5 Most Undervalued Hotel Stocks To Buy According To Hedge Funds

1. Marriott International, Inc. (NYSE:MAR)

Number of Hedge Fund Holders: 47

Marriott International, Inc. (NYSE:MAR) is perhaps the most famous name in our list of the most undervalued hotel stocks to buy according to hedge funds. Out of the 943 hedge funds tracked by Insider Monkey, 47 hedge funds reported owning stakes Marriott International, Inc. (NYSE:MAR). The biggest hedge fund stakeholders of the hotel at the end of 2022 included Boykin Curry’s Eagle Capital Management ($696 million stake) and Robert Rodriguez And Steven Romick’s First Pacific Advisors LLC ($116.4 million stake).

Marriott International, Inc. (NYSE:MAR) shares have gained about 15% year to date through February 26. Marriott International, Inc. (NYSE:MAR) recently posted strong Q4 results.  Adjusted EPS in the fourth quarter came in at $1.96, beating estimates by $0.14. Revenue in the period jumped about 33% on a YoY basis to reach $5.92 billion, beating estimates by $540 million.

LRT Capital made the following comment about Marriott International, Inc. (NASDAQ:MAR) in its October investor letter:

“Marriott International, Inc. (NASDAQ:MAR) is the world’s largest hotel company followed closely by Hilton (HLT) and Intercontinental Hotels Group plc (IHG). The company owns a portfolio of brands from the low end (Courtyard, SpringHill Suites, Aloft), through the mid-tier (Marriott, Sheraton, Westin, Renaissance Hotels), to the luxury high end (JW Marriot, Ritz-Carlton, St. Regis). In total the company had 7,642 properties with over 1.4 million rooms as of the end of Q1 2021.

The majority (85%) of Marriott’s revenue comes from hotels in the United States, with the rest almost evenly split between Asia Pacific and Europe. Like it’s smaller peer, Hilton, the company today is almost exclusively a manager and franchisor of hotels, not a hotel owner. The company owns 66 hotels, manages 2,083 and franchises 5,493. Like all franchise-based businesses Marriott requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Marriott currently faces a difficult operating environment due to the Covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure (the company acquired Starwood Properties in late 2016) – if pent-up demand for travel materializes post-Covid, as we expect it will, the company will quickly go from losing money to raking in profits.”

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