Overnight Trade of the Day: LaSalle Hotel Properties (LHO)
Analysis: I have been taking some dips into the REIT market over the past couple weeks, and it has turned out pretty well for us. The market has been turning out results better than most have been expecting. One sector that has been especially surprising is the hotel REIT sector. These companies across the board are beating estimates with some turning in some extremely strong quarters. Overall, the Q4 of 2009 was not an exceptional quarter for these companies quarter-over-quarter, but they are pulling in some exceptional EPS estimates. Many of the companies are raking in revenues well above expectations, which is always a great sign. In the past month, four out of the five major REITs in the hotel sector have posted surprise beats.
Well, that brings us to our REIT for today - LaSalle Hotel Properties (LHO). The company is in a nice position for a pop. It has been set up by a sell off moving into earnings, and if earnings are better than expected, it will have a great bounce upwards. Over the past month, the stock has lost almost 15% in value, and it has lost around 5% in the past week or so. This type of downward movement has been up and down, but the downward trend has occurred. Not often what we want for a stock…a longterm downward momentum. Yet, for our Overnight Trades, it is perfect.
This trend means that a lot of sellers are involved in the stock, and buyers are sitting on the sidelines. If we can get buyers to get back into the stock, it pops. Well, that is where the earnings beat comes into light. Hard to predict … right? Not as much as you think. LHO has a tremendous history of consistently beating earnings estimates. It has not missed in years. Further, the trend that we are seeing in EPS estimates is about half of Q3 of 2009 for Q4. Most companies are coming in right in line with what they did one year ago and some have even beaten Q3. Analysts really underestimated this sector for the Q4.
LaSalle, I feel, is great, as well, because it operates most of its business with businessmen and middle class travelers. The companies that have really been doing well have been this group, and LHO is a part of it. I like LHO to be a great surprise for tomorrow.
Entry: We are looking to get involved before the close of the day at 19.60 - 19.70.
Exit: We will be exiting tomorrow morning for gains or losses.