AdCare Health Systems Viewed Through The Eyes Of A Preferred Investor - An Update

| About: Adcare Health (ADK)

Summary

ADK, as far as I'm concerned, is a company going nowhere rather slowly.

Surprisingly, its commons actually ended up three cents this past quarter.

Unsurprisingly, its preferred basically held its own, but as far as I'm concerned, not a great sign considering the irrational exuberance of the recent preferred universe.

This review updates my initial look at AdCare Health Systems (NYSEMKT:ADK) from my July 21, 2016, article, "AdCare Health Systems Viewed Through The Eyes Of A Preferred Investor."

Though I hope you will read the original linked article in full, my bottom-line assessment and buy recommendation at the time were as follows:

Frankly, I believe this company is in serious trouble, and is scrambling to right a sinking ship. I could be wrong about this tentative sale and whether or not its budding partnership is a good or bad thing, but I'm unwilling to stick around to suffer the outcome. Consequently, the final ring has rung, and my 1,000 shares have been sold. ADK's fortunes are no longer my concern.

Let's see how ADK's commons have performed over the past quarter since I wrote the previous article. Because of the greater volume of common shares traded as opposed to the limited liquidity of most preferreds, I find the commons to be a better indicator of a company's overall performance.

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It appears that over the past three months, ADK's share price movement had moved up initially and settled back basically to where it began the quarter. On July 15, 2016, it traded at $1.92, now it's priced at $1.95. That's an $0.03 increase over the past three months.

Now let's compare ADK's share price performance over the past three months in relation to a number of its peers. Chart provided by Yahoo Finance:

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Now, dear reader, you know why I don't trade common stocks. It appears contrary to my previous doom and gloom article, ADK has not only outperformed its long-term healthcare service providers' peer group, it also outperformed the S&P. The peers as charted above: Brookdale Senior Living (NYSE:BKD), Civitas Solutions (NYSE:CIVI), Capital Senior Living (NYSE:CSU), and National Healthcare Corp. (NYSEMKT:NHC).

Before we discuss ADK's future prospects, let's see how its preferred has fared during the past three months. The following chart is provided by MarketWatch:

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The initial time I reported about ADK on 4/22/16, ADK-A was priced at $21.91. On July 21, its price was $20.95. Currently, it's priced at $21.60, a $0.65 price increase over the past three months, yet still $0.31 below where it was six months ago. However, considering the irrational exuberance in the preferred market over the past few quarters, the above performance of ADK-A is certainly nothing to write home about. Especially because of the humongous yield it offers, considering its IPO coupon rate was a hefty 10.875% for a $2.71875 per year dividend total; which signified that that this company had to offer Olympian high interests rates to induce investors to bite on its preferred offering. Basically, at the same interest rate as a sub-prime loan would be offered to a homeowner with lousy credit.

However, because this puppy basically held its own this past quarter, it deserves a deeper dive into the numbers.

Now for a little forward guidance

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Because as a long-term cumulative preferred investor, I am little concerned about quarterly financial reports and their attendant conference calls, which are liberally spun, I don't bother paying much attention to them unless the particular company is at risk of suffering some existential threat. ADK might be one of those companies worth taking a closer look at.

According to the above snapshot of AdCare Health's financial highlights provided by Finviz, ADK's common share performance these past three months did not make up for its terrible performance over the past year. For the year, it was down -39.54%, and YTD down -21.57%.

ADK has a market cap of a paltry $37.30 million, and on sales of $26.60 million, it lost $17.10 million.

Consequently, verbatim, I am going to recommend the following as I did in the previous report:

Frankly, I believe this company is in serious trouble, and is scrambling to right a sinking ship. I could be wrong about this tentative sale and whether or not its budding partnership is a good or bad thing, but I'm unwilling to stick around to suffer the outcome. Consequently, the final ring has rung, and my 1,000 shares have been sold. ADK's fortunes are no longer my concern.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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