I’m rarely at a loss for my weekly observations – especially post inauguration – with this week being no exception. Without further introduction, I’ll dive right into current headlines and my take on the impact to investors.
The Paris Accord
The only positive I can see is that a campaign promise has been fulfilled. With several multi-nationals aligned in favor of the accord, no penalties for failure, standards being self-determined – the obvious downside is to be ostracized on the world stage. Withdrawal (which would only be effective after Trump’s first term) only further abdicates the US role as a leader in the world and gives voice to potentially adding teeth to where there are none (as in Nicaragua’s position). Perhaps a worldwide carbon tax assessed against companies of non-signatory nations? One has to wonder about a future where a rogue nation such as North Korea (signed) appears to be more forward thinking than we are. And no, Mr. Trump, coal is not poised for a comeback. While the opposition is forming, perhaps we’ll next see a domestic battle regarding state rights versus interstate commerce? Still too early to tell, but could this be another reason to diversify into foreign issues?
Health Care
On another note, in reviewing DivHut’s June Watch list (Jun 2nd), I found myself cycling between his reference to HCP and an article this morning in the Dallas Morning News regarding Walnut Hill Medical Center. I’ve been cautious on health care recently evidenced by the comment stream in my recent post. Although not a REIT, this for profit (reportedly part owned by HSTM) hospital closed its doors without notice. One reason cryptically given:
The Medicare provider agreement between the hospital and the Secretary of Health and Human Services terminated on June 1, 2017 in accordance with the provisions of the Social Security Act.
Perhaps, Vivianne, I do have a crystal ball. 🙂 The reality is that there is too little clarity between governmental actions and reality for my comfort right now.
Like DivHut, I’m waiting for a pullback while averaging down some positions. Looks like I’ll stay in the States since the US dollar is continuing its retreat.
Update: 11 Jun 2017 – This facility appears to have attempted to skirt the Federal Stark law by being classified as physician-invested vs. physician-owned allowing for government reimbursements. The corporate structure appears to have been an unnamed development company (perhaps in conjunction with HSTM) with practicing physicians as the shareholders of said development company. Bankruptcy was filed on June 6th. With no word of foul play, this appears to be a case of mismanagement (not enough liquidity).
Seeking Returns 
Health, in all its forms, still looks strong long term. You might want exposure via REITs, pharma, medical devices, bio-tech, etc. but in general the sector as a whole has a long term tailwind behind it. That hospital closure was indeed a bit sudden and the reasoning “cryptic.” I would say that most health REITs are large diversified entities owning, hospitals, SNF, MOB, rehab, etc. which should insulate you from the ravages of a hospital or MOB closing. I’m looking at HCP but will wait for below $30 before pulling the trigger. Thank you for the DivHut mention. Much appreciated.
LikeLiked by 1 person
Based on demographics alone, I agree the health sector looks strong and diversity via REITs will shield one from individual closures. The issues that I’ve been grappling with for almost a year with the REITs is dependency on Medicare/Medicaid, private insurance reimbursements, and the on/off campus reimbursement rates. If a seismic shift in the status quo occurs via new administration policies what is the likelihood of even a REIT to withstand multi-pronged attacks?
I’ll attempt to find out more this week on this closure (it was a cardiac hospital). The only logic I see is mismanagement, fraud, or the first wave of government rule making.
I like GIS by the way – have it in the trust. Have K on the watch list for the same reasons. Thanks for the comment!
LikeLike
Healthcare is always at risk for government interference but until that happens(and even after), it should be a strong performer. I own and continue to hold UNH which is best of breed in my mind and a good example of not putting all your eggs in one basket as a company as their growth strategy has been quite interesting and includes buying healthcare facilities to go along with their pharmacy and insurance businesses.
LikeLiked by 1 person
I’ve got UNH and HUM as well. I like both more for their HSA/FSA management (use of ‘free money’) aspect. I agree that UNH’s diversification puts them ahead of most of their peers. Just wish they (both) paid more of a dividend 🙂
Thanks for visiting!
LikeLike