Below is a note from Hedgeye CEO Keith McCullough on why we're adding Host Hotels (HST) to Investing Ideas today:
Our Lodging (and REITS) team is amped up bullish on Host Hotels (HST), suggesting that last week's selloff is a big buying opportunity. Todd Jordan is the lead analyst on this stock and in his post quarter comments to Institutional Research Subscribers, this is what he wrote:
"Investors are accustomed to companies reporting adjusted earnings, which usually means earnings before bad stuff. In the bizzaro world, a company provides guidance that excludes good stuff. Is the HST management team operating in bizzaro world? If you were on the phone with your trader following the wet blanket conference call prepared remarks, you missed a generally positive Q&A session. Management basically admitted that their guidance did not factor in any positives. We’re all for conservatism, especially after the consistent guide downs from the hotel REITs last year, but this seems more than just finding the religion of conservatism.
Maybe management overdid it; maybe they want to buy stock now that they completed the debt deal. We’re not exactly sure why management wet blanketed what was a great quarter. However, we see clear signs of RevPAR reacceleration, mostly on the very profitable business transient side. Backing up our acceleration thesis are 4 sets of data points: April STR data, our RevPAR trend model, our forward ADR tracker (through the end of May), and now complete, our Macro RevPAR Leading Indicator Model. All of these suggest calendar adjusted RevPAR acceleration in Q2. If we’re right, HST should post another big beat in Q2 and will be forced to acknowledge improving trends in their commentary and guidance. "
