We recently compiled a list of the 8 Most Undervalued REIT Stocks To Buy Now. In this article, we are going to take a look at where Host Hotels & Resorts, Inc. (NASDAQ:HST) stands against the other undervalued REIT stocks.
Historically, REITs are a major beneficiary of rate cuts. They tend to outperform markets if cuts are followed by a recession while they perform in line with the S&P in the case of no recession. Laurel Durkay, Morgan Stanley Investment Management head of global listed real assets, previously mentioned to CNBC that the REITs that are going to benefit the most from a rate cut would be net lease companies that would experience an improved acquisition spread and a better cash flow growth as a direct result of the rate cut.
Furthermore, REITs are more resilient as they continue to capitalize on the trends that persist regardless of the volatility in conventional real estate. For instance, data center REITs benefit from AI trends, health care REITs benefit from an aging demographic, and housing REITs benefit from the housing affordability issues persistent in the United States.
In recent news, Fed Chair Jerome Powell pointed towards further, smaller rate cuts saying that the Fed is not on any preset course. Two more rate cuts are to be witnessed this year in case the economy performs as expected. However, these cuts will be smaller and not as aggressive as the first half percentage point rate cut. The rate cut is taking center stage at the REIT conference in NYC, as reported by CNBC.
This rate cut is positive news for the REIT sector as seconded by Conor Flynn, CEO of Kimco Realty. In his opinion, the potential rate cut would change investor appetite in real estate investment trusts. He believes in a bright outlook for the sector and that the cut would benefit real estate in general as well as his business.
Our Methodology:
In order to compile our list, we first used stock screeners to identify REIT stocks that are trading with a forward P/E under 20, as of October 7. We listed stocks from all sub-segments of the REIT industry. From those, we picked the stocks which have the highest number of hedge fund holders. The 8 most undervalued REIT stocks to buy now have been ranked in ascending order of the number of hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A high-end hotel lobby, with modern furnishings, lush carpeting, and natural light.
Host Hotels & Resorts, Inc. (NASDAQ:HST)
Number of Hedge Fund Holders: 26
Forward P/E: 18.43
Host Hotels & Resorts, Inc. (NASDAQ:HST) is one of the largest lodging real estate investment trusts. The firm has a geographically diverse portfolio of luxury and upper-upscale hotels across the United States. It was incorporated as a Maryland corporation in 1998. Currently, the REIT is headquartered in Bethesda, Maryland.
The portfolio of the REIT comprises high-quality assets in attractive markets across the US. The firm owns 76 properties in the United States and 5 properties internationally totaling approximately 43,400 rooms. Host Hotels & Resorts, Inc. (NASDAQ:HST) also has a strong scale and reputation as evident from the fact that it serves as the largest third-party owner of Marriott and Hyatt hotels. Host entered the pandemic with a strong balance sheet allowing it to re-invest in the portfolio during a period of low demand which led to 2023 FFO per share growth above 2019 levels, while other full-service lodging REITs lagged.
For Q2 2024, the firm delivered net income of $242 million, up 13.1% year-over-year. Comparable hotel total RevPAR was $368.25 for the quarter, an increase of 0.5% since the prior year. This was due to the group business driving increases in banquet and catering revenues. The firm also diversified its presence in New York City by acquiring the 1 Hotel Central Park subsequent to the quarter end. The REIT has acquired $1.5 billion of iconic and irreplaceable real estate so far in 2024 which positions it well for future EBITDA growth.
With unrivaled properties, a strong scale, a robust balance sheet, and a significant EBITDA growth potential, Host Hotels & Resorts, Inc. (NASDAQ:HST) is an attractive REIT stock to consider. The firm is an S&P 500 company.
Overall HST ranks 4th on our list of the most undervalued REIT stocks to buy. While we acknowledge the potential of HST as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than HST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.