Key Takeaways:
- The senior living sector is attractive to investors due to Canada’s aging population and shortage of long-term care beds.
- Extendicare Inc.’s stock has doubled this year, outperforming its peers and the S&P/TSX Composite Index, due to its transition to home health care.
- Chartwell Retirement Residences and Sienna Senior Living are also performing well, with shares up over 20% this year.
- Savaria Corp. is a play on the growing stay-at-home senior cohort, with products that help seniors with health and mobility issues.
- Investors should be aware of short-term risks, such as tariffs, recession, and regulatory challenges, when investing in senior living stocks.
Introduction to Senior Living Stocks
The senior living sector is becoming increasingly attractive to investors due to Canada’s aging population and shortage of long-term care beds. Many seniors are adamant about aging at home, which has led to a growing demand for home health care services. This trend has resulted in some investors eyeing senior living stocks, including Extendicare Inc., Chartwell Retirement Residences, Sienna Senior Living, and Savaria Corp. These companies offer a range of services, from long-term care and retirement residences to home health care and accessibility equipment.
Extendicare Inc.: A Leader in Home Health Care
Extendicare Inc.’s stock has doubled this year, outperforming its peers and the S&P/TSX Composite Index. This significant increase can be attributed to the company’s transition to home health care, which is seen as a lower-capital business compared to long-term care facilities. Extendicare’s acquisition of CBI Home Health, a national home health care platform, has also contributed to its success. BMO Capital Markets analyst Tom Callaghan has upgraded his recommendation for the stock to "outperform" (buy) from "market perform" (hold), citing the company’s favorable business mix and increasing home health exposure.
Chartwell Retirement Residences: A Shift Away from Long-Term Care
Chartwell Retirement Residences is another stock that has performed well this year, with shares up over 20%. The company has largely transitioned away from long-term care to focus more on private-pay retirement residences. This shift has been driven by the challenges of government regulation and occupancy rate requirements in the long-term care industry. Chartwell’s occupancy rates are currently around 95%, up from 77% during the pandemic, driven by high demand from aging demographics and a slowdown in the construction of seniors’ residences.
Sienna Senior Living: A Mix of Long-Term Care and Retirement Residences
Sienna Senior Living owns and operates long-term care homes and retirement residences in several provinces, alongside its seniors’ housing operations management business. The company has progressed in shifting its revenue and net operating income mix from government-funded to private-pay, but remains slightly tilted towards the former. CIBC Capital Markets analyst Tal Woolley has updated the company’s stock to "outperformer" (buy) from "sector performer" (hold), citing the company’s potential for growth through acquisitions and its prudent approach to development.
Savaria Corp.: A Play on the Stay-at-Home Senior Cohort
Savaria Corp. is a company that offers accessibility equipment, such as stairlifts, wheelchair ramps, and home elevators, to help seniors with health and mobility issues. The company’s products are designed to enable seniors to stay in their homes for as long as possible, which is a growing trend. Newhaven Asset Management Inc.’s portfolio manager, Rebecca Teltscher, owns Savaria stock for its focus on the stay-at-home senior cohort, citing the risk of a recession or prolonged housing downturn, which could curb occupancy rates in long-term care facilities.
Challenges and Risks in the Senior Living Sector
While the senior living sector appears attractive in the long term, there are short-term risks that investors should be aware of. These include tariffs, recession, and regulatory challenges. The threat of tariffs has weighed down Savaria’s shares this year, despite the company’s products being exempt from tariffs. Additionally, the long-term care sector is highly regulated, which can become burdensome for companies. Investors should carefully consider these risks when investing in senior living stocks and choose companies that are well-positioned to navigate these challenges.
Conclusion
In conclusion, the senior living sector is an attractive investment opportunity due to Canada’s aging population and shortage of long-term care beds. Extendicare Inc., Chartwell Retirement Residences, Sienna Senior Living, and Savaria Corp. are all companies that offer a range of services to meet the needs of seniors. While there are short-term risks to consider, investors who are willing to take a long-term view may find opportunities for growth in this sector. By carefully evaluating the strengths and weaknesses of each company and considering the trends and challenges in the sector, investors can make informed decisions and potentially reap rewards in the senior living sector.
