Senior Housing Properties Trust: It’s Fallen, Can It Get Back Up?

SNH Logo

We’re getting old. We all are. But no one group is reaching ‘old age’ faster than the baby boomer generation born between 1946 and 1964. By ‘old age’ I’m referring to retirement, and unfortunately for many seniors, it means senior housing facilities. Today’s younger generation isn’t like that of days past, which cared for their elderly parents for many years. In today’s society, seniors are increasingly going into senior housing, whether independent living facilities, assisted living facilities, skilled nursing, etc.

This secular trend has not gone unnoticed and everyone from real estate developers to hedge fund managers has made investments in senior housing in anticipation of an increase in demand. The first baby boomers entered retirement age just a few years ago and even though people in general are living healthier lives for longer, traveling more and enjoying retirement for a few more years, the sheer number of baby boomers means that senior housing will be in greater demand.

Annaly: Can You Invest In It And Still Sleep Well At Night?

Annaly Capital Management

Have you ever had a very bad experience with Mortgage REITs? Just last year, it was painful to watch as Annaly (NLY), American Capital Agency Corp. (AGNC), Armour Residential (ARR) and others declined 25% or more in just two months. I understand why we have such distaste for them. It could be because of similarly bad experiences or maybe we just don’t like to see such volatile moves. Or perhaps we avoid them because they are so difficult to understand that they keep us up at night if we own shares in any of them… even if just a few shares. They certainly aren’t the traditional dividend growers that have increased dividends over long periods of time but hey, they do pay some seriously high dividends in normal economic environments. Should we be investing in them?

Investors who don’t know or understand them should certainly not invest in them!! As Peter Lynch has often been quoted as saying:

Invest in what you know

It is one of Lynch’s investment principles, and is the concept behind his book, One Up on Wall Street. As investors, we would be wise to follow that advice. But we do have options.

Mortgage REITs: Proceed Without Fear

Annaly Logo

I wrote an article on December 24th, 2013 about how Annaly’s price seemed to be at a bottom.(Read Article) While other authors on this site were suggesting to run for the hills, I hope you heeded my advice and put at least some money to work on NLY. Investors who did have benefitted from a 13%+ return since then, including dividends paid. Whether or not Annaly can continue its positive performance is the subject of another article I am working on. But in the meantime, I think its interesting that the Annaly logo is the family crest and reads, “Prodesse Non Nocere”, which means “proceed without fear”. I wanted to provide some additional insight into mortgage REITs as an asset class so that investors can invest in them intelligently, without fear, and without having to read from those that try to instill fear.