Get Rid of This REIT Before November

While most of the stock market has suffered in October, the shares of real estate investment trust (REIT) Ventas (VTR) are set to finish with a gain of over 7%. The security has pared most of its September losses, and is now within striking distance of its year-to-date highs in the $60 region. However, if recent history is any indicator, VTR stock could be set to cool off soon.

Specifically, Ventas has been among the worst S&P 500 stocks to own in November, looking back 10 years. The shares have averaged a loss of 5.61% — the third-steepest of all stocks — and has ended the month lower more than half the time, per data from Schaeffer’s Senior Quantitative Analyst Rocky White.

VTR could run into a familiar wall in the aforementioned $59-$60 area, which has capped rally attempts in 2018. This region is also home to the equity’s year-to-date breakeven.

Should VTR once again struggle next month, a shift in sentiment among options traders could exacerbate selling pressure. While absolute volume tends to run light on VTR options, the stock’s Schaeffer’s put/call open interest ratio (SOIR) of 0.45 indicates that call open interest more than doubles put open interest among options slated to expire in the next three months. This reading registers in just the 6th percentile of its annual range, implying that near-term traders have rarely been this call-heavy in the past year.

Further, the top strikes among all options series are the November 57.50 and 60 calls. This abundance of bullish bets, particularly at that 60 strike, could translate into an added layer of options-related resistance in the short term.

1 COMMENT

  1. Under its triple-net leased properties segment, VTR invests in and owns seniors housing and healthcare properties throughout the United States and the United Kingdom and leases those properties to healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses.
    Its cash flows and profit margins have increased over time. But the author is also correct in his articile. In my view, the current 5.56% dividend is sustainable. Its assets are solid. I would not sell this REIT but would HOLD it into the future if my goal was sustained checks each year for income. In the past ten years, share price has doubled. So it is not a barn burner but not a loser either.
    My bottom line is this: It depends on the investor’s strategic objective. It is just like a tug boat in the harbor, not fast just a steady performer.