Most Wall Street analysts and market experts spend the bulk of their time talking about large-cap stocks, and for good reason -- more investors hold them in their portfolios, so it's worth taking the time to examine them. However, some of the best investment opportunities could be those that Wall Street isn't paying attention to.
Medical offices could be the best way to invest in healthcare
Healthcare real estate is a compelling growth opportunity. The existing healthcare real estate market is estimated to be $1.1 trillion in size, and more than three-fourths of properties aren't owned by real estate investment trusts, or REITs. This is especially true with medical offices, where a disproportionate number of properties are owned by the health systems and physicians who occupy them. So, there should be no shortage of acquisition opportunities.
Physicians Realty Trust is a REIT that focuses exclusively on medical offices, aiming to leverage their relationships with health systems and physicians to find attractive investment opportunities.
While medical offices haven't been completely unscathed by the COVID-19 pandemic, they are performing better than most other types of healthcare real estate. Specifically, most of the larger healthcare REITs own substantial portfolios of senior housing properties, which have seen move-in rates essentially fall to zero since the outbreak began. On the other hand, Physicians Realty Trust successfully collected 94% of its April rent and most of its portfolio is not only occupied, but actively being used. What's more, Physicians Realty Trust has $690 million in liquidity available under its credit facility and another $30 million in cash, and no debt maturities until 2023.
This excellent healthcare REIT currently yields about 6% and is trading for roughly 25% less than its pre-COVID level, even as its business is in rather strong shape.
This baby Berkshire could be a great stock for patient investors
It's no wonder why Boston Omaha is often compared to an early-stage Berkshire Hathaway (BRK.A -0.28%) (BRK.B -0.36%). For one thing, its business model is to acquire businesses (including insurance) which then generate capital to allow the company to acquire more businesses and common stocks. And as if the business model wasn't enough of a similarity, Boston Omaha's co-CEO, Alex Rozek, is actually Berkshire Hathaway CEO Warren Buffett's great-nephew.
Boston Omaha is a relatively new venture, founded in 2015, and its primary businesses so far are billboard advertising through its Link Media subsidiary and insurance through its General Indemnity Group (GIG) business. And the company recently entered its third business line with acquisition of internet service provider AireBeam Communications.
The company had $91 million of cash and equivalents at the beginning of 2020 -- a pretty large amount considering the company's market cap is just under $450 million. So, although the COVID-19 pandemic will certainly have some negative effects on the operating business, the company is in a strong position to put its capital to work in other investments at favorable prices.
And it appears to be doing just that. In the co-CEOs' recent annual letter to shareholders, they revealed that over $20 million had already been spent this year on publicly traded securities. And in March, the company authorized a $20 million share repurchase program, allowing the company to buy back its own shares at a relative discount during the pandemic.
While I'm not saying Boston Omaha will achieve the same 20%-plus annualized returns that Berkshire has for the past 55 years, the business model is solid and so far the execution has been impressive.
Don't expect a smooth upward climb
As a final thought, the stock market is likely to remain turbulent for the foreseeable future, and that's especially true for smaller and under-the-radar stocks like these. While I believe the risk/reward profiles of these stocks certainly makes sense from a long-term perspective, it's important that investors are prepared for the ups and downs that are likely to occur for as long as the coronavirus situation lasts.