RehabCare Group, Inc. (NYSE: RHB): Stock of the Day

by David Fessler, Advisory Panelist

Invest like the Rockefellers

Football season is still months away. But it’s a sure bet that the best players are already working out, getting in shape and mentally preparing for the upcoming season.

The same holds true for investing. Many investors who got beat up in the last “game” are still sitting on the sidelines, nursing their wounds – afraid to play.

But it’s clear – as evidenced in the markets recent 30% run-up that the best players are already back in the game. So what are they investing in?

Larger-cap healthcare stocks are often overlooked in any rally, as improving economic conditions – or the perception of them – often favor smaller cap stocks.

How do you pick a good healthcare company to invest in?

There’s no one better at investing in the healthcare sector than Venrock Associates, originally established as the venture investment firm of the Rockefeller family.

Venrock has been in the venture funding business for over 8 decades, investing over $2.3 billion in 430 companies with household names like Apple, Intel, Millennium Pharmaceuticals, and countless others.

The company pioneered healthcare venture funding way back in the 1960’s, and its historical portfolio contains five of the largest biotech firms ever created.

The average retail investor can’t invest with Venrock, but you can invest like them.

And a small-cap healthcare company you might want to consider is RehabCare Group, Inc. (NYSE: RHB). RehabCare is a provider of rehabilitation program management services in more than 1,200 hospitals nursing homes, outpatient care, and other long-term care facilities.

The company also owns and operates six rehabilitation hospitals and five long-term acute care hospitals.

Since the beginning of March, shares are up nearly 64%. And for good reason: RehabCare’s services are increasingly in demand by healthcare providers.

You see, rehabilitation is one of those things that few patients want to go through. It’s often uncomfortable and sometimes accompanied by a fair amount of pain. But the end result is quicker patient recovery, and less time spent in more expensive care facilities.

RehabCare recently announced quarterly results for the period ending March 31st, and results were outstanding. The company nearly doubled profits from the same quarter of the previous year, with revenue growth across all divisions.

Company President and CEO, John H. Short, Ph.D, commented: “We were very pleased by a strong quarter of consolidated revenue and earnings growth.”

Short indicated the company was reaffirming its fiscal 2009 guidance on all its divisions for the remainder of the year, on continued expectations of strong revenue and earnings in future quarters.

In light of the current financial environment, the company is taking positive steps to strengthen its balance sheet. Outstanding debt has been cut by two-thirds in the last year, and RehabCare continues to build a strong cash position.

Bottom-line, is that RehabCare has plenty of room to run for the rest of 2009, and likely beyond. Since this is a small cap stock, investors shouldn’t chase it. Look for a moderate It’s time to get off the bench and get back in the game…

Good Investing,

Dave Fessler

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