David Stafford's  Instablog

The markets have been down the past couple of days. This is perhaps associated with Bernanke. Not to fault Bernanke, because surely he's blamed for enough already, but whenever he speaks, this tends to happen, either the day after, or immediately upon him speaking.

MPW, another focus of this line of writing, is not down by much, but is down 18 cents giving it a price of 9.18 dollars. With MPW dropping in price like this it may be worth reconsidering it's role in a portfolio.

When MPW was up 9-10 dollars, I thought of it as a sort of stable version of a healthcare Reit. Reits tend to be volatile or kind of iffy sometimes when they have high payouts. MPW is perhaps a little more stable in general, relative to reits like arr and cim which require a lot of technical expertise of their managers, namely the ability to hedge interest rate risk, but still they're profitable, and at somewhat of a higher premium they still seem to be a reasonable investment.

Now that MPW is losing core value or stock price, it may be tempting to re-allign it wihin a portfolio.

When I think of how to construct a Reit portfolio, I choose the Reits based on popularity, and payout. Price is of course something one kind of uses to rank these investments by tier per se, but its the payout that really matters in my mind.

A good way to kind of keep a handle on these high dividend paying Reits could be to do as I do, if one wishes, and to look at them as sort of cash flow generating investments, whereby one tries to generate specific cash flow figures, and tries to forecast changes in that cashflow, and also hedges against core value depreciation.

I'd like to think that one can sit on these Reits, or at least some of them, for around 2-3 years without having to micro-manage them too much.

However, as MPW loses core value, it may be time to re-define it within the sort of price based tier paradigm,

For, as it loses value, it perhaps retreats from being kind of a stalwart, CD, or bond like investment, more into a sort of security-like investment.

Bonds and CDs are a good way to lock up capital. keep it safe, and get some returns in the process. Securitys are more dynamic, Reits tend to fall into one of these two types of categories. Bastions or money makers one could say.

The money makers, like ARR, and CIM, are cheap, theoretically somewhat risky(due to the aforementioned interest rate risks), and give the buyer a good amount cash-flow for the buck invested per se. In so many words, they as structures, which lose a few defense points, for they lack a moat, or flying buttresses, but they are located next to fertile farmland, hence they produce income, but you have to keep an eye on them.

As MPW is losing value, I see it as kind of straddling this line between safe-haven, and productive frontier outpost.

At the same time, I am tempted to theorize that MPW, post re-structuring per se, or once Ernest health is fully co-opted will begin to be even more productive than it was before.

With this in mind, perhaps given the recent mark tumult, perhaps MPW is underpriced. However, its getting cheap enough to kind of lose that bastion quality.

Hence, going forward, whereas I would have simply created a loss hedge with a Reit like MPW, it may now be time to reconsider, not only as a cash flow generator, but also as a stock which one could lump into the "growth" category. All in all it seems like a pretty good deal.

Before its drop in price, I was considering putting enough into MPW to generate 1/4 of the cash flow figure I was looking for, while rounding it out with ARR, to reach the predetermined cash flow figure. Then with future cash flows suring up my holdings in other, more safe-haven cash flow generating stocks. Hence, you get while the getting is good in these risky border out-posts, and then use the proceeds to sure up the core bastions.

However, now that MPW is losing a decent amount of price-value, and is presumably going to increase in cash-flow production in the future, it may be tempting to re-consider it as a sort of risky border outpost investment. With future improved bastion capabilities.

Either way, regardless of one's paradigm, there's a theme which seems to hold true at least for the past several drops like this, and that theme is the good old "buy the dip" theme. Hence either way, it might be sage to increase one's holdings in MPW, if for nothing else, than for potential cash flow increases.

Now, MPW and SBRA had a hard day of it yesterday, seeing losses and erratic price movements. But today, MPW and SBRA were the only two beacons of positive growth amidst the healthcare Reit crowd.

In an unusual reversal of roles, SBRA played second fiddle to MPW today. MPW lead the charge out of the darkness with a gain of 4 cents or .42%. SBRA seemingly caught a rope that MPW had cast to aid its ailing fellow adventure, and slowly slinked out of the maelstrom, recording a gain of 1 cent or .06%.

This image of the shamblin hulk being pulled out of a mire by the more streamlined MPW was a sight one usually does not see, but nonetheless it was a sight that was welcomed.

The two boats swallowed deepest into the belly of today tempest were VTR and HCP. VTR was down 1.93%, and HCP was down 2.32%.

MPW opened at a humble, 9.54, and was chomping at its bit early spiking up, but then coming back down and following into its sort of plateau style pattern. This was all well and good, MPW seemed to be pretty much frozen to its lower bollinger band ranger for a decent part of the day around noon. At about 3:45 however, as usual, MPW regained a certain flicker in its eyes. Out of nowhere MPW exploded strait up to 9.62 from 9.578. Once it had found a new toe hold, it grabbed for higher heights again, foiling all doubters and claiming yet another positive cent to finish the day.

As usual SBRA also had a good showing, opening at 16.25, and then exploding up in the last 15 mins up from 16.36 up to 16.85. All things considered today, SBRA was up by 3.76 percent and MPW was up by 1.26%. Thus today healthcare Reit activity looked alot like a marathon finish, with the favourites winning with significant space in between themselves and "the pack".

Today was not as good a day from the marekts over all with the DJ down .15%, and the S&P down .04%. As another interesting topic of note, today SBRA's beta and institutional ownership levels hit the same levels, with a beta 0f .86, and a similar % for institutional ownership levels.

The rest of the healthcare Reits were in decent form, with only VTR and HCP finishing the day down. Even though they finished the day down, they still showed a little bit of an interesting phenomenon with the amount that they lost. VTR finished the day down 22 cents, and HCP finished the day down, 11 cents. Thus their prices were down in multiples of 11. Interestingly enough, the percentage lost showed a unique correlation, with VTR down .38% and HCp down .27%, similar percentages seperated by........ .11%.

Today had a surprising and spirited finish for MPW and SBRA, and it was certainly one of the more positive pattents to see.