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Student of markets, enjoys following their course.
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Around the World in Several Pieces
  • Health Care REITs; A glimmer of hope for befuddled investors? 0 comments
    Jan 4, 2012 8:34 PM | about stocks: SNH, BMR

    Health Care REITs

    A glimmer of hope for befuddled investors?

     

     

    Amidst this odd melange of economic situations perhaps most appropriately defined as global stagflation, is there a decent place to still invest one's money? Individual companies are always great if one can find a sure fire growing enterprise, but what if one wants to shoot for some over-the-horizon security and perhaps growth? Well, we know that if there's one thing that's supposedly stable, we could shoot for US treasuries, however given their current returns, one might as well, take some time and set up a small ice cream stand next to a local school, in order to reap some healthier profits. If one is looking for a somewhat more promising sort of venture to invest in, perhaps one would be wise to invest in something that is looking good on the micro level.

     

    We know that the majority of the US population is aging. The population group known as the “baby boomers” are currently getting into their later years, and we all know what that means. According to a human's heart rate and hormonal atrophy, a human being hits “maximum performance” levels at say 35, fortunately unlike other species, instead of succumbing to natures mundane tribulations we instead have “societies” and social networks. Thus instead of going up the flume at the ripe old age of 35, we live a lot longer on average. Now living longer, doesn't mean staying healthy longer, and as we all know, getting older means the slow degradation of our bodily functions. Now if we were talking about cars we'd say it would be wise to invest in auto/auto-service related entities. But, here we are talking about people, aging people and lots of them. Thus what should be in our mind? Perhaps health care.

     

    Now healthcare is a thing which is usually conducted in some sort of setting. With ramshackle street hospitals usually being reserved for demonstrations, and protests, I feel its thus safe to say that sick people will end up in hospitals or senior living centers. It doesn't take a PHD to see that with this influx into an expensive health care system, REITs related to the healthcare industry will probably be a good place to park one's cash.

     

    The US government's stability, is questionable, the US economy, is getting a hollow ring to it these days, but healthcare is looking for increased demand and a steady price level for its “goods and services”. Hence amidst failing businesses, further tightening credit levels for small businesses and the like, it is perhaps best invest with the obvious trend.

     

    US healthcare is a great place to invest for several reasons. From a purely profit based perspective the US Healthcare system is a great business to throw some money at. Since the 1950's and 60's the US has been known for its technology heavy medical system. When studies were conducted relating the then new CCP healthcare system and ours here in the US, the obvious reality that was observed was that a system such as ours won't work in most places, because we here in the US are happy to throw money down the toilet, listening to profit driven health care providers who are all to happy to charge you a substantial fee for a ride in their latest super magnetic field gismo. Various studies have also gone on to show that in some cases the several thousand dollar ride in the MRE can actually yield little positive benefits to ones health with no noticeable increase in overall health relative to increase in number of fancy tests one has conducted on ones self at the local cyber-apothecary.

     

    Thus in a way one is left to question what the health care system in the US is exactly. Is it really an industry related to “health” or one related to fancy contraptions and expensive prices for using them. Regardless of the answer, one thing is for sure, with the fear of death hanging over an individual, these fancy rides can seem like make or break activities as far as their health is concerned, and as more and more Americans age, these great circuses of “health” will surely find more and more patrons for their expensive tests, and expensive drugs.

     

    All of this could be disconcerting if it weren't for one key fact. That fact is that the US Government, whose policies are largely determined by social and professional interest groups, is all too happy to help keep the pep in your step. The US governments health care programs do not drive down the cost of healthcare here, but instead, like its college loan programs, arguably helps to inflate the price of the services and goods rendered to patrons at these bastions of bodily care, hence we have a subsidized industry that doesn't really have much of a competition here. One could say that oh, when people go to Mexico, or India for operations that this thus somehow undermines the high prices of the US healthcare system. However, as more and more Americans age, and as the demand for immediate medical treatment increases the basis for this already somewhat questionable “3rd world health system compliment” perspective appears to be more and more implausible.

     

    Thus, invest in the cash cow's stable. If the cost of medical services continue to increase, buy into the people that own the properties where wonder drugs are made, and where they are furthermore administered.

     

    By investing in healthcare related REIT's for the short to medium term, one is thus riding this government backstopped bubble, at no real cost to ones self, and perhaps as one's own medical bills start to pile up, ones own medical expenses wont look quite so daunting knowing that one raked up a healthy sum, investing in this same expense that was undertake by countless others.

     

    Thus health care REIT's seem like a decent idea.

     

    For a couple low price opportunities to throw your hat into the ring, check out; BMR; Biomed Realty Trust, and SNH; Senior Housing Trust for starters.

     

    These two are kind of interesting plays in that they obviously kind of flank this whale of an industry. BMR is helping house the labs where medical bread and butter aka drugs are made and developed, and Senior Housing Trust, is involved, in the location where many of these drugs are administered and where those poor souls with ill health and hence medical bills clearly reside, at least some of the time. BMR is also involved in also getting in “wellness centers” now as well. Because we all know, when you've been walking on one par of feet for over 50 years, they tend to require a good rubbing every once in a while.

     

    When looking at REITs in general, it is good to shoulder in amongst institutional investors, because they contribute the following variables to the REIT; Oversight from Institutional advisory staff, which in turn will lead to more analysts, publishing research on the REIT which will in turn lead to a greater market for the REIT and hence, greater liquidity. It also feels better in knowing that you've got some big buddies watching your back while you sleep.

     

    With this in mind, SNH seems to be a healthy choice, with 86% of its shares being held by institutional investors and mutual funds. BMR is also looking sharp with 93% of its shares being held by institutional investors and mutual funds. Needless to say there should be some stability and liquidity wrapped up in investments into these two REITs.

     

    Either way, I hope your investments reap the rewards that you are looking for.

     

    At the time of writing this I have no positions relative to these two REITs, nor am I being payed in any way by the REIT Industry or Healthcare REIT industry.    

    Themes: REIT, Healthcare Stocks: SNH, BMR
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