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Right now, concerns about the economy's structure continue to dominate headlines.
On Monday, the U.S. Federal Reserve announced that up to 47 million Americans could lose their jobs during the 2020 coronavirus crisis. That would represent a staggering 32% of Americans out of work.
The shutdown of commerce is especially bad news for real estate investment trusts (REITs) that own hotels, shopping centers, and other points of social and recreational activity. Some of the top-performing assets of the last decade have seen their market capitalizations collapse.
There are two classes of REITs that will perform quite well in 2020.
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Information technology REITs, which manage data centers and next-generation technologies, have largely been immune from the crisis. The reliance on the digital economy today has helped keep the price of data REITs elevated.
Another is hospital REITs.
Now, they have taken a hit alongside the broader market sell-off. But they also offer a unique buying opportunity for those looking to invest now.
Here's one hospital REIT that is severely undervalued. In fact, we could easily see a 100% return on your money within 18 months.
Acute Care Demand Surges Make This Hospital REIT a Buy
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Medical Properties Trust Inc. (NYSE: MPW) is a REIT that specifically owns acute care hospitals, the very type of building that have been swarmed by coronavirus patients around the globe.
The Alabama-based company owns hospitals in the United States, Australia, Germany, Great Britain, Portugal, and Spain, all places stricken by the coronavirus. The firm invests in healthcare facilities specializing in acute care and community and rehabilitation hospitals. Roughly 81% of its income comes directly from the hospital system, offering pure exposure to the coronavirus threat.
It's largely never a good thing to take a large stake of revenue from one customer. However, MPW may prove the exception to the rule. About 30% of its income comes from the Steward Health Care System, a firm that caters to patients in 11 states.
Steward Health Care has already established itself as a first-wave responder to the coronavirus. Earlier this month, its Dorchester, Mass.-based Carney Hospital became the nation's first dedicated facility to treat coronavirus. It converted all 159 beds to enhance "patient isolation protocols" and boosted equipment like ventilators.
MPW by the Numbers
Right now, this REIT is trading at a massive discount to its 52-week high of $24.29.
Shares currently trade at $16.78 and carry a 6.45% dividend. Simply put, this is an absolute bargain.
Compare that to the current 10-year Treasury bill at 0.66%, and it's easy to understand now is the time to own MPW. Last week, the U.S. government pledged its full economic might to support U.S. hospital systems as doctors and nurses battle this epidemic. The U.S. government has effectively guaranteed the cash flow and performance of hospitals around the country.
However, this REIT plunged as though its tenants weren't medical companies but instead washed up retail companies poised to go out of business. Medical Properties Trust rents its facilities to hospital networks across the globe. While tenants may see their margins squeezed due to the traffic coming in and out of the facilities (they will earn less from costly surgeries this year), these companies will still be able to pay their rents - which is all that matters when it comes to the ownership of this REIT.
Right now, investors are loading up on shares of Amazon.com.com Inc. (NASDAQ: AMZN), Costco Corp. (NASDAQ: COST), and Walmart Inc. (NYSE: WMT) as the stocks to own during the coronavirus crisis. However, these companies all face the same broader economic pressures of the retail industry, particularly when examining the stability of their supply chains.
Investors can instead focus on the combination of strong yield and price appreciation upside for this REIT. MPW has the capacity to not only raise its dividend again this year, but it could also seek to borrow cheap capital with interest rates low and pour more money into facilities in the future.
Remember, demand for acute care isn't going away in our lifetime, and the ability to snap up one of the top REITs in the medical sector at nearly 33% lower than where prices sat less than a month ago is a rare opportunity. Shares of MPW could easily hit $25 again following the end of this coronavirus crisis.
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