HCP down 32% two days after buy, WTF

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:

  1. I think healthcare facilities are a solid investment with the amount of growing population we have and soon to be baby boomers.
  2. With the upcoming baby boomers, HCP has a large variety of senior living facilities that will benefit from this population
  3. HCP also has a good diversity of other healthcare facilities including Medical Office Buildings which will benefit from the rise of outpatient services.
  4. 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:

  1. HCP’s largest tenant HCR ManorCare (23% of portfolio) are under federal investigation over fraud for their Medicare Reimbursements (that’s never good)
  2. HCP with their largest tentant under investigation, their 2016 outlook looks poor.
  3. 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.

9 replies
  1. Mike H.
    Mike H. says:

    I took a look at this stock. HCP has basically written off ManorCare, but it might be difficult for you to break even on this investment within the next couple months. I’m buying 15-18 shares today because I think that the price will get back up over 30 by the end of the year. Vacancy rates are extremely low these days, which should help with cashflow. It’s a risk for sure: if the hammer drops on ManorCare, we could be right back here again soon.

    Remember that you don’t lose money unless you sell. I think HCP’s fundamentals are solid, and that this current situation is just a blip. Just one man’s opinion – I’ve mis-timed plenty of other investments before.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Thanks Mike H.

      I am in the same philosophy, I don’t lose money if I don’t sell. I think that’s another reason why I’m game to continue to hold onto this stock. That’s awesome that you’re taking this opportunity to buy. Right on!

      -Andrew

      Reply
      • Mike H.
        Mike H. says:

        Turns out I was wrong. HCP is almost back to 30 now.

        We’ll see if this little rally keeps going. I think fears of a recession are subsiding a bit. That’s just my sense.

        Reply
        • Wallet Squirrel
          Wallet Squirrel says:

          I know I’m not supposed to check my stocks too often, but it’s been fun seeing my HCP stock go from $-90 to $-70 and now $-54. It may be more fun seeing yourself not lose money than it is to gain money lol

          Reply
  2. Dividend Miracle
    Dividend Miracle says:

    Hey WS,

    That sucks and I hate when that happens! It happened to me when I brought KMI last year. Got it in the 30’s then it dropped in the teens! WTF
    I did average down to the 20’s and will buy some more shortly I hope, but don’t worry HCP is a great company. You should average down and should be in the green over time!
    DM

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Thanks Dividend Miracle,

      KMI was starting to make a comeback as well. HCP has risen slightly so I think it’s bottomed out for a bit. I’m hesitant to average down but time will tell. I think I’ll focus on some other stocks for now and come back and think about it. Good thing about being a Dividend Investor is I have time.

      Reply
  3. Dividend Miracle
    Dividend Miracle says:

    WS,
    Low and behold. lol HCP has fought back and is sitting at $33.83 (We both should have averaged down but I didn’t have extra cash on my end) KMI is still treating me well and can’t wait for the dividend this month.

    Also CVX is over $100 I know we spoke about this one before and I wouldn’t steer you wrong but from me to you I say pick up Chevron/Exxon or both but I know you said you need to look more into the oil stocks before you pull the trigger.

    Soon enough you will be at the 10K mark for your portfolio!
    DM

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      OH MY GOODNESS, right? I thought that when their largest tenant was having problems, it would be a lot harder to come back from but dang! They are back and going strong. I should have averaged down, but this is one of my first ACTUAL examples of a stock rebounding from a large scandal. Lesson heard!

      CVX is another one I keep kicking myself over for selling around $92 (now $102) but I still stand by my decision that I should know more about the oil & gas business before hopping in. I think it’s just luck that it went up. I sold for a small profit so I can’t argue with that. Now I just need to learn more about this industry so I know when to buy in. I’ll follow your progress with his stock.

      Thanks for remembering our conversation! =)

      Reply
  4. Dividend Miracle
    Dividend Miracle says:

    Yep no problem! And yes as far as HCP goes we both learned a lesson! Hopefully this year I can pick up more CVX and XOM but only time will tell.

    DM

    Reply

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