2CHYP has extensive exposure to the healthcare REIT sector as it has strong fundamentals and low market prices. MPW brings exposure to ACH (acute care hospitals) while OHI and SNR are pure plays on SNFs (skilled nursing facilities) and SH (senior housing) respectively. Presently, there is high volatility among operators as the ACA is potentially getting repealed and bundling continues to change revenue models.
I believe this change is being interpreted and priced in as a negative, while fundamentally it is more of a shakeup. There will be both winners and losers with the overall healthcare sector coming out just fine. Demand continues to hit record highs and facility supply is in check. As such, whatever dance happens with the operators, the REIT owned facilities should always be needed.
Today, we sold a portion of OHI and put those proceeds to work in SNR. While we continue to like both companies, the relative outperformance of OHI’s market price makes SNR’s 10.8% dividend yield likely the higher returning position. Healthcare REITs will continue to bounce around and we can take advantage of relative moves by shifting our overweights to the most opportunistic.
Commentary may contain forward looking statements which are by definition uncertain. We retain no obligation to update or correct forward looking statements should the available information change. Actual results may differ materially from our forecasts or estimations.