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TMFDeej (97.71)

What I'm Buying Now

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August 15, 2014 – Comments (14) | RELATED TICKERS: CTRE , ADK , CLMT

I have been continuing my ongoing efforts to concentrate my portfolio into my best ideas.

I previously mentioned that I sold a few demutualizations. I also have sold out of GLDD, AER, and ALLE and rolled the proceeds into Extendicare (pre-pop), Canexus (pre- & post-pop), NRF (pre- & post-pop), CTRE (limit orders in the $14s) and ADK. Those are by far my favorite ideas right now. I still think that the stocks that I sold have a very good chance of beating the market, but I like the ideas that I put the money into better and am hoping to get more bang for my buck.

I'm keeping a very close eye on NCT. I love the story of a misunderstood company that's transitioning from a hodgepodge of investments to one solely focused on senior living facilities. Still, I want to know what the company's distribution will be like post-spin before I add any more shares. I think that there is a decent chance that it will cut its current 8.5% distribution when it spins off Newcastle Senior Living. I personally wouldn't necessarily mind them doing so, but if they do I think that there's a good chance of a temporary sell off.

I strongly believe that there will continue to be a tremendous amount of consolidation in the senior living and healthcare REIT sector. Some of the companies that I have been adding are special situations in their own right that also stand to benefit from the consolidation trend and significant demographic tailwinds.

I've bought a little more Caulmet (CLMT) when its distribution climbed to the 9% level. I realize that the company's current cash flow does not cover this level of distribution, but I have been and continue to be of the belief that it will grow into it when a number of substantial new projects and expansions come on-line over the next couple of years. CLMT's Q2 was worse than I had expected, as a result of yet more downtime for maintenance at some of its refineries and worse crack spreads. I hope that the falling price of oil will help the crack spreads a little and that we will see less facility downtime during the second half of the year. If so, that should be enough to carry the company until increased cash starts flowing in. This definitely goes to show that the MLP structure is less than ideal for refiners, which have volatile cash flows and facilities that require significant investment. That's fine with me, that's why we have been given the opportunity to buy into CLMT at this level. I wonder if it ultimately would consider de-MLPing (how's that for a new word) like Kinder Morgan (KMI) recently did.

I am sitting on around 35% cash. I will continue to ease that money into the market over the rest of the year if we see pullbacks or if I come up with any interesting new ideas.

So that's what I've been up to. I'd love to hear what others have been buying.  Please share your ideas.

I actually will be away on vacation next week.  I don't think that I can unplug completely from the markets though.  The amazing technology that we have today will enable me to log-in and check a few things from the middle of the Bermuda Triangle (I'm going close to there, but not in it).

Thanks for reading everyone.  Have a great weekend!

Jason

14 Comments – Post Your Own

#1) On August 15, 2014 at 12:34 PM, TMFDeej (97.71) wrote:

BTW, you know that you're overweight a sector when you're "only" 40 and yet on tons of random news-related websites you keep getting banner ads for senior living facilities ;).

Jason

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#2) On August 15, 2014 at 2:09 PM, TDRH (97.30) wrote:

Maybe they think you are making decisions about what to do with you parents?

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#3) On August 15, 2014 at 3:00 PM, TMFDeej (97.71) wrote:

I think that it's just all the research that I've been doing on the companies in general, plus trying to find out more about each company's individual locations on a micro level to make sure that they're not to messed up.  That's a lot of cookies that I haven't bother to clean out.

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#4) On August 15, 2014 at 3:31 PM, EnigmaDude (55.14) wrote:

I have been buying a few shares of NCT while the share price is below $4.50. I expect that even if they do reduce the dividend post-split that the share price will rise above $5 and keep rising once the market figures out what they are up to. And I don't think the price will go much lower than the low 4's any time soon.

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#5) On August 15, 2014 at 3:36 PM, EnigmaDude (55.14) wrote:

Sorry - meant to say post-spinoff (not post-split).

Also, if my daughter was not about to start her freshman year in college I would be looking to pick up shares of KMI as well. But I'm a bit strapped for cash at the moment so I am just nibbling a bit and doing some swing trades to raise cash to add to my long-term dividend stock positions. I also really like MAIN (a BDC that pays a monthly dividend) and would be adding to it if I had more cash.

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#6) On August 17, 2014 at 12:16 PM, constructive (99.97) wrote:

Where'd you find these ideas?

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#7) On August 17, 2014 at 5:44 PM, TMFDeej (97.71) wrote:

Greetings Mega from a boat of the coast of NewYork. Technology is an amazing thing. Where did these ideas come from?  Extendicare has been on a number of investing blogs, like Reminiscence of a Stock Blogger. Its also a TMF Special Ops rec. 

I saw one old article on SA about Canexus, but did most of that research on my own.

NRF was a Jim Royal rec from his Special situations portfolio here at TMF. 

IM familiar with  Caulmet from years ago and became interested in it again when I saw te yield skyrocket. 

ADK i saw mentioned in an article on Value Walk and then dida ton of legwork on my own.

 I saw NCT in a SA article but again had to do a lot of legwork. 

CTRE is an orphaned spinoff from a Special Ops rec ENSG.

Come across any interesting ideas lately?

Jason 

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#8) On August 18, 2014 at 9:26 AM, Mathman6577 (< 20) wrote:

Instead of buying a MLP, buy the index ETF AMLP

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#9) On August 19, 2014 at 2:43 PM, acekeldog (99.45) wrote:

Pardon my simpleton question. Why did NCT do the reverse split?

 

 

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#10) On August 19, 2014 at 11:30 PM, gman444 (28.23) wrote:

Hi Deej--thought I'd throw in my 2 cents.  Re: NCT--I think I know too much about his industry to be able to stomach investing in it.  Have done very well though with MPW and HTA in this space and think both are good for the long run.

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#11) On August 20, 2014 at 4:35 PM, TMFDeej (97.71) wrote:

Thanks for sharing your thoughts gman. What specifcally don't you like about NCT? 

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#12) On August 20, 2014 at 9:46 PM, gman444 (28.23) wrote:

Sorry if it came across as a slam--not meant that way.  It is not the company, which I know nothing about other than what I've read on your posts--it is the industry.  I guess I know more about the health care delivery system than most since I've spent a long time in it. 

Where to start?  Maybe I'll go about it this way and try to keep it brief--am open to longer discussions if you are interested. Everyone in every industry has an eye to cost-cutting and efficiency, with an eye to the bottom line--after all, that is capitalism, though I know I am oversimplifying.  Health care delivery is in general, a messy, messy business, unless the problems being treated are straightforward and uncomplicated.  Unfortunately this is not the case for those who are in nursing homes.

Quality of care in these facilities can be (again in general) routinely and notoriously deplorable,  for a number of reasons.  But the one I will mention here is that companies are incentivized to provide poor care. Better care means higher costs, which are often not reimbursed by HMO's, etc.  Unfortunately we have gotten to the point where all too often, the reverse is not true (higher costs to the consumer don't necessarily mean better care). And the training of medical personnel has been progressively cheapened and abbreviated; you won't find Harvard grads working in nursing homes. 

Of course you can find good nursing homes--it is just my impression that is is fairly rare.  And the cost of poor care is a little different than say an oil pipeline company cutting corners and providing shoddy pipelines, though this is not desireable either. 

 I'm reminded of something I read once about the expensive carpet business--some incredible figure like 80-90% of these carpets are a cheaper knock-off of what it is claimed they are. Except in this case, the cost is quality of life for elders.  So I just tend to stay away from some industries, my personal taste.

And just my 2 cents--purely ancectodotal, no numbers or empirical studies.  And I have been unsuccessful at my attempt to be short-winded.

 

 

 

 

 

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#13) On August 21, 2014 at 12:29 PM, EnigmaDude (55.14) wrote:

gman - I think you are confusing the term "senior housing" with nursing homes. Here is a definition of Senior Housing (notice that there is no mention of health care):

HUD has determined that the dwelling is specifically designed for and occupied by elderly persons under a Federal, State or local government program or

It is occupied solely by persons who are 62 or older or

It houses at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that demonstrates intent to house persons who are 55 or older.

Therefore, housing that satisfies the legal definition of senior housing or housing for older persons described above, can legally exclude families with children.

 

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#14) On August 22, 2014 at 10:20 PM, gman444 (28.23) wrote:

EnigmaDude--yes, you are right--thanks for the correction.  Senior Housing is indeed a different deal from Nursing Homes, and a much more palatable investing idea.  Guess that rant just wanted to come out.  Apologies to Deej.

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