Best Real Estate and Hospitality Stocks To Buy: Ashford Investment Management’s Top Picks

Ashford Investment Management is the securities investment division of real estate-focused asset management firm Ashford Inc (NYSEMKT:AINC). The Texas-based fund is currently headed by Rob Hay, who apart from being Ashford Investment Management’s Chief Investment Officer (CIO) also serves as the Chief Strategy Officer at Ashford Inc. Mr. Hay holds an A.B. in politics from Princeton University and prior to joining Ashford Inc. worked at Merrill Lynch. Ashford Investment Management runs industry-focused strategies centered on equities from the real estate, hospitality and leisure space. The strategies run by the firm target annualized volatility in the range of 10-15%, whereas stocks from the sector, in which it invests, historically have a 20% to 30% volatility. Ashford Investment Management recently filed its first 13F with the Securities and Exchange Commission (SEC),  revealing a US equity portfolio worth $164.6 million as of the end of December. In this post, we will look closely at the fund’s top stock picks going into 2016.

We determine hedge fund sentiment by analyzing the equity portfolios of some of the best-performing hedge funds and institutional investors. Through extensive research, we have determined that the due diligence that these investors employ, as well as their long-term focus makes them the perfect targets to emulate (see the details here).

#5 Host Hotels and Resorts Inc (NYSE:HST)

– Shares Owned by Ashford Investment Management (as of December 31): 337,400

– Value of Holding (as of December 31): $5.17 million

Shares of Host Hotels and Resorts Inc (NYSE:HST) declined throughout 2015, ending the year more than 30% in the red. Though they continued this decline in the first few weeks of 2016, they recently have changed their trajectory and now are trading flat for the year. However, the stock’s dividend yield is still attractive at 5.17%. On February 7, the REIT reported its fourth-quarter results, declaring EPS of $0.39, versus analysts’ estimates of $0.33, while the revenue was in-line with expectations at $1.33 billion. Despite the earnings beat, on February 18, analysts at SunTrust lowered their target price on the stock to $16 from $19, but kept the rating at ‘Neutral’. Jeffrey Furber‘s AEW Capital Management inched down its stake in the company by 5% to 6.3 million shares during the fourth quarter.

#4 Toll Brothers Inc (NYSE:TOL)

– Shares Owned by Ashford Investment Management (as of December 31): 166,800

– Value of Holding (as of December 31): $5.55 million

Due to the labor shortage, higher costs and weakness in credit markets, property developer Toll Brothers Inc (NYSE:TOL) has lost one-fourth of its value so far this year. The company is scheduled to report its fiscal 2016 first quarter results next week and analysts are expecting EPS of $0.43 on revenue of $950.88 million. For the first quarter of fiscal 2015, the company posted EPS of  $0.44 on revenue of $853.30 million. On January 25, analysts at Raymond James upgraded the stock to ‘Strong Buy’ from  ‘Outperform’ with a price target of $40, which represents a potential upside of over 60%. Ken Griffin‘s Citadel Investment Group more than halved its stake in Toll Brothers Inc (NYSE:TOL) to over 1.68 million shares during the October-December period.

#3 Diamond Resorts International Inc (NYSE:DRII)

– Shares Owned by Ashford Investment Management (as of December 31): 251,400

– Value of Holding (as of December 31): $6.41 million

Diamond Resorts International Inc (NYSE:DRII) is another company in Ashford Investment Management’s equity portfolio, whose stock has slid by around 25% year-to-date. Most of the losses the stock has witnessed this year came after the company was featured in an article in the New York Times on January 22, which revealed how the company uses high-pressure tactics on consumers to seal the deal. However, on January 25, Diamond Resorts International Inc (NYSE:DRII) refuted the allegations in an e-mail to investors, adding that it follows industry practices and enjoys high customer ratings from its clients. On February 4, analysts at Credit Suisse initiated coverage on the stock with an ‘Outperform’ rating and $25 price target. Matthew Halbower‘s Pentwater Capital Management cut its stake in the company by 28% to 1.92 million shares during the fourth quarter.

#2 Marriott International Inc (NASDAQ:MAR)

– Shares Owned by Ashford Investment Management (as of December 31): 100,400

– Value of Holding (as of December 31): $6.73 million

Shares of Marriott International Inc (NASDAQ:MAR) are down by 20% over the last 52 weeks, but they have lost just 2% so far this year. In late November, the company announced that it would acquire Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT) in a deal valued at $12.2 billion. On February 17, along with its fourth-quarter report, the company announced that, on March 28, shareholders of both companies will meet separately to decide on the transaction. For the fourth quarter, Marriott International Inc (NASDAQ:MAR) reported EPS of $0.77 on revenue of $3.71 billion, compared to $0.68 and $3.56 billion, respectively, it delivered a year earlier. Ken Heebner‘s Capital Growth Management closed its stake in Marriott International during the fourth quarter.

#1 CBRE Group Inc (NYSE:CBG)

– Shares Owned by Ashford Investment Management (as of December 31): 195,800

– Value of Holding (as of December 31): $6.77 million

Apart from being Ashford Investment Management’s top stock pick at the end of December, CBRE Group Inc (NYSE:CBG) is also the top stock among the ones mentioned in this list that has suffered the maximum decline this year (down 26.63%). However, analysts remain bullish on the real estate services and investment firm. Eight of the nine analysts who cover the stock currently have a ‘Buy’ rating on it with an average price target of $39. For its fiscal 2016 fourth quarter, CBRE Group Inc (NYSE:CBG) reported EPS of $0.81 on revenue of $3.70 billion, beating analysts’ estimate of EPS of $0.78 on revenue of $3.41 billion. John W. Rogers‘ Ariel Investments reduced its stake in the company by 8% to 2.86 million shares during the October-December period.

Disclosure: None