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mcingram1976 (30.36)

Healthcare Reit's

Recs

2

April 08, 2008 – Comments (1) | RELATED TICKERS: HCP , HR , MPW

I needed a defensive play in this uncertain market.  Using the research wizard, calculating forward p/e multiples I discovered a couple of stocks with the potential for a $100+ stock price. I am a little uncomfortable with their debt load; but remain convinced health care reits will continue to outperform the major indexes handily over the next three years. My logic is increased demand for medical care by baby boomers, income will be partially hedged by medicare payments, and the fed's hands will be tied for a while as they unwind equities from subprime. e.g. I doubt we will see many interest rate hikes over the next few years. All these things solidify my rationale for holding positions in HCP & HR.  The third security is a bit of a wild card, given it's smaller size, MPW.

P.S. I bought positions in these securities a couple of months ago and plan to hold them over the next decade.

1 Comments – Post Your Own

#1) On April 08, 2008 at 1:48 PM, wolfhounds (< 20) wrote:

I've been an investor in healthcare REIT's for over 10 years. REIT's in general have outperformed every domestic class of stock (with dividend reinvestment) during that period. But you can't analyze these companies by traditional P/E and debt loads. The correct analysis is FFO, which is the free cash per share being generated. There should be a history of continued increases in FFO and dividends. Debt loads should be analyzed for maturity and spread to other fixed rates, and whether debt taken on during acquisitions is increasing FFO.

Each healthcare REIT is a different shade of gray. They own different types of properties with different exposures to heathcare growth. You must make sure your not in a stagnent part of the industry. And don't forget that earnings estimates are not the predictor of price appreciation potential. That indicator is potential to grow dividends through cash flow growth.

Good luck!!

Al 

 

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