National HealthCare (NHC) short, mcap=$886m

NHC short pitch:
– Operator of skilled nursing facilities
– Multiple secular challenges with an imminent earnings cliff.
– Short thesis boils down to patient volume shift from SNFs to home healthcare.
– Home healthcare is materially cheaper than SNFs with similar patient outcomes.
– The major insurers have spent billions of dollars and are explicit about their desire to shift volumes towards home health at the expense of SNFs.
– Current dividend levels are unsustainable.
– The shareholder base is not paying attention to the rapidly deteriorating fundamentals of the business and long-term challenges.

NHC valuation:
– Sustainable dividend level is likely 50% lower than the current one.
– Dividends of ~$1.30/share and 5% yield imply a $35/share valuation.
– That’s equivalent to 7x EBITDA.

Exp. gain:

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