Why Ventas Belongs In My 'Fab-Five' DAVOS Portfolio

The U.S. healthcare real estate market is large - around $1 trillion - and care delivery is increasingly interconnected. By consolidating healthcare assets into a securities (REIT) structure, VTR is well positioned to dominate.

Summary

  • This leading healthcare REIT is still a powerful player in my Fab-Five REIT portfolio.
  • As most sports enthusiasts know, defense wins games, and Ventas can certainly prove that it knows how to defend against risk.
  • I believe 2018 will be a year in which the healthcare REIT begins to flex muscle and score points, possibly a slam dunk acquisition.

In a recent Forbes article I wrote,

“In Tech it’s FANG, in REIT’s it’s DAVOS”

In that article I went on to explain,

“I’m sure that you are familiar with the acronym FANG created by CNBC’s Jim Cramer a few years ago. It’s representative of four of the most popular and best-performing tech stocks in recent memory - Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Google (NASDAQ:GOOG) (NASDAQ:GOOGL)."

I think Cramer is on to something: FANG has become a household name.

So I thought to myself, wouldn’t it be cool to create my very own REIT version of FANG? Not just to showcase some flashy acronym like SWAN (stands for “sleep well at night”), but to create a benchmark of the best REIT performers in one easy-to-use phrase. As a result, I decided to create this catchy 5-letter acronym called DAVOS.

These five REITs include Digital Realty (DLR), American Tower (AMT), Ventas, Inc. (VTR), Realty Income (O), and Simon Property Group (SPG).

As you can see, the DAVOS portfolio has performed well year-to-date, thanks in large part to the two “tech” names Digital Realty (+28.6% YTD) and American Tower (+33.6% YTD). Conversely, Realty Income (+.20% YTD) and Simon Property (-4.1% YTD) have under-performed. As you can see below, Digital Realty is trading at a 23% premium to the company’s 5-year P/AFFO multiple and Simon Property Group is trading at a 16% discount to its 5-year P/AFFO multiple.

Screening these metrics (historical P/AFFO and YTD returns), Ventas, Inc. appears to be trading at “sound value” and while I am not thrilled with the year-to-date results, this leading healthcare REIT is still a powerful player in my Fab-Five REIT portfolio. As Dick Vitale would say,

“He’s a PT-Per tonight, baby!”

Note: Vitale created the acronym “PTP” to stand for “prime-time performer,” and has used the phrase throughout the years to describe clutch players.

Let’s Start With Defense

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