SNH I am starting to sweat.

[scottr]

Hi everyone.  I am very new here.  This is my first post. 

I am writing to see if any of you are currently holding the REIT SNH.

Before anyone tells me - yes yes only invest in things you understand.  Well I made the mistake of putting a bunch of money in this REIT a year or so ago as I read it was a good income generator - my mistake is I didn't really understand the financials or the business in general.  You live.  You learn.

In the last 6 months and especially recently, I have watched this holding go lower and lower and lower and lower...

Now I understand you shouldn't sell something low (ideally), and if it were the INDEX i'd be happy to buy more.  I am in no rush/need to sell anything right now, BUT i am getting pretty stressed because i DON'T UNDERSTAND WHY it is going lower and lower and lower... and I have a large amount of money in this and watching it lose more and more and more.... without any confidence of a rebound (like the index) is making me uneasy.

Can anyone give me some insight into their thoughts on this holding and why it is losing value day over day?  Am i right to be nervous or is there something going on here I have missed?

Thanks.

[Financial.Velociraptor]

Hi everyone.  I am very new here.  This is my first post. 

I am writing to see if any of you are currently holding the REIT SNH.

Before anyone tells me - yes yes only invest in things you understand.  Well I made the mistake of putting a bunch of money in this REIT a year or so ago as I read it was a good income generator - my mistake is I didn't really understand the financials or the business in general.  You live.  You learn.

In the last 6 months and especially recently, I have watched this holding go lower and lower and lower and lower...

Now I understand you shouldn't sell something low (ideally), and if it were the INDEX i'd be happy to buy more.  I am in no rush/need to sell anything right now, BUT i am getting pretty stressed because i DON'T UNDERSTAND WHY it is going lower and lower and lower... and I have a large amount of money in this and watching it lose more and more and more.... without any confidence of a rebound (like the index) is making me uneasy.

Can anyone give me some insight into their thoughts on this holding and why it is losing value day over day?  Am i right to be nervous or is there something going on here I have missed?

Thanks.

What time frame are you looking at?  I show it originally listed at 8.63 in Feb 2000 and is now at 17.74.  That is roughly a double in 17 or so years while paying a fat distribution all the way.  You may be poorly suited to individual stock holdings if a few years of downward action makes experience physical discomfort. 

I see a company in growth mode with a reasonable Baa3 credit rating.  I can't find their bonds so I'm assuming the credit is some kind of revolving facility or term loan with a bank(s).  Moody's predicts no trouble with refinancing.  There is certainly some interest rate risk here as commercial property is always financed at a variable interest rate.  That will squeeze margins in the current rising rate environment but they can probably raise rents during a booming economy to offset. 

Do you know how the stock has performed after accounting for dividends for you?  You probably are not as far down as you think you are.  But seriously, your health is  more important than your wallet.  If holding this is causing you grief sell the damn thing a follow an approach that lets you sleep at night.

[Rob_bob]

Well recently real estate as a sector has been going down, utilities are also pulling back from highs even though the broad market is up.

I compared SNH to ICF, a RE index on a short term chart and they are roughly moving together. SNH had a bigger run/ higher top than ICF so it has fallen further, it's more "volatile".  5 year chart shows SNH down 28% while ICF is up 22.56%

Sectors go up and down and not at the same time. Stay the course, you should be in it for the long term.

Personally I stay away from individual REITs and go with an index ETF.

[Mr. Boh]

In general REITs preform poorly in a rising rate environment. As the risk free rate increases, people pay less for risk. I don't know anything about SNH but to me an extremely high dividend (8.79%) is a red flag.

[ChpBstrd]

I held OHI, their competitor/twin. OHI took a dive in November when they revealed some of their client nursing homes were having trouble making payments and would probably need to renegotiate their leases or go bankrupt. Investors who had feared such an outcome for a long time ran for the hills. They're probably right and this is probably the tip of an iceberg rather than an isolated issue with a handful of operators. Rising expenses plus lower medicaid/medicare reimbursement rates equals bankrupt nursing homes - unless the rents go down. Despite management's assurances, that dividend is at risk and the current administration won't be riding to the rescue. All this applies to SNH too.

I swallowed my pride and sold a couple weeks ago. I'm feeling good about that decision, as OHI fell an additional few % since. Over the past 2 years I roughly broke even on the trade considering capital losses, dividends, and options premia received. That sucks compared to the indexes! I've sworn off high-dividend investing. OHI's ttm yield is now around 9.5%.

Now my only solo stock is a small position in Salesforce, which has been a rocket. Everything else is in indexes, bonds, and a few options. No more dividend games for me.

[Mighty-Dollar]

Not surprising. Real estate is riskier than small/mid cap stocks and even riskier than commodities. That is a fact.
https://www.mfs.com/wps/FileServerServlet?articleId=templatedata/internet/file/data/sales_tools/mfsvp_20yrsb_fly&servletCommand=default
At least you didn't invest in some non-traded REIT. Then you lose 50% of your money all in one day 5 to 10 years from now. Unfortunately millenials are flocking to real estate and gold. Very strange.

[neil]

VGSIX is Vanguard's REIT index fund.  If you compare SNH to it, it has pretty much tracked it on a 1yr curve.  You can deep-dive further, but this is a pretty strong starting point when looking for "reasons".  REITs have not done well in the short term, and SNH is taking the same roller coaster.

Aside from general REIT risk (higher interest rates will be a headwind for the industry) elder care has extra risk due to Medicare/subsidies/etc.  The problem is with the operators renting to the REITs and HCP/OHI are current examples of this risk manifesting itself.  I think SNH has less risk than most in this area but you really need to understand what you are getting into and expect the ride to be bumpy. I really haven't looked into it for awhile and claim to be current.

If you don't understand, why did you buy it?  This is a core issue with complicating your portfolio. 

[MrSpendy]

https://forum.mrmoneymustache.com/investor-alley/investment-for-a-declining-economy-(recession-proof)/msg1417341/#msg1417341

Wrote the below on February 5th, 2017. Portnoys/RMR have a bad reputation. It is deserved.

SNH trades at a discount because it is externally managed by the RMR Group, a real estate concern which has generally, over time, prioritized funneling money to the Portnoy family by growing AUM at the expense of long term shareholder returns.

You can read more about them and their empire by googling "Corvex commonwealth REIT" "RMR Group" "Lakewood Select Income REIT" etc. that should give you a flavor for how hedge funds and other market participants feel about how the portnoys run their companies.

I have made money buying their REITs in the past when the discount appeared to price in a lot of the poorly aligned management, but I would not recommend n investment in shares managed by them without knowing what you are getting into. Picking a stock by dividend yield alone is generally a good way to taken advantage of by more knowledgable market participants or management teams. Have also made money owning the management company (RMR group, which is the parasite that sucks the fees from all the other entitities.

In short, caveat emptor.

[scottr]

Thank you all for your feedback.  Might have to cut my losses on this one.  Or at least some of them.  Lesson learnt.

[Philbert]

I wouldn't sell just yet. It all depends on your timeframe. It's still paying out, and if you're doing dividend reinvestment, then you're automatically buying shares at this lower price. It's still generating income for you. You don't have to reinvest dividends. You can use them to buy index funds or another stock.

This is how people lose money in the market. They panic and sell low. Stocks are most volatile in the first year. The longer you own it, the less those dips matter. I bought SNH a few years ago at around $21.50. Thanks to div. reinvestment, I'm not down by much. I'm planning to hold onto it for the long haul. Everyone's financial sitch is different, but if you're able to hold, then do so. I mean, baby boomers are just starting to retire, so retirement homes will still be needed in the future.

More importantly, nobody knows what's going to happen in the future. Maybe it keeps dropping then eventually goes back up in a few weeks or months or years, or maybe it doesn't. I own TGT, and that plummeted last year, but finally, it's making a recovery.

[BTDretire]

I'm a subscibed member of the forum called "The REIT Forum" on Seeking Alpha.
Analyst, "Colorado Wealth Management Fund"
 The analyst does tons of research into REITs, mREITS and Preferred REITs,
His long articles are way more than I can absorb, but he always has a conclusion.
His site also includes spreadsheets with lines of data with strong buy, buy, and sell prices.
There is also a chat that is busy with smart REIT investors.
I ask about SNH on the chat, I don't know I will get any info, there are a lot of REITs,
so it's hard for an analyst to cover everything.
If I get any info today or tomorrow, I'll let you know.

  UPDATE
 My guru declined, saying was not familiar with SNH and is putting his research hours into Strip Center REITs and
Apartment REITs at this time.

[scottr]

I'm a subscibed member of the forum called "The REIT Forum" on Seeking Alpha.
 The analyst does tons of research into REITs, mREITS and Preferred REITs,
His long articles are way more than I can absorb, but he always has a conclusion.
His site also includes spreadsheets with lines of data with strong buy, buy, and sell prices.
There is also a chat that is busy with smart REIT investors.
I ask about SNH on the chat, I don't know I will get any info, there are a lot of REITs,
so it's hard for an analyst to cover everything.
If I get any info today or tomorrow, I'll let you know.

Thanks!  Let me know if you find out anything!

[BTDretire]

I'm a subscibed member of the forum called "The REIT Forum" on Seeking Alpha.
 The analyst does tons of research into REITs, mREITS and Preferred REITs,
His long articles are way more than I can absorb, but he always has a conclusion.
His site also includes spreadsheets with lines of data with strong buy, buy, and sell prices.
There is also a chat that is busy with smart REIT investors.
I ask about SNH on the chat, I don't know I will get any info, there are a lot of REITs,
so it's hard for an analyst to cover everything.
If I get any info today or tomorrow, I'll let you know.

 Sorry,
 My guru declined, saying was not familiar with SNH and is putting his research hours into Strip Center REITs and
Apartment REITs at this time.

Thanks!  Let me know if you find out anything!

[scottr]

I wouldn't sell just yet. It all depends on your timeframe. It's still paying out, and if you're doing dividend reinvestment, then you're automatically buying shares at this lower price. It's still generating income for you. You don't have to reinvest dividends. You can use them to buy index funds or another stock.

This is how people lose money in the market. They panic and sell low. Stocks are most volatile in the first year. The longer you own it, the less those dips matter. I bought SNH a few years ago at around $21.50. Thanks to div. reinvestment, I'm not down by much. I'm planning to hold onto it for the long haul. Everyone's financial sitch is different, but if you're able to hold, then do so. I mean, baby boomers are just starting to retire, so retirement homes will still be needed in the future.

More importantly, nobody knows what's going to happen in the future. Maybe it keeps dropping then eventually goes back up in a few weeks or months or years, or maybe it doesn't. I own TGT, and that plummeted last year, but finally, it's making a recovery.

Thanks for the response.  Right now I am in no rush / need to sell but i'm worried about the opportunity cost of holding a depreciating asset and potentially losing a lot more $.  I have decided to stop reinvesting dividends on SNH as I honestly have no confidence or Idea if it will bounce back.

Am monitoring it closely but might start pulling some stuff out.