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HOTels are HOT...



June 14, 2010 – Comments (5) | RELATED TICKERS: HT , BEE.DL , SHO

Yes, Hotel industry is HOT. Hotel REITs / owners, hotel operators, REITs investing in and financing hotels,...all of them red HOT.

Now, I know that this is no news to some of you who noticed hotels going up for quite some time, but I also know that most of you still don't believe this rally in hotel stocks is sustainable. The correction that we are experiencing right now, a lot of you think is actually the start of the end for some of these stocks.

I, however, have a different opinion. I think hotel stocks were HOT, then corrected for a month or so, and now are coming back strong.

I'm also of the opinion that goes against the conventional wisdom: I think that (in this case), past returns (which I will share with you soon) are, in fact, the indicator of future results.  

I have to warn you, though, that this opinion of mine is not based on fundamental analysis (not even a little tiny bit), but purely on my "chart-eyeballing" and my observation of this industry's movement for the last few months. 

So here it goes. Here is the list of the 9 stocks from the hotel industry that I think will nicely outperform the market for the next 1-12-24 months: 

1. FCH, FelCor Lodging Trust Inc., Last Price $6.43, 12-Month Return 121%, currently 28.5% off 52W high

FelCor Lodging Trust Incorporated (FelCor) operates as a real estate investment trust (REIT). The Company is the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor Lodging Limited Partnership (FelCor LP), through which it holds ownership interests in 85 hotels with approximately 24,000 rooms at December 31, 2009. Of the 85 hotels in which it had an ownership interest at December 31, 2009, FelCor owned a 100% interest in 64 hotels, a 90% or greater interest in entities owning four hotels, an 81% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and a 50% interest in entities owning 15 hotels.


2. BEE, Strategic Hotels & Resorts, Inc., Last Price $4.65, 12-Month Return 183%, currently 33% off 52W high

Strategic Hotels & Resorts, Inc. (SHR) is a self-administered and self-managed real estate investment trust (REIT). It owns and asset manages upper upscale and luxury hotels that are subject to long-term management contracts. SHR owns its properties through its investment in Strategic Hotel Funding, L.L.C. (SH Funding), its operating partnership, and its subsidiaries. The Company is the managing member of SH Funding and held approximately 99% of its membership units as of February 24, 2010. As of February 24, 2010, SHR wholly owned or leased 14 hotels; held a 51% interest in affiliates that own two hotels where SHR asset manages such hotels, and held a 45% interest in and acted as asset manager for a joint venture that owns one hotel. Its existing hotels are operated under the upper upscale and luxury brands of Fairmont, Four Seasons, Hyatt, InterContinental, Loews, Marriott, Ritz-Carlton and Westin.


3. SHO, Sunstone Hotel Investors Inc., Last Price $11.45, 12-M Return 110%, 15% off 52W high

Sunstone Hotel Investors, Inc. is a real estate investment trust (REIT). The Company owns, directly or indirectly, 100% of the interests of Sunstone Hotel Partnership, LLC (the Operating Partnership), which is the entity that directly or indirectly owns its hotel properties. It also owns 100% of the interests of its taxable REIT subsidiary, Sunstone Hotel TRS Lessee, Inc., which leases all of its hotels from the Operating Partnership, and engages third parties to manage its hotels. The Company owns primarily upper upscale and upscale hotels in the United States. As of December 31, 2009, it owned 29 hotels. The 29 hotels are consisted of 10,966 rooms, located in 13 states and in Washington, District of Colombia. It also owns a 38% equity interest in a joint venture that owns one hotel, and it owns other non-hotel investments. Its majority of hotels are operated under brands, such as Marriott, Fairmont, Hilton and Hyatt. 


4. WYN, Wyndham Worldwide Corp., Last Price $23.82, 12-M Return 94.8%, 15% off 52W high

Wyndham Worldwide Corporation is a hospitality company, which offers individual consumers and business customers a range of hospitality products and services across various accommodation alternatives and price ranges through its portfolio of brands. The Company operates in three segments: Lodging, Vacation Exchange and Rentals and Vacation Ownership. Lodging franchises hotels in the upscale, midscale, economy and extended stay segments of the lodging industry and provides hotel management services for full-service hotels globally. Vacation Exchange and Rentals provides vacation exchange products and services to owners of intervals of vacation ownership interests (VOIs) and markets vacation rental properties primarily on behalf of independent owners. Vacation Ownership develops, markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs and provides property management services at resorts. 


5. LHO, LaSalle Hotel Properties, Last Price $23.76, 12-M Return 62.7%, 16% off 52 W high 

Lasalle Hotel Properties is a self-managed and self-administered real estate investment trust (REIT). As of December 31, 2009, the Company owned interests in 31 hotels with approximately 8,500 rooms/suites located in 11 states and the District of Columbia. The Company also owns a 95.0% joint venture interest in a property under development. The Company’s operations are conducted, through LaSalle Hotel Operating Partnership, L.P. (the Operating Partnership). The Company is the sole general partner of the Operating Partnership. On February 2, 2010, the Company’s joint venture arrangement with LaSalle Investment Management was mutually dissolved. On March 1, 2010, the Company completed the acquisition of the Sofitel Washington, DC Lafayette Square, a hotel with 237 guestrooms. As of December 31, 2009, its 31 hotels were leased by LaSalle Hotel Lessee, Inc., and were managed and operated by third parties.


6. DRH, DiamondRock Hospitality Co., Last Price $9.08, 12-M Return 34.4%, 23% off 52W high

DiamondRock Hospitality Company is a lodging-focused real estate company. It owns a portfolio of 20 premium hotels and resorts that contain approximately 9,600 guestrooms. The hotels are concentrated in key gateway cities and in destination resort locations and are all operated under a brand owned by the lodging brand companies, which include Marriott International, Inc. (Marriott), Starwood Hotels & Resorts Worldwide, Inc. (Starwood) or Hilton Worldwide (Hilton). The Company’s properties are concentrated in five gateway cities, New York City, Los Angeles, Chicago, Boston and Atlanta.


7. OEH, Orient Express Hotels Ltd, Last Price $8.83, 12-M Return -1.1%, 43% off 52W high

Orient-Express Hotels Ltd. (OEH) is a hotel and travel company. OEH owns or part-owns 50 properties (all of which it manages), including the two hotels in Sicily purchased in January 2010, consisting of 41 highly individual deluxe hotels, one stand-alone restaurant, six tourist trains and two river/canal cruise businesses. These are located in 24 countries worldwide. OEH has also develops for-sale residences adjoining some of its hotels. OEH’s worldwide portfolio of hotels consists of 3,595 individual guest rooms and multiple-room suites, each known as a key.


8. AHT, Ashford Hospitality Trust Inc., Last Price $7.76, 12-M Return 83.4%, 20% off 52W high

Ashford Hospitality Trust, Inc. is a self-advised real estate investment trust (REIT). The Company owns its lodging investments and conducts its business through Ashford Hospitality Limited Partnership, its operating partnership. Ashford OP General Partner LLC, a wholly owned subsidiary of the Company, serves as the sole general partner of the operating partnership. The Company operates in two business segments within the hotel lodging industry: direct hotel investments and hotel financing. As of December 31, 2009, it owned 96 hotel properties directly and six hotel properties through equity investments with joint venture partners, which represented 22,483 total rooms (22,141 net rooms) excluding those attributable to joint venture partners. The Company operates in two business segments: direct hotel investments and hotel financing.

9. HT, Hersha Hospitality Trust, Last Price $5.22, 12-M Return 67.2%, 13% off 52W high

Hersha Hospitality Trust (Hersha) is a self-advised real estate investment trust (REIT). The Company invests primarily in institutional grade hotels in business districts, primary suburban office markets and stable destination and secondary markets in the Northeastern United States, and select markets on the West Coast. As of December 31, 2009, its portfolio consisted of 57 wholly owned limited and full service properties and interests in 17 limited and full service properties owned through joint venture investments. Of the 17 limited and full service properties owned through its investment in joint ventures, two are consolidated. These 74 properties, with a total of 9,392 rooms, are located in Arizona, California, Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island and Virginia and operate under brands. In addition, some of its hotels operate as independent boutique hotels.


Disclaimer: By no means is this a recommendation to buy any of these stocks. This should be just a starting point for further DD. My wife does work for, but that doesn't make me a hotel industry expert. Good Luck All! 

5 Comments – Post Your Own

#1) On June 15, 2010 at 12:11 AM, dragonLZ (70.05) wrote:

Another Disclaimer:

In the past, I issued "HOT rating" for 3 other industries: Media, Regional Banks, and Retail.

All three of these were doing quite well until this correction started back in May. Even though all three are far from "former glory", they all are still ouperforming the market.

Media is doing the best: up 59.6% since the original blog was posted back in October of 2009. S&P 500 is up 5% during the same time frame.

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#2) On June 15, 2010 at 12:25 PM, SockMarket (34.40) wrote:

WYN is looking very tempting. Great post dragon. +1

I don't know if it means anything to you but recs don't mean much. It is nice when you get them but some of my best blogs have suffered through with 3-6 also (and some terrible ones have gotten 40+).

From what I can tell the tastes of people here are for macro and political posts, not individual stocks. That doesn't mean that you shouldn't write on them!

Simply put regardless of the rec count your blogs really help.

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#3) On June 15, 2010 at 4:35 PM, dragonLZ (70.05) wrote:

Thank you very much, Dan. I also follow your blog whenever I can (if it's not about politics :)

I would lie if I said I don't care about recs, but I'm used to not getting many. Especially on these kind of posts. Majority of my posts are not very reader-friendly.

I think hotels will do OK.

Btw., Volume Story stocks had another good day. Part 2 is coming soon... :)

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#4) On June 15, 2010 at 4:58 PM, Momentum22 (29.34) wrote:

Nice...I am waiting for the "China is HOT" post. I have become a fan at these levels and think once the volume ramps up a bit more we will see their "bear market" end quite quickly.

You still liking Sprint? Now that Cramer is pumping Sprint I might have to re-visit... : ) 

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#5) On June 15, 2010 at 9:31 PM, dragonLZ (70.05) wrote:

Thanks for commenting and the rec, Momentum.

I don't think there will be a "China is HOT" post by me. I think the one UltraLong had about Chinese stocks was a very good one.

And yes, I still think Sprint will do well (although I'm worried about Cramer just as you are :)

I think S just started going up.

I also want to you to know that even though my style might seem like I'm focused just on short term movements, majority of my calls are actually made with long term returns in mind.   


I see your 22 is doing quite well. I remember you being bullish when a lot of people were ultra bearish a few weeks ago. I admire that and wish you best of luck.

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