Why The Ensign Group Inc. Got Crushered Today

Ensign may appear to have entered some subspace instability, but shareholders' money has merely been transported to a potentially more lucrative place.

Jun 3, 2014 at 1:03PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of The Ensign Group (NASDAQ:ENSG), a provider of skilled nursing and rehabilitative service in states west of the Rocky Mountains, look as if they've ejected their warp core and were placed on red alert with shares down as much as 45% at one point. The good news for shareholders is that all is not what it appears and their money has safely been transported to a spun-off holding in a not-so-distant quadrant.

So what: According to The Ensign Group's early morning press release, its spin-off of CareTrust REIT (NASDAQ:CTRE) was successfully completed this morning, with Ensign shareholders receiving one share of CareTrust REIT for each share of Ensign that they owned. CareTrust is now free to focus its efforts on being a pure-play health-care real estate business while The Ensign Group can now focus its efforts on expanding its skilled nursing network – which it in fact did this morning with the purchase of four new facilities.

Now what: You might say Ensign Group has just entered the neutral zone. You'd think Q was playing tricks on investors with just a forward P/E of nine, but a challenging array of declining Medicare reimbursements at the heart of the Obamacare rollout are going to make Ensign's growth challenging unless it's able to rein in its spending and grow by acquisition as it announced this morning. Ensign's ability to engage its impulse engines will also depend on the data set of its patients. If the number of privately insured patients rises due to the implementation of Obamacare, it could actually be more beneficial for Ensign over the long run. For now I'd suggest the best course of action is to wait for a reasonable pullback before going to warp nine on Ensign.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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