Home Health Stocks Rose Prior to Market Volatility
Home health stocks rose across the board in January, although companies in the sector are now looking to navigate volatility in the markets.
In the largest month-to-month change, Louisville, Kentucky-based Almost Family (Nasdaq: AFAM) saw its stock price rise 4.07%. Lafayette, Louisiana-based LHC Group (Nasdaq: LHCG) experienced gains of 3.84%, with Baton Rouge, Louisiana-based Amedisys (Nasdaq: AMED) rising slightly at 0.32 percent.
The three stocks make up the Home Health Index (HHI), which keeps track of the largest publicly traded companies within the home health industry. The index, updated each month by health care merger and advisory firm Stoneridge Partners, also looks at the sector’s performance compared to the rest of the stock market.
Illinois-based Addus HomeCare (Nasdaq: ADUS) also saw gains for the month, with its stock price rising 5.17% during the month. The company is not tracked by the index because so little of its revenue comes from Medicare.
Compared to December 2017, the HHI rose 2.82%, which was below the S&P 500’s 5.67% growth.
That’s the good news, as the picture changed in late January.
During the last week of the month and into early February, markets crashed. As recently as Feb. 6, the Dow Jones Industrial Average experienced the largest point drop in history at 1,200 points. Similarly, the S&P 500 experienced significant drops. Expected increases in interest rates, worries about inflation, and recent changes in leadership at the Federal Reserve are just a few factors likely causing these sell-offs.
In the days since, markets have rebounded, however. In the longer term, the recent tax reform package that slashed corporate rates should be to the benefit of the publicly traded home health players.
“As the new tax bill expectations set in, we saw index companies gain. Even with the late-month market volatility, stocks were in line with expectations, and we’ll continue to monitor how tax reform will affect future stock prices,” said Stoneridge President Rich Tinsley, in the HHI update.
Also noteworthy was the announcement that the planned merger of Almost Family and LHC Group ran into a hurdle, as LHC Group refiled some paperwork with the Securities and Exchange Commission (SEC). This move restarts the regulatory approval process and their merger, valued at $2.4 billion, with a combined revenue of $1.8 billion, is now anticipated to close sometime in the summer.
Written by Erik Prado