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Derek WarrenAmerican Hotel IncomeHOT.UN.TOPAST TOP PICKJun 13, 2014

(A Top Pick June 17/13. Down 1.27%.) Had disappointing quarters in Q4 and Q1. He has a “wait and see” attitude to make sure they can turn this next quarter around. Yielding about 8.9%.

Derek Warren

Owned

Unlock Rating

$19.07

Stock price when the opinion was issued

$0.55

As of Jun 26, 2026. Market Open.

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DON'T BUY

They own U.S. hotels, a high-risk, high-reward stock. He's bearish on hotels, which is struggling with labour costs and keeping labour. HOT.UN has done a good job restoring vacancies, in the low-70s, though their peak was in the 80s. However, they've made up the balance on their hotel rates. Their balance sheet is slightly higher, so he would avoid. There are better hotel names.

DON'T BUY

Hotels are typically the first sector to go down in a downturn and the first to come out. Today there is zero visibility, however. He would move on from this one.

DON'T BUY

He once owned this, selling it before Covid fortunately. The reason was that the 9% dividend could not be sustainable. Indeed, the dividend was cut during Covid. He wouldn't buy it back. Their hotels remain largely empty. He isn't a flipper or trader. Perhaps you can make a trade her if the US economy rapidly reopens and travel revives. There are better ways to play the reopening. Doesn't know when their dividend will return.

SELL

It is a difficult stock to own in this environment. The pandemic has shut them. He believes the distribution has been suspended. They have impaired cash flow and higher level.

DON'T BUY

He does not think their distribution level is sustainable. They don’t have the right dividend coverage or distribution level.

DON'T BUY

It is operating in a very difficult space and he is short in that space. These leases reset every night. Revenue per available room at best is going be flat over the next year. They have too much debt and don’t cover their distribution.

SELL

This would be a sell for him. He is not into the hotel space. It comes down to how well you operate these assets. He is not a fan of the operations or management. Railway hotels that are now being sold at losses. Not a good investment. Avoid.

DON'T BUY

This REIT has had so many problems. They owned a lot of railway depot hotels, where engineers would take rest. These contracts have been lost and they own in secondary markets. They have over distributed and missed earnings on several occasions. They are now having to invest to keep these assets maintained. This is still a work in progress stock. He does not think the 12% yield will be sustainable. Stay away.

COMMENT

A steady downtrend since 2017, but there are places to hang your hat. Now, it's in a seasonal time, going up or sideways at worst in the summer.

DON'T BUY

A huge dividend is not a good thing. The market is telling us something – the dividend is too high. They may be capitalizing too much of their maintenance expenditures. The CAP-X is about 6% of net operating income. It should be 20-25%, which is closer to what they are actually spending. They don’t have to cut their dividend, but at this point in the cycle and with more sensitivity in the cycle, they should be more conservative with their capital.

BUY

A REIT that owns hotels in secondary US cities. They've upgraded old hotels, many on railway lines. They took a cash-flow hit and the street wasn't ready for that. The stock took a big hit in 2018. Good sustainable yield of 11%. As these investments pay off this and next year, they'll see higher income and share price. But they need to show payback and results in their next earnings report.

BUY

REITs aren't doing bad now. We're getting close to the end of the cycle rate-tightening as bond yields have risen alot. on This REIT comes down to your view on interest rates--he thinks we'll come to the end of this in 6-12 months when the cycle turns. REITs like this have decent valuations. However, the bears say that the bond market will correct for another two years.

DON'T BUY

He suggests to be careful about chasing yield. He would not suggest any investor to average down in this type of near peak market conditions. This is one you want to be disciplined with your exit strategy, especially if it drops below $8.50 per share level.

DON'T BUY

He's met them a few times and nearly bought their stock. It was the hotel chain for railroad workers, but have since re-positioned themselves into premiere brands operating in secondary markets like Pittsburgh. They've done a good job of repositioning, but had a poor quarter. True, there are good things in thosenumbers, but it'll take maybe three quarters to work through this transition. Also, hotels are vulnerable to an economic downturn.

HOLD

He has met with their management a few times. They have transitioned their business from hotels for railworkers and staff, which was a simple and good business. They have transitioned to owning more hotels, generally in B cities in the US. He doesn’t have confidence that this will work out well. Its price has been dropping. He doesn’t recommend selling it this low.

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Derek WarrenAmerican Hotel IncomeHOT.UN.TOPAST TOP PICKJun 13, 2014

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