Lords of the Manor by Robin Goldwyn Blumenthal
Summary: A lower cost alternative to hospitals, the average stay at any of Manor Care's 500 facilities has shrunk from two years to 3 months, and is more profitable ($400 a night per short stay beds, vs. $200 for long term care). HCR also operates hospice and home health care, outpatient rehab therapy and assisted living facilities. Despite recent excitement over Genesis Health Care's (GHCI) buyout, HCR has gone unnoticed: Its market cap of $3.7 billion, stock at about $50, an 18.5 P/E—low for the industry, and an estimated 15% annual EPS growth from sales, operations, share repurchases and 4.5% free cash flow yields leads Jim Lane of Tripoint Asset Management to project a $65 share price (+30%) by Q3'08, noting HCR's 97% ownership of its real estate should hedge any downside. HCR may also pursue acquisitions, but with Democrats back in control of Congress, a stable Medicare environment should encourage growth anyway.