Fund's AHR Bet Clings to Past Growth Amid Lofty Valuation and Mounting Risks

What happened

Neo Ivy Capital Management bought 136,925 shares of American Healthcare REIT (AHR) for $6.44 million, as highlighted in a Motley Fool article citing the company's 16.4% NOI growth and 93% share price surge. This purchase aligns with AHR's reported Q3 2025 same-store NOI growth, driven by catch-up from COVID-era weakness and consolidation of its Trilogy platform. However, the DeepValue master report rates AHR as a POTENTIAL SELL, noting that this growth is peaking as occupancy nears 90%+ and sector competition for acquisitions intensifies. The stock trades at a rich 32x EV/EBITDA multiple, embedding expectations for sustained high growth that evidence suggests will normalize toward high-single-digits. Moreover, AHR's heavy reliance on a $1 billion ATM program for funding risks significant dilution without clear accretion, making the fund's optimism appear misplaced against a backdrop of thinning margins and valuation sensitivity.

Implication

The fund's stake in AHR reflects confidence in recent operational momentum, but it overlooks critical downside risks highlighted in the DeepValue report, such as potential NOI growth deceleration and dilutive equity issuance. AHR's current price assumes mid-teens NOI and over 10% NFFO per-share growth, which is unsustainable as occupancy gains slow and labor costs pressure margins in its operating-intensive portfolios. Investors face asymmetric risk: any guidance miss or margin compression could trigger a de-rating toward the bear case value of $38, offering limited upside versus the base case $50. The reliance on ongoing ATM issuance for growth means per-share metrics are vulnerable if capital markets become less receptive or acquisition yields compress further. Consequently, this news reinforces the need for caution, suggesting trimming or avoiding new positions until AHR's 2026 guidance confirms another leg of accretive growth or the price retreats toward the $40 attractive entry level.

Thesis delta

The fund's investment does not materially shift the thesis that AHR is overvalued with high downside risk from growth normalization and dilution. However, it underscores persistent market optimism that could temporarily support the stock, but the core concerns around valuation, external funding dependence, and margin pressures remain unchanged. Investors should monitor upcoming 2026 guidance for signs of sustained high growth or early warning indicators of deceleration.