3 Ways to Play the Long-Term Care Crisis in 2024

Core Viewpoint - The long-term health care crisis in the U.S. is significant, with Americans spending $245 billion on long-term care, indicating a growing investment opportunity in long-term care stocks [1][2]. Group 1: Long-Term Care Industry Overview - The long-term care sector includes businesses providing care in homes and nursing facilities, with strong operators managing to be profitable despite low margins [1]. - The aging population is expected to be a major theme impacting the health care sector and REITs over the next decade [5]. Group 2: Company Profiles Welltower (WELL) - Welltower is a real estate investment trust (REIT) focused on providing capital to senior housing operators and health systems, generating 85% of its net operating income (NOI) from the U.S. [3][4]. - In 2023, seniors housing accounted for 42% of its NOI, with a projected occupancy rate increase of 290 basis points for 2024 [4][6]. - The company reported a 21.7% growth in same-store NOI for seniors housing in Q2 2023 and has engaged in $4.9 billion in acquisitions and loan funding since the start of 2024 [6]. Chemed (CHE) - Chemed has a market capitalization of $8.69 billion and derives 60% of its revenue from Vitas, a leading hospice care provider, and 40% from Roto-Rooter [7][8]. - The company reported $596 million in revenue for Q2 2023, with a 34.1% increase in adjusted earnings per share [8]. - Vitas' EBITDA was 17.8%, significantly higher than the previous year, while Roto-Rooter's EBITDA remained strong at 27.0% [9]. The Pennant Group (PNTG) - The Pennant Group, with a market cap of $861 million, has seen its shares rise by 101% in 2024 [10]. - The company operates a decentralized model for home health and hospice care, managing 53 senior living communities across 13 states [10][11]. - It has achieved a compounded annual revenue growth of 22% over the past decade and is positioned to benefit from industry consolidation due to the aging population [11][12].