Park Hotels & Resorts Inc. - A Buy?
From just a quick glance at their balance sheet, you have $9.7B of real assets, $1.3B of cash, and about $5B of debt. Even going with the 5.6B tangible book value given by their 10-Q, the stock is trading at 30.7% of book value.
Okay, so you might say that massive losses will destroy their equity position, but assuming the debt stays constant, you would need to mark down their hotels at 50-55% of current book value for their tangible book value to line up with the current market cap.
Does anyone honestly think the market is getting a little ahead of itself? I mean, management says that it would take 17 months to run out of cash if 100% of their hotels remain closed (currently that's not the case), so unless creditors try to pull some crazy shit equity holders should be ok.
Even Bill Ackman initiated a position, so it seems that there might be some major value there (of course the stock dropped as low as $4, idk his cost basis). Am I missing something?
There is certainly value in this company. Its basically Hilton- a hotel chain that will not die in the foreseeable future.
Beyond that, it is clearly a value play, a REIT of this quality selling for a third of its book value is a great deal, and you should invest if you have the capital to do so. These are the types of deals that people like Benjamin Graham write about with absolute glee. The market overreacted and is punishing REITs and bank stocks. Getting in now, with decent diversification (maybe 5 or 10 additional such "value plays" is a wise move)- however if you feel very comfortable with a particular company, no need to over-diversify and erode your superior returns- but at the risk of suggesting you speculate, diversification helps ease the mind- imo.
As advice, I've been suggesting people buy companies that are historically cheap and see no real danger from this pandemic- for example banks and REITs. Both may see some performance issues in the next 6-12 months, but as long-term plays they are extremely undervalued. Furthermore, getting in at 1/3 book value, means that the company would need to erode 66% of its equity to begin to lose money- highly unlikely, and almost impossible if you ask me for such a high quality issue.
Stock is being discussed here: https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pk-pa…
Cool thanks, hurts to see it up 20% already today before I've established a position, but I will do some more research.
I started building a position in Summit Hotel Properties about a month ago and it's been up quite a bit since then (not because I'm smart, just timed it right). I like their portfolio because it's select-service with a strong leisure component, and they have a ton of cash on hand with no debt maturities for awhile. Stocks about double the low's, but still about half the prior high.
Sunstone. That is all I will say.
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