Fries in the bag, chud.
You're not getting the inheritance you thought you were. Nana's bagholding life, and she's not going to let the suits take it from her without a fight.
**PART 1: The Setup**
https://preview.redd.it/97p7mlj7oxje1.jpg?width=960&format=pjpg&auto=webp&s=f31f08a9ec7a038a13bff2fd9eb4be8dca05255e
Healthcare spending as a percentage of GDP is booming, and has no plans on stopping any time soon. The primary culprit is an aging population and long life expectancy, layered on a for-profit medical structure in the U.S.
https://preview.redd.it/i76cmpyeoxje1.jpg?width=1024&format=pjpg&auto=webp&s=899d4f8f877b3b7d529eca3ef12b49ec0cc927c3
Over time, the proportion of the elderly U.S. population is projected to skyrocket, especially among the oldest cohorts.
[U.S. Census Bureau, Population Division. \(2020\)](https://preview.redd.it/9yrd2d9koxje1.png?width=871&format=png&auto=webp&s=f6796deeb368b85147b7981fe9104fb051e8b7f8)
And that inheritance your parents and grandparents have been bragging about for decades is getting dumped into long term care at a 10% CAGR.
https://preview.redd.it/iot8vl7uoxje1.png?width=3000&format=png&auto=webp&s=990a8b60a91e93aeb5acdf76fe010c5c04758815
Fortunately, this is a trend even the most PLTR full-ported regard can understand.
People get old, old people are sick, sick people pay for healthcare, and in particular, old people pay for long term care (LTC).
https://preview.redd.it/edolo102pxje1.png?width=1216&format=png&auto=webp&s=355e6331c2c2b2f4ab085f63f07c8235ff4595f9
So, how do you play it?
**PART 2: The Play**
Surprisingly, even with a braindead growth thesis, leaders in long term care are trading below conservative estimates of intrinsic value. Let's focus on some leaders: $PNTG, $NHC, $ADUS, $ENSG, $HCA
Of course, the meat of the thesis is future growth. All we know for sure about these companies is their track record. However, buying companies at low multiples to their historic operating incomes is never a bad idea, especially if there is no reason to believe they would suddenly lose that income stream.
Pennant Group Inc ($PNTG) is in Home Health and Hospice Services, and Senior Living Services.
Trading at 900M Marketcap, you're getting 13% CAGR on 35M in operating income. 25X operating income growing at 13% without any sign of stopping is already compelling.
https://preview.redd.it/1sepjddcqxje1.png?width=1187&format=png&auto=webp&s=703dccd68f8aea1f8c76197e8bfd897169d3d339
National HealthCare Corporation ($NHC) is in skilled nursing facilities, assisted and independent living facilities, homecare and hospice agencies, and health hospitals. The valuation is even more compelling.
For 1.6B Marketcap, you're getting 6% CAGR on 20X operating income.
https://preview.redd.it/1umqjgakqxje1.png?width=1182&format=png&auto=webp&s=f7faa43a1ea1b4998c7fd1272a1f1a8599c1975a
But the best bit is your balance sheet. The company is trading at 1.6X P/B
https://preview.redd.it/w1grfqurqxje1.png?width=505&format=png&auto=webp&s=1d115278be69d4eb32865bc4a9265ed2eb486ede
Backing out the book value and goodwill, and then applying a conservative discount to book value at 700M. Subtract this from the 1.6B market cap, and for 900M market cap minus book value, you're getting \~80M in operating income with at least 6% growth. Pretty compelling.
Addus Homecare ($ADUS) looks great as well.
https://preview.redd.it/tvaewaafrxje1.png?width=1191&format=png&auto=webp&s=eb63ab66587a6e3e417a2a60f072f9519d45de86
At 2B Marketcap, you're paying 20X operating income for 10% CAGR. Already compelling, but just like $NHC, you're also getting a massive margin of safety with a thicc book value.
https://preview.redd.it/39pmepmkrxje1.png?width=495&format=png&auto=webp&s=1b1a5f58574e368109f82a38a42953ee14205466
The Ensign Group ($ENSG) is the largest of these LTC providers. At 7.3B Marketcap, you're getting the company for a little over 20X operating income.
https://preview.redd.it/qyiwa9forxje1.png?width=1192&format=png&auto=webp&s=33076da03d71ae103f88c18b676b0267df082c3c
You might expect their growth to be lower being the largest player, but they have the highest CAGR of them all at 13%. Combined with a larger moat, better margins than the other players, it's incredible that this has such a reasonable multiple to income.
Finally, I want to throw in HCA Healthcare ($HCA), as it's a Michael Burry long and tangent to the thesis at reasonable valuation. They own and operate hospitals. Little less sexy as I think hospitals have riskier revenue streams, but the company has a ridiculous moat in hospital operations as the largest player by a mile. They're even bigger than the VA.
https://preview.redd.it/g6l1m67esxje1.png?width=1201&format=png&auto=webp&s=dd9bd983f28ef788634a67195092b1a2c50dfb78
78B Market cap, 7.8X operating income. No brainer valuation here, and it helps widen the net of exposure to the thesis.
TLDR: Nana’s inheritance = my tendies. Boomers are bagholding life, and LTC stocks are going to benefit. $PNTG $NHC $ADUS $ENSG $HCA for reasonably valued plays.
My positions:
https://preview.redd.it/9r5voxb2txje1.png?width=399&format=png&auto=webp&s=a14cdd18208d1ec3c3f0948c05c30f1ee4153807
https://preview.redd.it/8yvds7c2txje1.png?width=387&format=png&auto=webp&s=11890e21e54ecab685f6b6801a598b7515d900c9
https://preview.redd.it/81wbnxb2txje1.png?width=396&format=png&auto=webp&s=35b1113978815f329ceb96e37b08221e6e1487a6