Tuesday, May 1, 2012

Reducing Portfolio’s health-care exposure

Senior Housing Property Trust (SNH), one of the e-FinancialWriter REITs, reported its 2012 first quarter results yesterday.

Revenue rose to $145 million from $99 million. Net income was $32.4 million, or $0.20 per share, missing consensus estimate of $0.24. For the same period last year, net income was $31.8 million, or $0.22 per share.

SNH is expanding operations and has acquired or is in the process of acquiring 14 more properties. But the stock hasn’t gone anywhere since I added it at the end of 2010, and is dragging down the Portfolio’s total performance. The consolation, of course, is the 6+ percent dividend.

I think we are well-covered in the health care sector with three other holdings, in fact over weighted. 

And I’m concerned about the state of the health care industry ...

Medicare and Medicaid cutbacks for hospitals, nursing homes, and assisted living facilities are almost guaranteed. Insurance companies are getting out of the long-term care business, Prudential being the latest. So with less backstops to protect the elderly and sick, patients will be forced to pay more out of pocket, which for many will be impossible.

Plus I want to diversify into another real estate sector … residential rentals.

Therefore, I am removing SNH from the portfolio today.

Best wishes,


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