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Shares of four hotel real estate investment trusts were mixed Monday after a UBS analyst upgraded their stock ratings on valuation.
The stock of Bermuda-based Orient-Express Hotels Ltd. gained 70 cents, or 1.5 percent, to $46.70 in midday trading, while the stock of Harrisburg, Pa.-based Hersha Hospitality Trust rose 27 cents, or 2.7 percent, to $10.37. Strategic Hotels & Resorts Inc. in Chicago rose 12 cents to $20.39.
Bethesda, Md.-based DiamondRock Hospitality Co.'s shares lost 20 cents, or 1.2 percent, to $16.30.
On Monday, UBS analyst William B. Truelove raised his ratings on the four hotel REITs to "Buy 2" from "Neutral 2," saying each stock is undervalued for a host of reasons.
Shares of Orient-Express have been oversold, dropping 11 percent since the REIT named a new chief executive on July 26, the analyst noted. Truelove remains bullish on the company's exposure to the European market, where the lodging recovery cycle is in earlier stages than the U.S., and to the luxury segment, which is more resistant to economic pressures.
As for DiamondRock, Truelove said several hotel renovations and a strong Chicago hotel market from increased conventions stand to boost the REIT's portfolio. The company also has a "first look" agreement with Marriott International Inc. on potential acquisitions, which strengthens its competitive advantage.
The analyst regards Strategic Hotels as having "the best real estate portfolio of our covered U.S. lodging REITs" because of its high-quality properties in markets with restrictions to new supply.
Similarly, more than 30 percent of Hersha's portfolio consists of properties in the New York metropolitan area, another high barrier-to-entry market that Truelove expects to be one of the best performing this year and next. The REIT also has obtained off-market opportunities in New York and San Francisco, another supply-constrained market, through its relationships with hotel developers.
Truelove didn't change his earnings estimates or price targets for any of the lodging REITs.
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