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Sunstone Hotel Investors Will Weather The Storm Thanks To Its Robust Balance Sheet

Dec. 01, 2021 10:00 AM ETSunstone Hotel Investors, Inc. (SHO)14 Comments


  • Sunstone Hotels saw its share price slide as the new COVID variant seems to be spreading fast.
  • I still like the preferred shares thanks to the superior asset coverage ratio.
  • I would consider going long the common shares as well. Perhaps I will write some out of the money put options.
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Schone witte badhanddoeken op de keurig schone slaapkamer - gezelligheid en schoon concept

Saowaluck Voraprukpisut/iStock via Getty Images

Introduction to Sunstone Hotel Investors

It’s been about six months since I last looked at Sunstone Hotel Investors (NYSE:SHO), and in that article I was mainly interested in checking out the REIT’s preferred shares. The hotel industry was

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This article was written by

The Investment Doctor profile picture

The Investment Doctor is a financial writer, highlighting European small-caps with a 5-7 year investment horizon. He strongly believes a portfolio should consist of a mixture of dividend and growth stocks.

He is the leader of the investment group European Small Cap Ideas which offers exclusive access to actionable research on appealing Europe-focused investment opportunities not found elsewhere. The a focus is on high-quality ideas in the small-cap space, with emphasis on capital gains and dividend income for continuous cash flow. Features include: two model portfolios - the European Small Cap Ideas portfolio and the European REIT Portfolio, weekly updates, educational content to learn more about the European investing opportunities, and an active chat room to discuss the latest developments of the portfolio holdings. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SHO.PH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

The SHO.PR.I prefs below $23 is great value right now.
tensei profile picture
@Hanger its below $20 now...
The Investment Doctor profile picture
@tensei Both prefs are now indeed yielding over 7%. I didn't expect to see that level!
@The Investment Doctor SHO has among the lowest debt for hotel REITs. Its balance sheet is excellent. Hotel Reits survived covid when their hotels were shut, so they'll survive anything. I'm adding more now that the yields are 8% with 25% upside to par value. It will get back to par, may just take a agile for inflation to roll over.
JrMastermind profile picture
Sunstone (SHO) and Chatham (CLDT) were two prospects that I identified during the early days of the pandemic downturn. I liked them for much the same reason, I saw their balance sheet and cash position as key to both their survival, and the opportunity for growth through acquisition at a time when the valuations were depressed.The thing is, neither stock tanked far enough for me to pull the trigger. I recall looking at the dividend history and thinking IF there is no further dilution, and IF they are able to return to paying the pre-covid divy, then I MIGHT see a ~5% YoB in 2-3 years. By comparison, the companies/funds that I either bought, or tried to buy, are already delivering eye popping returns one year later.I still like them, but I think the market is treating them more like reliable, blue chip stocks rather than the vulnerable hospitality stocks that they are.
JrMastermind profile picture
What does SA have against paragraphs?!
The Investment Doctor profile picture
@JrMastermind I don't think there's an issue with paragraphs. Let me try this out.

See, this is how I move seamlessly to a new paragraph. Still about the same subject though: paragraphs.

This final paragraph is just to figure out if it comes through when I hit the 'publish' button. Fingers crossed!
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