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Strategies & Market Trends : Value Investing
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To: Grommit who wrote (37756)10/12/2012 5:38:26 PM
From: E_K_S1 Recommendation  Read Replies (2) of 78715
 
Hi Grommit -

Senior Housing Properties Trust (SNH)

I started a small position in SNH. I would not call it a true "value" buy but perhaps if it is compared to other medical REITs it might be a candidate at current levels. The company has raised their dividend every year for the last six years. You do raise a possible concern that fees charged may be reduced if/when Medicare reimbursement amounts decrease but I think the market may have priced this in the stock. The stock is off more than 10% from it's highs in 2011.

As with many of these REITs, debt levels are pretty high. 14.6x their net annual income equals their long term debt amount ($1.96B). This is at the high end as I would like to see something south of 10x's. The current yield for the SNH common is 6.9%.

Insiders did buy shares in March 2011 at slightly higher prices so management does have some skin in how the company performs. Nothing too exciting about BV which is at $14.85/share or their PE that is quite high at 21.

My main interest is to capitalize on the future growth potential w/ the baby boomer generation and their need for senior housing. My buy is really to compliment my MPW shares which I feel is in the fully valued (to over valued) price range.

SNH is well capitalized and may be in a position to acquire other marginal property operators at value prices. Management appears to be an efficient and good operator, so that is a bonus.

My initial buy is small but would like to build up a long term position, hopefully at lower prices.

If you see any other candidate hospital/senior housing REITs and/or preferreds, please post.

EKS
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