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Why Estia Health, Japara, and Regis shares stormed higher on Monday

One area of the share market that has started the week with a bang is the aged care industry.

In morning trade strong gains are being made by a number of aged care providers despite the ongoing Royal Commission in Adelaide.

Here’s the state of play at the time of writing:

The Estia Health Ltd (ASX: EHE) share price is up over 7.5% to $2.51.

The Japara Healthcare Ltd (ASX: JHC) share price has jumped 9% to $1.36.

The Regis Healthcare Ltd (ASX: REG) share price has risen 3.5% to $3.13.

Why are the aged care providers charging higher?

Although the Aged Care Royal Commission has taken its first evidence today, investors have overlooked this and been buying aged care shares due to a positive announcement by the Federal Government over the weekend.

According to the ABC, the Federal Government will provide an additional $662 million in funding for aged care and senior Australians.

Approximately $280 million is to be committed for 10,000 additional home care packages, with $320 million allocated to aged care providers to help increase support.

Aged Care Minister Ken Wyatt explained that the “significant investment” has been made in an effort to speed up access to home care and reduce the number of people on waitlists.

He said: “Home care packages and an increase to residential care means we’re giving people options to the services they access.”

Should you invest?

I think this is a positive development for the industry and should provide these aged care providers with a nice boost in the coming year or two.

And while I think they could prove to be great long term investments due to Australia’a ageing population and the expected increase in demand for their services, I intend to hold off an investment until the Royal Commission concludes.

Until then, I would sooner buy one of these top dividend shares which have been rated as buys.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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