Thursday, 3 January 2008

Buying some Starwood Hotels

Buying ~$21,000 worth of Starwood Hotels at $41.07

2 Year Chart of Starwood

Whilst I'm sure in a global slowdown hotel stocks can take a beating, I think that for now the big hotel chains have significant earnings power, particularly whilst we have generally rising prices across the globe. I do a fair amount of travelling, and the major hotels always seem very busy/full, from London to New York to Asia to South America. I would have thought that pricing in the US may have taken a hit by now, but just have a flick around to see what pricing is like...good luck finding anything for under $400 a night in NY.

I'd also recommend a quick flick through Google news for Starwood, it's the first time I'd done this, and as I'd thought from other things I read previously, they seem to be expanding across the emerging markets. Some headlines:

- "Starwood Hotels & Resorts Worldwide Inc, in co-operation with TCC Capital Land, will open a new hotel in Chiang Mai (Thailand)in the second quarter of 2008..."
- "Indian real estate company Parsvnath reported near pacts with Marriott, Starwood"
- "Starwood Hotels and Resorts will debut its aloft brand in the Middle East"
- "The US-based hospitality chain Starwood Hotels and Resorts Worldwide will open more hotels — under the Westin and Aloft brands — in India"

To me, this all sounds like a company growing strongly, and so buying today at the same price the stock was at in early 2004 looks positively a bargain. I haven't done too much research into their finances, so when I get a chance I'll look into their debt levels and funding profile. Yahoo has their total debt at $3.16bn. Also, Yahoo has their P/E at ~15 and the forward P/E at about 16, although I've read some analyst articles including this one by Zacks
which states "Starwood...which currently trades at 8.9x our 2008 EBITDA estimate", so not entirely sure what to believe!

Anyway...f*ck it, it looks cheap. I may keep an eye on buying some other hotel operators also. As I mentioned above, although I'm sure during a global slowdown, hotel earnings could suffer, I think 1) they have significant earnings and growth potential at the moment, plus 2) stocks like these will hopefully act as some sort of hedge to a generally bearish book that I plan to set up.


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