Hospitality Pptys Tr (NYSE:HPT)

CAPS Rating: 4 out of 5

The Company is a real estate investment trust which invests in real estate used in hospitality industries.


Player Avatar JakilaTheHun (99.93) Submitted: 6/22/2010 2:25:47 PM : Outperform Start Price: $6.77 HPT Score: +203.88

I added this pick in Apr '09 under $10. HPT primarily operates truck stops/travel centers and hotels/lodging. I am long-term bearish on the entire trucking industry, but under $10, I felt like this was a no-brainer in spite of that. At $22, I still believe this REIT is undervalued, but I believe the macroeconomic factors are even further aligned against it. I'm mixed on the future outlook for hotels and my views have turned slightly more bearish due to a few macroeconomic changes.

Cash flows are very high for HPT. They report FFOs around $3 per share on an annual basis. The value of their underlying properties is difficult to gauge (mainly because I value travel centers radically different than I would most commercial properties), but with that level of FFOs/cash flows, the stock should probably still be selling over $22. I'd estimate the underlying value of their equity interest in their properties to be $20 per share at a minimum and potentially upwards of $30.

Dividend yield is still fantastic at 8.1%! That would also suggest that the price of this stock should move upwards a bit. A 6% yield might be more reasonable. That would be achieved at $30.

Valuation is tricky due to my long-term macroeconomic fears. I'd say it's worth at least $30 and I'll go ahead and peg it at $35 based on my own quick and dirty analysis. Not a ton of research was put into this, so take that for what you will.

I'll let this pick run till at least $30 --- or alternatively, I'll collect the dividends for a few more years if the price stays below that.

Featured Broker Partners