COMPANY DESCRIPTION

HCP is a real estate investment trust engaged in investing primarily in real estate serving the healthcare industry. Co. acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. Co.'s portfolio is comprised of investments in five healthcare segments: senior housing; post-acute/skilled nursing; life science; medical office; and hospital. Co. makes investments within its healthcare segments using the following investment products: properties under lease, debt investments, developments and redevelopments, investment management and investments in senior housing operations. At Dec 31 2013, Co. had 1,079 properties in the U.S.

 

ECONOMIC MOAT

HCP economic moat comes from its successful strategy of renting health-care properties to tenant operators under long-term, triple-net leases that provide for steady and slow-growing cash flow over time. These leases impose switching costs on HCP's tenants.  Many of HCP properties are located close to hospital campuses.  Prime location properties create a sustainable competitive advantage for HCP.

 

OUTLOOK

 

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STRENGTHS

  • Leases create some protection from inflation due to built in escalators and tenant responsibility to share increased operating costs

WEAKNESSES

  • Largest tenant HCR ManaorCare (roughly 1/3 business)

THREATS

  • Tenant's may push for lower rents upon lease expirations

  • REITs have been bid up in low interest rate enviromment. REITs could fall out of favor as interest rates rise

OPPORTUNITIES

  • Favorable industry trends

  • Growing and aging population

  • Favorable regulatory environment

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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