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 Park Hotels & Resorts Inc. (NYSE:PK) 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 suite with trendy contemporary décor and luxurious amenities.
Park Hotels & Resorts Inc. (NYSE:PK)
Number of Hedge Fund Holders: 27
Forward P/E: 16.00
Park Hotels & Resorts Inc. (NYSE:PK) is a lodging real estate investment trust. The firm has a diverse portfolio of market-leading hotels and resorts in some of the top markets in the US and internationally. It was formed as an independent company in 2017 after its spin-off from Hilton. The firm’s headquarters are in Tysons, Virginia.
Park’s irreplaceable portfolio comprises 43 hotels with 26,000 rooms positioned in prime US markets with high barriers to entry. A majority of this portfolio is situated in the central business districts of major cities or conference destinations or resorts. The firm is currently experiencing tailwinds to its growth in 2024 and beyond. The 2024 group revenue pace, which represents bookings for future business, is 11% above 2023.
Simultaneously, Hawaii holds a bright future for Park being a top US resort destination consistently. While US airlines have increased routes to Hawaii, Japanese demand has improved with forward airline bookings to Oahu from Japan up 99% year-over-year through the first half of 2024.
During the year’s fiscal second quarter, Park Hotels & Resorts Inc. (NYSE:PK) saw strong group and leisure demand trends at its hotels in Boston, Miami, and New York. This resulted in a comparable Revenue per Available Room (RevPAR) growth of 2% as compared to the prior-year period. As aforementioned, Group demand continues to improve with more business demand, increasing citywide events and strong convention calendars at its Boston, Chicago, and New York hotels
In conclusion, Park Hotels & Resorts Inc. (NYSE:PK) serves as one of the largest publicly traded lodging real estate investment trusts. The firm has a lot to offer with its established portfolio of hotels and resorts with significant underlying real estate value and strong growth trends. Additionally, it affiliates with some of the biggest names including Hilton, Marriott, and Hyatt.
Overall PK ranks 3rd on our list of the most undervalued REIT stocks to buy. While we acknowledge the potential of PK 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 PK 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.