according to the research firm SNL Financial. Of that, the country’s healthcare REITs accounted for 12.2% of the total, or about $2.24 billion.

    When considering that the healthcare real estate sector is a fraction the size of the office and retail markets, the comparatively large amount of capital raised by the healthcare-focused REITs suggests that investors remain quite bullish on the sector, analysts say.

    The REIT sector raising the most capital during the period was specialty, with about $4 billion, followed by office, $3 billion; retail, $2.6 billion; hotel, $2.5 billion; and, as noted above, healthcare at $2.2 billion.

    And why shouldn’t the healthcare REITs attract so much investor attention? Healthcare has been among the top-performing REIT sectors throughout the past several years – and that trend continued through Q1 2013.

    The most recent S&P Dow Jones Global Real Estate Report, released April 18, found that healthcare REITs led the way with a Q1 return of nearly 14.4%, far outpacing the broader REIT index return of 7.9%. Healthcare REITs also outperformed the office (12.5%), hotel/resort/leisure (14.3% ) and industrial (10.9%) sectors, S&P reported.

    Major capital raises by healthcare REITs so far this year have included the March 21 initial public offering (IPO) of Chicago-based Aviv REIT Inc., which raised $303.6 million as well as issuing a variety of other equity and debt offerings. In the common equity category, some of the larger capital raises by healthcare REITs this year have included about $590 million by Duke Realty Corp. and $273.7 million by Senior Housing Properties Trust, both of which took place in January. In February, Medical Properties Trust Inc. raised $180 million.

    In the senior debt category, Ventas Inc. led with way with a $500 million offering in February. Other large healthcare REIT debt offerings in 2013 have included locally based Healthcare Trust of America Inc. and Healthcare Realty Trust Inc., which raised $300 million and $250 million, respectively, both in March.

    So what are healthcare REITs going to do with all that cash? The obvious answer is: buy more properties, and perhaps each other. Last year, some of the major mergers and acquisitions among healthcare REITs included the $1.9 billion acquisition of Sunrise Senior Living by Health Care REIT Inc., as well as Ventas’ separate acquisitions of Codgell Spencer Inc. and Nationwide Health Properties Inc. for a total of about $8 billion.

    The strong long-term prospects for HRE, combined with the fact that healthcare REITs continue to trade at high premiums to net asset value has some securities analysts predicting that we will see further consolidation in 2013.

    - See more at: http://www.ownerusers.com/billions-pour-healthcare-reits#sthash.lb2eG40E.dpuf

    Like(0)

  5. I would not get involved in this sector. Repeatedly, over the past three years, governments have made decisions that have devastated hospitals and doctors practices by cutting reimbursement rates and creating an avalanche of regulations, regardless of the consequences. Reimbursement rates will continue to be cut regardless of the CPI. Further, the ACA calls for quasi-governmental regional bodies to determine when and if health care facilities can be added. Neither government bureaucrats nor hospital administrators have had any experience micro-managing 19% of the economy. In our area, a major hospital finds itself in the unhappy predicament of being unable to pay the doctors they hired three years ago and they are working without contracts. Chaos ahead.

    Like(0)

  6. And then there’s this article:
    Avoid REITS with Long-Term Bond-Like Leases ” Analyst (VTR) (MPW) (EPR) (LXP)
    11:56 AM ET, 06/13/2013 – Street Insider
    With bond yields rising, investors are increasingly interested in how equities will response to expectations of Fed tapering. Commenting, Keybanc analyst Jordan Sadler note that Fed stimulus appears to have reached an inflection point, and accordingly he shifted sector weighting recommendations for REITS toward the shorter term lease sectors and away from sectors with longer term, bond-like leases.

    “We recommend investors overweight hotels, self storage and industrial REITs, and underweight health care and triple net REITs,” said Sadler. “With a 60 bps move in the 10-year Treasury yield from 1.63% at the beginning of May to 2.23% today, market participants now have a better sense of what can happen to bond prices and interest rate-sensitive equities, in the event of a shift in interest rates.”

    “While the recent relative underperformance is likely a bit overdone in the short term, we suspect that the Fed’s signal could prove meaningful over the longer run. We are now more concerned that the shift in the Fed’s rhetoric could be reflected in investor sentiment over time, with an acceleration of fund flows into equities and a deceleration into (and possible outflows from) fixed income and perhaps REITs,” added Sadler.

    Like(0)

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

What These Icons Mean

  • The user who posted this comment is a Stock Gumshoe Premium Member (also known as an "IRREGULAR").
  • This user regularly writes articles for Stock Gumshoe. They may or may not be the author of the current article.
  • This user's comments have been "liked” by at least a few members of the Stock Gumshoe community.
  • This user has commented widely, with input that has been liked enough to earn a two-thumbs-up rating from other readers.
  • This is the highest rating a user can get. They are among the most respected commentors of our community.