Adding to This REIT Holding on Weakness and Lifting Our Rating

Symbol	Transaction Type	# Shares Traded	Recent Price $	Shares Owned After Trade	% Portfolio
WELL	Buy	150	227.85	790	3.0

After you receive this alert, the Pro Portfolio will buy 150 shares of Welltower (WELL) at or near $229. Following the trade, we will own 790 WELL shares, accounting for roughly 3.0% of the Pro Portfolio’s assets.

We are using the modest selloff in WELL shares following the company’s Q3 2026 results to pick up more shares for the Portfolio. We are doing so because of the strong prospects for further operating leverage being realized inside Welltower and the accelerating tailwind for our aging of the population theme. We are not only adding more shares to the Portfolio, but also nudging our price target to $270 from $265, and lifting our rating to a One from Two.

Two housekeeping items: First, for now, we will maintain our current WELL checkpoint at $190 but intend to lift that figure as the shares move higher. Second, the trade we are making will increase the Portfolio’s share count exposure to WELL by 23%.

Also on Our Mind

As we make this trade, we are also keeping a close watch on the First Trust Nasdaq Cybersecurity ETF (CIBR). The shares rebounded considerably in the second half of October, and that makes our latest stock purchase at $89.15 back in late July look very smart. While the ETF is not overbought as yet, its position size in the Portfolio has moved passed the 4.4% level. Should it breach 4.5%, some prudent action will be required.

Let’s Get Into Welltower Things

In response to Welltower’s (WELL) quarterly earnings report, the shares have moved lower, which in our view reflects softer-than-expected net income attributable to common stockholders, which came in at 0.54 for the quarter, up from $0.41 in Q3 2025 but below the $0.62 market consensus. However, as we know, when it comes to assessing real estate investment trusts (REITs) like Welltower, the better metric than EPS is Funds from Operations (FFO) because it eliminates the distortion caused by accounting depreciation and non-recurring property sales.

Based on FFO per share, Welltower reported $1.67 per share, up almost 25% year over year and ahead of the $1.64 consensus. Management boosted its 2026 FFO per share guidance to $6.47 to $6.53 from $6.36 to $6.44, which points to a strong final quarter of the year. The market consensus for 2026 FFO per share was $6.41.

‘SHO’ the Way

Our thesis on Welltower, as you likely know, rests on the aging of the U.S. population and the rising demand for senior housing that comes with it, and the company’s third-quarter results show that thesis converting into earnings growth.

Total same-store net operating income rose 15.8%, led once again by the Seniors Housing Operating (SHO) business, which now accounts for roughly 70% of same-store NOI. SHO NOI rose 21%, its 16th consecutive quarter above 20%, as a 320-basis-point gain in occupancy and a 5.3% increase in revenue per occupied room (RevPOR) drove revenue growth of just over 9%. But costs barely budged. Expenses per occupied room rose only 80 basis points, thanks to operating leverage, softer wage growth and the company’s Welltower Business System technology platform. That combination lifted the SHO margin 310 basis points to 31.7%, with 66 cents of every incremental revenue dollar falling to the bottom line, a post-COVID high.

Growth Story Is Shifting

Looking ahead, the senior housing growth story is shifting from filling units to raising rates, and in our view that bodes well for better margins and FFO per share. Communities above 90% occupancy, nearly two-thirds of the portfolio, are posting RevPOR growth north of 6%, and management called this the strongest pricing environment it has seen in roughly 11 years. Because most existing-resident increases take effect early in the year, the acceleration in RevPOR as 2026 has progressed tells us street rates are moving higher. That matters for profits, since a dollar of rate growth carries almost no added cost. New supply isn’t likely to get in the way anytime soon either, as management said development yields fall short of what it can earn buying existing assets. Management also sees another year of favorable occupancy gains in 2027 if recent trends hold.

Management was quick to point out demographics alone won’t lift every owner. It expects premium properties and operators to command pricing power that mid-market product won’t. That view explains the company’s increasing focus on premium senior living, including $6 billion of dispositions this year, much of it the sale of its medical office portfolio. The recently announced Brookdale sale fits that pattern, as Welltower prefers to own senior housing through an equity structure and exits assets where it can’t.

Year to date, investment activity totals $21 billion across 196 transactions with a median size of $35.5 million, of which $13.3 billion had closed by the end of September. During the quarter, Welltower funded $4.1 billion of gross investment, with the bulk going to 43 newer SHO communities that are 66% occupied and were acquired at a 10%–15% discount to replacement cost. Odds are those properties become a meaningful growth contributor as they lease up and pricing improves.

Deal Pipeline

In terms of the deal pipeline, management sees higher borrowing costs producing more potential deal flow as industry senior housing debt maturities increase from roughly $8 billion this year to $10 billion–$12 billion annually in 2027 and 2028. The thinking is that a fair amount of owners will become sellers rather than refinance at higher rates, but management was also quick to point out that per-share growth over the next five years will hinge more on executing within its existing portfolio than on buying more. That implies bringing occupancy rates and pricing level up over time as well as instilling the company’s cost containment focus, which in our view should deliver further operating leverage. To us, the barometer to watch is RevPOR growth in its 90%-plus occupied communities, as that’s where the handoff from occupancy to pricing will show up first.

More Pro Portfolio:

(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade’s executed price here. Be sure to toggle the chart to sort by Purchase Date.)

At the time of publication, TheStreet Pro Portfolio was long CIBR and WELL