Medical Properties Trust
I often am asked to disclose my single-favorite stock pick. At such times, I always try to remind investors that the best approach is not to hunt for the single-best stock, but to assemble a portfolio of stocks with the very best fundamentals. I am big on diversification and like to have stocks in my portfolio that zig when others zag to help smooth out market gyrations.
So, when I was asked this week to select my favorite small-cap stocks, I was tempted to reply that I like all my stocks equally. However, as well all know, like Mr. Orwell’s famous pigs, some stocks are more equal than others.
My favorite small-cap pick right now is a real estate investment trust. Medical Properties Trust (MPW) is a REIT that acquires, develops and invests in healthcare facilities; leases healthcare facilities out to various healthcare operators and providers; and provides mortgages, working capital and other term loans. Its holdings include general and long-term acute-care hospitals and inpatient rehabilitation hospitals, as well as medical office buildings and wellness centers, and operates a pair of non-owned general acute-care facilities.
As a REIT, the company must distribute at least 90% of its taxable income to its shareholders — for now, that comes out to a 5.1% annual dividend yield.
In the first quarter, Medical Properties announced that its revenues rose 41.4% to $58.4 million, compared to $41.3 million in the same quarter a year ago. During the same period, the company’s earnings rose 125% to $26.2 million, or 18 cents per share, compared to $10.6 million, or 8 cents per share. Medical Properties has also been benefiting from strong insider buying.
The stock was upgraded by Portfolio Grader in November to an “A” and remains a “strong buy.”