John Leonard, CFA
Special situations, micro-cap, contrarian, CFA

Overreaction To Regulatory Fears Creates An Attractive Entry Point At Kindred Healthcare

The current valuation for Kindred Healthcare (NYSE:KND) more than discounts lower expected Medicare and Medicaid reimbursement rates and ignores favorable industry and company specific trends, strong cash flow and an "M&A put."

Company overview

KND is the largest diversified post-acute healthcare provider in the U.S. and operates transitional care hospitals (TCH), inpatient rehabilitation hospitals (NYSE:IRF), nursing centers, assisted living facilities, a contract rehabilitation business and a home health and hospice business. KND operates through 429 facilities in 46 states and serves 543,000 patients and residents.

Investment thesis

The current negative regulatory environment is similar to the early 1990s and provides a similar attractive investment opportunity. In 1993, the proposed Clinton healthcare plan caused a decline in...

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