Top Nursing Home Stocks To Buy Now

Advances in medical care have successfully reduced or eliminated the impact of many life-threatening diseases.

Today, a cancer diagnosis isn’t a death sentence, and conditions like heart disease and diabetes are identified earlier and managed more effectively.

As a result, people are living longer than ever before, and their quality of life is far superior to that of generations past.

It is no longer uncommon to find healthy, active octogenarians and nonagenarians contributing to the workforce or participating in a wide variety of leisure pursuits.

By 2060, the number of Americans aged 65 or older will likely double from today’s 50 million to approximately 100 million – and these changing demographics aren’t limited to the United States.

By 2030, the global population of people over the age of 60 is expected to increase from 900 million to around 1.5 billion. That number will be closer to two billion by 2050.

An aging population will impact every aspect of the world’s economy as nations focus on caring for their elderly.

The healthcare industry will reallocate resources to geriatric medicine, and creating appropriate senior housing solutions will be a top priority. And for investors are looking at these trends carefully the question is what are the best nursing home stocks to buy now?

Understanding the Business Behind Nursing Home Stocks

Outside of the senior living industry, the term “nursing home” is used to cover any facility that is exclusively designed for those over the age of 55. However, there are several different levels of care, and many companies specialize in a single category.

  • Independent Living (IL) – This type of housing is intended for individuals who do not require any assistance to maintain their independent lifestyles. They generally choose this living arrangement, so they can avoid the responsibilities associated with owning and maintaining a home. Typically, these communities are set up to cater to the interests of retirees aged 55 and over.
  • Assisted Living (AL) – People who are in generally good health and relatively active may still require a bit of support with their daily care. For example, they may need assistance with meals, housekeeping, and medication management. Assisted living offers a more supportive living environment to ensure the safety of senior residents.
  • Memory Care (MC) – The effects of dementia, Alzheimer’s, and other conditions that affect memory can be devastating, and even the most dedicated caretakers may be unable to ensure patient safety in a home environment. Memory Care facilities are specifically designed to ensure the needs of residents suffering from memory loss are met.
  • Skilled Nursing (SN) – When memory isn’t necessarily the issue, but elderly residents still require substantial care due to illness or injury, Skilled Nursing facilities offer the highest level of support. Specialized nurses staff these facilities to ensure patients receive the rehabilitative care necessary to regain as much independence as possible.

This information is important for investors, because the type of residence directly impacts financial performance.

Increased levels of support may put pressure on profits, unless monthly fees are high enough to offset operating expenses.

One of the biggest risks facing those who operate skilled nursing facilities is an inability to collect payment for patient care.

While demand for all types of elderly housing will increase as the population ages, analysts indicate that the greatest long-term profits are likely to come from companies that specialize in independent living arrangements.

However, in the short-term, these companies may be facing some challenges. Industry-wide, there is an over-supply of assisted living facilities, which means many units are standing vacant.

Should You Invest in Welltower Stock?

Welltower [NYSE: WELL] is a major player in the elderly housing industry, and it enjoys a sterling reputation. In fact, the company made Fortune’s 2019 list of World’s Most Admired Companies.

Today, Welltower stock might not look like a great investment opportunity by the numbers, but most analysts expect substantial growth in coming years.

From the financial side, Welltower’s yield is five percent, and it has an elevated price-to-funds-from-operations ratio of 19 times.

However, the company has just completed several critical transitions that will have a long-term impact on its financial success.

In an effort to mitigate the risk of cuts to Medicare and Medicaid payouts, Welltower [NYSE: WELL] made a strategic decision to increase the percentage of private-pay residents.

That figure is now at approximately 90%, ensuring long-term financial security for the business.

In addition to this change, Welltower [NYSE: WELL] has shifted the balance of its portfolio.

Roughly 65% of rents come from independent living facilities, and just 10% come from skilled nursing homes.

Since these are the fees that facilities have more trouble collecting, Welltower is in an excellent position to secure its income going forward. That makes it a promising choice for investors who buy now.

Is Brookdale Senior Living Stock a Buy?

Another major player in the elderly housing space is Brookdale Senior Living. This organization boasts one of the largest networks of senior housing in the country, and it has facilities available to handle all levels of care.

The company also offers a range of additional services, such as home health care, hospice, and outpatient therapy.

From an investment perspective, Brookdale [NYSE: BKD] has had a dismal two-year streak, which was driven by lower-than-expected occupancy and new competition.

However, there are indications that is about to change. In recent months, share prices rose by 20.15%, and analysts believe there is potential for an additional 25% increase in the near future.

Those willing to accept the risks associated with any senior living stock may find that now is the right time to invest in Brookdale [NYSE: BKD].

The Ensign Group Stock: Buy or Sell?

Unlike Welltower and Brookdale [NYSE: BKD]the Ensign Group doesn’t have the size and scope of a major industry player.

This company operates skilled nursing and assisted living facilities in the northwest, and it offers a collection of supplementary healthcare services such as physical, occupational, and speech therapies, hospice, and home health aides.

At the end of third quarter 2018, Ensign [NYSE: ENSG] had revenues of $514.4 million and a net income of $20.9 million. The profit margin was 4.06%.

While Ensign doesn’t have a lot of innovation to report, it can show a history of steady returns. That makes it a solid buy for investors willing to pay the higher-than-average per-share price.

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