I knew this would happen, but why so soon? Last Monday I finally decided to pull the trigger on HCP, a healthcare REIT that has a diversity of healthcare facilities in its portfolio including senior housing, life science facilities, medical office buildings, hospitals and skilled nursing facilities. Essentially HCP owns the facilities and healthcare organizations pay rent to use these facilities. I love REITs so it seemed like a great investment.
Here’s why I bought 12 shares of HCP at $34.52:
- I think healthcare facilities are a solid investment with the amount of growing population we have and soon to be baby boomers.
- With the upcoming baby boomers, HCP has a large variety of senior living facilities that will benefit from this population
- HCP also has a good diversity of other healthcare facilities including Medical Office Buildings which will benefit from the rise of outpatient services.
- HCP has a 31 year consectutive record of raising dividneds, it’s the only REIT in the S&P 500 Dividend Arstocrats Index
In 2 days it declined to $26.13 because:
- HCP’s largest tenant HCR ManorCare (23% of portfolio) are under federal investigation over fraud for their Medicare Reimbursements (that’s never good)
- HCP with their largest tentant under investigation, their 2016 outlook looks poor.
- The post-acute/skilled nursing industry is getting heavily saturated right now with everyone prepping for the baby boomers.
What I am now going to do:
I could sell these shares and use the remaining cash to get a bigger stake into something else, but I don’t know what would spike to make up for the money I lost. I follow Warren Buffet’s ideology when it’s better not to lose any money than gain some. Yet in this case, I lost money. Luckily some of my other positions have been doing well so I’m not in a negative portfolio, yay!
I know better than to make an emotional decision with stocks so I am going to continue to hold onto HCP. I do think that they are making strides to remove themselves from HCR ManorCare by selling non-strategic HCR facilities to reduce their portfolio . I also think with a portfolio of over 1,100 healthcare facilities they have room to come back. I’m currently $99 in the hole with this stock after only owning it for 2 days. Damn. There really is nothing I can do about that timing except do more even more research into each stock I purchase. So for now, I wait.
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