There are two opposing views on aged-cared stocks. The bulls say the fallout from the Royal Commission into Aged Care Quality and Safety is already priced into stocks. Share prices have fallen too far, creating opportunity for contrarians who see value.
In contrast, the bears say aged-care stocks have further to fall. Optimists are underestimating the Royal Commission’s likely impact on the sector, just as they did with the Financial Services Royal Commission and its effect on bank share prices.
I favour the bears on aged care, although I’m not as pessimistic as some. After tumbling from their 52-week highs, value is returning to Estia Health (EHE), Japara Healthcare (JHC), Regis Healthcare (REG) and Aveo Group AOG). But the margin of safety is not yet sufficient to account for risks.