HCP, Inc. is a Way to Play Real Estate and Healthcare


My bearish stance from last week still stands, despite the fact that the S&P 500 closed higher last Friday and opened higher this morning. However, I want to avoid recommending too many bearish trades while we wait for the market to recover.

That’s why I’m recommending a bullish trade on HCP, Inc. (NYSE:HCP), a real estate investment trust (REIT) that serves the healthcare industry.

This is a Good Environment for Real Estate

A few weeks ago, I recommended a bearish trade on Apple Hospitality REIT, Inc. (NYSE:APLE), an REIT that was struggling. APLE’s problems seemed technical in nature, and HCP seems to have a strong fundamental and technical picture.

Interest rates are low, which makes REITs more appealing. Generally, these stocks pay out high dividends, and as my regular readers know, high dividends are appealing when interest rates drop.

And HCP is tied to another industry I happen to favor: healthcare. If we look at the daily chart of the Health Care Select Sector SPDR Fund (NYSEARCA:XLV) we can see that it pulled back with the rest of the market, but it has also opened higher the past two sessions.

Daily Chart of Health Care Select Sector SPDR Fund (XLV) — Chart Source: TradingView

In the past, I’ve said that XLV is consolidating under its all-time highs, and it will continue its long-term uptrend eventually. That may not be the case while the market is struggling, however, we can see in the chart above that healthcare stocks aren’t suffering more than the rest of the market.

Since HCP is tied to the success of healthcare stocks, their relative stability is a sign that HCP will stay strong enough to benefit from lower interest rates.

Above Both Moving Averages

Looking at the chart for HCP, we can see that the stock has been rising steadily since early 2019, and now it is above both its 50- and 200-day moving averages.

Daily Chart of HCP, Inc. (HCP) — Chart Source: TradingView

HCP is pushing higher today, setting a new 52-week high. The rest of the market may be less certain, but a bullish call option on HCP looks like a good play right now.

Buy to open the HCP, Inc. (HCP) Oct. 18th $35 Calls (HCP191018C00035000) at $1.10 or lower.

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