I came up with this in a short time – I'm looking for some more experienced investors to give me the negatives and possible counter points to weigh this long term. If I'm being too narrow-minded/shallow please let me know.
American Healthcare REIT (AHR) is a Real Estate Investment Trust that operates $4.5B worth of properties/assets that has a current market cap of $2.47B, I'm no financial wizard – I'm basing future outlook on under-evaluation, lower than reasonable interest (growing), the basis of their growth in America, and current investors who've bought in the last quarter.
Background: AHR IPO'd early February 2024 – at a share price of $12/sh which quickly moved to $13.5~ increasing steadily both in volume and share price to $19 today. Besides the fact that they've beat revenue estimates the only 2/3 quarters they've been public . . .
https://www.nasdaq.com/market-activity/stocks/ahr/earnings
TLDR;
- federal rate cuts in the next year or so propel REIT's forward most likely
- senior living is peaking, AHR specializes in nursing homes, senior care etc.
- mostly, there has been very low volume recently but continued steady growth with revenue estimates beating the first two quarter, Vanguard recently purchased ~1% ownership last month, other funds following suite slowly.
- the current assets value surpass the market cap valuation by almost 2x,
1. Federal Interest rate cut history and effects on REIT's
https://www.forbes.com/advisor/investing/fed-funds-rate-history/
Federal interest rate cuts come in waves historically for stretches of at least 2 years at a time, with quarterly cuts of interest rate percentage ranging from 0.25%-1% a quarter.
Mar 22' -> July 23': 0.25% up to 5.50%
Aug 18' -> Mar 20': 2.25% down to 0%
Dec 15' -> Dec 18': . 0.25% up to 2.50%
Now – current market consensus point to at least 3 cuts by December. Historically fed rate cuts have assisted in the stock price and performance of REIT's but obviously that doesn't just apply to REIT's – spending in general will increase with decreased interest and that would only grow – there is more depth to this but looking in the big picture – I take these points with probabilities along with the following but if you look into the many positive factors:
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Transactional volume returns
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cost of capital reduction
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expansions increased with rate reductions
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increased investments from income investors in REITs
2. AHR basis of Portfolio and Increase of the average age of Americans
https://www.americanhealthcarereit.com/portfolio/
https://wealthmd.net/2023/07/13/america-is-getting-older-demographics/
https://usafacts.org/articles/how-have-us-fertility-and-birth-rates-changed-over-time/
AHR specializes in senior housing, nursing facilities, and senior health campuses. In the last decade the average American's age has gone from 37.2 years old to 38.9 with most recent census in 2022 – with the lowest fertility rate ever recorded in 2023, the most recent years couple deciding to not have children or waiting too long more than ever – the average age of the population will keep pushing upward, granted these effects will take a while to take effect but it has been a trend that has continued.
3. Low but steadily increasing volume and share price
https://www.marketbeat.com/instant-alerts/nyse-ahr-sec-filing-2024-08-13/
Looking at the current volume and share price historical charts – AHR has slowly grown and garnered more interest but with shockingly low volume for daily trading. Recently Vanguard has bought almost 1% of the company's shares along with other hedge funds getting a taste. This is just some confidence to instill but my last point –
4. AHR's current assets are much greater than their current market cap evaluation
|| || |TICKER|Market Cap|Total Assets| |AHR|2.47B|4.7B| |WELL|70.363B|45.53B| |VTR|24.064B|24.673B| |DOC|15.007B|15.699B| |OHI|9.951B|8.85B| |CTRE|4.289B|2.34B|
https://finance.yahoo.com/sectors/real-estate/reit-healthcare-facilities/
Looking at some of the top REIT's I could find from the top – no REIT is as undervalued in comparison to their assets as AHR is. Quickly compiling the first 5 top REIT's I could find – looking at their currently held assets, they are either evaluted more or around the same as their combined assets and this varies due to how much revenue they are able to turn and how much debt they may have but with AHR – by no means should a real estate trust be valued lower than the value of their actual assets.
Mind you – I compiled this information in under 2 days. I'm here pass to pass these ideas through some bigger brains I feel like this is reasonable outlook for a long term investment but I'm looking for the counter-arguments.
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