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David Stafford
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Student of markets, enjoys following their course.
My book:
Around the World in Several Pieces
  • MPW, The Healthcare Reit Of Many Faces. 2 comments
    Mar 28, 2012 3:41 PM | about stocks: MPW
    Today is yet another interesting day for the merry band of healthcare Reits. As usual so far, leading the day we have our knight in shining armour, SBRA. SBRA is somehow, as usual defying the markets, and rising in value. SBRA is up 2 cents at 3:17pm. The only other healthcare Reits at 0 or higher is LTC, with a flat figure for the day, not rising or falling, and SNH which is behind SBRA but above LTC with a gain of 1 cent.

    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.

    Themes: MPW, SBRA, LTC, SNH Stocks: MPW
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Comments (2)
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  • gordon
    , contributor
    Comments (470) | Send Message
     
    What's the status of the California investigation into Prime/MPW?
    28 Mar 2012, 08:34 PM Reply Like
  • David Stafford
    , contributor
    Comments (9) | Send Message
     
    Author’s reply » Hi, that's a very good point. The "upcoding" and malnutrition situation, looked like it could have caused some problems for Prime.

     

    "California Watch" seems to have brought this situation to the surface back in 2011.

     

    The torch was then taken up by the CtW group(Change to win)
    Whose members are associated with CtW through unions.

     

    I haven't seen any updates on the situation since 2011

     

    however,

     

    The "search for truth" yielded the following;

     

    CtW hasn't mentioned anything on their blog per se. Nor have they mentioned anything at all on their blog for several years, so I guess one can take that as one wishes.

     

    To see if I could get the down-low I called CtW at

     

    202-721-6060; which is the number for CtW's DC office, there wasn't an answer. It went strait to voice-mail too, so I'm not sure if they use this number really.

     

    Thanks for bringing this up though, I recently started following MPW, and am happy that you shined a lot on this more controversial side of MPW for me.

     

    Thanks.
    29 Mar 2012, 11:23 AM Reply Like
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