This revisit updates my April 22 article, "AdCare Health Systems Viewed Through The Eyes Of A Preferred Investor."
Although it is my hope that you will read the entire article, to which I have provided the link above, my bottom line assessment at the time was as follows:
My bottom line decision most often is to look at charts of the past few years performance of the company's common shares, coupled with whether or not said company is, over time, prospering or losing market value. Ultimately, I have to decide how safe this company is from an existential standpoint rather than how well its share price will perform over the next quarter or the following year. My bottom line is whether or not I believe in the long-term survivability of ADK, which I do not.
The price per share of ADK-A at the close of market on April 22, 2016 was $21.91, and it had just lost $0.44 on the previous trading day. How has it fared since then? As I write, the stock price is $20.95, or $0.96 below what it was then. During that three-month period, the investor would have received a dividend of $.6797, for a loss of $0.2803/share.
This is my eighth revisit, and for all you baseball fans, I'm still batting 1000 - a perfect score. However, to be fair, all the past reviews might not remain perfect as determined by the vagaries of the market, because I haven't checked them of late, but they all were in positive territory when I first reviewed them.
Now for a little forward guidance:
According the Finviz summary of ADK's financial highlights, it hasn't fared well this past year. With a market value of $35.31 million and $23.90 million in sales, it still lost $19.10 million. And it's on track not to do much better this year. Worse, this is a small company that, in my opinion, cannot lose more than half its value in a single year. Call me crazy.
As I write, I have placed an order to liquidate my 1000 shares, which have already begun to sell. Only 917 more to go.
Recently, ADK issued a press release which I consider painting a thick coat of lipstick on this pig. The release announces the sale of nine properties, and that the company has transferred operations as a result of the newly formed partnership with Peach Health Group.
"The ongoing process of improving the financial, clinical and operational performance of our portfolio continues as we strive to improve our returns on investments and increase cash flow. We are pleased to have partnered with Peach Health Group, a highly-regarded operator, to increase the value of this property and elevate the standard of care that is delivered. We are also working closely with Peach Health on recertification plans for our Jeffersonville and Oceanside properties
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 1000 shares have been sold. ADK's fortunes are no longer my concern.
As a side note, although I haven't done the math (too lazy at this time), I believe my investment has been a wash, considering the dividends I collected as opposed to the diminished share price I suffered. Another lesson for the yield hungry investor: When the coupon rate is inordinately high, it's high for a reason. This preferred was offering 10.87% at the IPO, and I don't believe they were offering it out of the goodness of their hearts. Just sayin'.
For those of you inclined to follow up on my past reviews, I list them below and provide the links to each review.
- Navios Maritime Holdings (NYSE:NM)
- Costamare (NYSE:CMRE)
- Global Ship Leasing (NYSE:GSL) and Safe Bulkers (NYSE:SB)
- Gastar Exploration (NYSEMKT:GST)
- Peregrine Pharmaceuticals (NASDAQ:PPHM)
- Ashford Hospitality (NYSE:AHT)
- NorthStar Realty Finance (NRF)
- AdCare Health Systems (NYSEMKT:ADK)
Disclosure: I am/we are long AHT-D, AHT-E, CMRE-C, CMRE-D, GSL-B, GST-A, NM-G, NM-H, NRF-B, NRF-D, NRF-E, PPHMP, SB-D.
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.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.