This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Starwood Shines as Next Hot Hotel Play

Editor's note: "Bricks and Mortar" is a series of columns written by real estate reporter Nicholas Yulico meant to help readers generate real estate and gaming-related stock ideas.

With Hilton Hotels (HLT - Get Report) being sold at a hefty premium to private-equity buyers, the best bet left in lodging is Starwood Hotels (HOT - Get Report).

So today, I'm adding Starwood to the Bricks and Mortar mock portfolio as a company worth buying.

Starwood owns some of the best brands in the hotel industry -- including Sheraton, Westin and W Hotels -- that will provide a strong international growth platform for years to come. Meanwhile, the spinoff of many of its hotel assets last year has left the company with a business model weighted toward a high-margin management and franchise fee business, along with time-share sales.

In addition, Starwood's operations produce a ton of free cash flow, while the balance sheet has low debt levels. That combination makes the hotelier an attractive buyout candidate for private-equity firms, which continues to eye hotel assets because they're cheap relative to other real estate sectors.

My last hotel pick, Hilton, agreed to be acquired by Blackstone Group (BX) for $47.50 a share, a 37% premium to where the stock was trading when I added it to the Bricks & Mortar portfolio.

Starwood shares have climbed since the Hilton deal, so it doesn't offer as much upside. But I still expect the stock to rise more than 15% from the current $72 level -- and as much as 25% if a buyout company approaches.

Starwood's stock should perform well so long as lodging fundamentals remain strong over the next few years, which admittedly isn't a risk-free proposition. Rival Marriott (MAR - Get Report) on Thursday tempered its revenue projections for 2007, signaling that the hot growth for the group may be cooling.

"Growth is slowing (in lodging), but it's still stronger than other sectors," says Dean Frankel, portfolio manager with Urdang Investment, which owns Starwood and other hotel stocks. Frankel says lodging is in a midcycle pause right now, but he expects growth to pick up next year, once the economy improves.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
HOT $81.35 -0.26%
HLT $22.03 -0.04%
MAR $69.27 0.06%
AAPL $93.21 -0.44%
FB $117.80 -0.22%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs