This blog tends to focus mostly on speculative stocks, companies that often have little to nothing in revenue and certainly don't distribute dividends to investors. But there is certainly a place in most portfolios for some solid performers, companies that pay investors to own them with regular dividend payments.
And in my opinion you can do a lot worse than to look at retirement homes for one simple reason, the baby boom generation. Those hippy dippy teens who were once skinny dipping at the Woodstock Music Festival, they're now moving into their golden years. Gone are the days of stripping down with friends for a cool refreshing swim in a lake, now comes the age when they're looking for help getting in and out of the bath.
The post war baby boom started in 1946, which means the front end of the boomer generation is now entering their 70's. And that's just the front end, the boomers have been called 'the pig in the python' and those who study demographics have been sounding alarm bells for a while now about the impact this generation is going to have on society as they enter old age.
One inescapable fact of human existence is that we all need somewhere to live, no matter what age we are. People are living longer and healthier now than at any point in history, but there's no defeating father time, it gets us all eventually. While some older people will be healthy enough to maintain their independence for a very long time, many will also have to look at moving into assisted living facilities and retirement homes.
That's the business Extendicare is in.
My legion of regular readers, all three of them, know that I pay close attention to short interest and that I have a healthy respect for bears. When I see a stock with short interest at 10% of the issued shares, or higher....that to me is a warning sign. However the level of short interest in Extendicare is well below 10%, sitting at just 2.3% of the 88.8 million odd shares that are issued as per stockwatch.com, that's current up to May 15th 2017.
Over the long term I don't see anything to worry about with an investment in EXE.TO. That's not to say I don't expect pullbacks and periods of consolidation, that's par for the course with stocks. But over the next 10 to 20 years I view retirement homes as being almost as sure a bet as running a Casino. And we all know that when running a Casino that the house always wins, unless its someone named Donald Trump at the helm, Thankfully his name isn't on Extendicare's Board of Directors.
But back to Extendicare's short interest, 2.3% of the issued shares represents a little over 2 million. My suspicion is that bears would like to cover, but they're pinched. You can't buy unless there are others willing to sell after all. Back in 2014/2015 when they were divesting the U.S. side of the business there was some uncertainty, but that issue has long since been resolved.
This isn't some tech company that's been around for 10+ years, surviving by selling its shares and engaging pumpers and promoters to drum up interest. Extendicare has paid a monthly dividend for years of 4 cents per share, which at current prices represents a yield of just under 4% which is better than a GIC, with the share price growing steadily over the past 5 years.
That 4 cent monthly dividend means that bears have to dig into their collective pockets every month for roughly $80,000 at current short levels, that's almost $1 million per year. Extendicare doesn't have to cover the dividend payments for shares that have been sold short, that's up to the bears who sold them.
Recently analysts covering the company poured a bit of cold water on things, but I've never been one to trust analysts, I don't think they have my best interests at heart. And certainly with EXE some price targets have been brutally wrong, but in a very good way for longs.
RBC just boosted their Price target from $9 per share to $9.75, which to me is like targeting 20 wins at this point in the season for the Blue Jays, even though they've already won 23. But it is what it is, perhaps its just a matter of industry players helping out the bears who seem to be stuck. You can read about it here:
I'll leave it there and, as always, strongly suggest further research. Take note that I am a shareholder and as such my opinions should be viewed as heavily biased.
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