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FelCor Lodging Trust Incorporated Message Board

  • Need_High_Yield Need_High_Yield Aug 4, 1999 6:33 PM Flag

    $12 ????

    Maybe I missed it in your earlier postings but
    exactly how did you determine that FCH was only worth

    Are you using the book value and want to buy at less
    than 50% of book?

    Are you looking at estimated
    FFO so you can buy at less than three times 1999
    estimated 1999 FFO (prior to today, now 3+)?

    what analytical basis, if any, are you using to come
    up with your figure?

    I can show you many
    REITs very heavily laden with debt, D/E ratios of 2, 3
    & even 4+, other REITs are selling at two or three
    times book value, two REITs come to mind that have a
    NEGATIVE stockholder equity, and several REITs pay out
    principal every quarter because their FFO doesn't even
    cover their dividends. I would think these are the ones
    you would look to short, not FCH.

    Well, I
    bought more today at 16 13/16. Never thaought I'd see
    this price. Think market is overreacting and we'll see
    $20+ by this time next year for a nice 20% gain plus a
    13% dividend = a 33% return. I'll take this any day!
    Regardless I believe the 13% dividend is very safe baring a
    major economic downturn.

    WHY is it only worth
    $12? With fully taxable and non-inflation resistant US
    Gov't. bonds barely paying 6%, 13% with inflation
    protection looks great to me. Why do you NEED

    Would sincerely like to hear your analysis process
    rather than just saying it's overpriced, etc.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • .... unless you are a day-trader. The MMs carry
      an inventory of the stocks they make a market in.
      They match up orders to buy and to sell. They will
      themselves sometimes buy and other times sell, theoretically
      to smooth the market out and meet the need for
      either a ready buyer or a ready seller. They can make
      money every day by buying for a little less and selling
      for a little more. Considering their position and
      function, consider yourself screwed a little every time you
      trade....the commission is not the only money being made!!

      On the other hand, every order gets filled*, either
      to sell or buy. If they are trying to maintain an
      artificially high price, the natural result is that they have
      to buy, as there are more sellers than buyers. If
      they are trying to maintain an artificially low price,
      the opposite. In the long run, the only way to move a
      market is to be a significant net seller or net buyer,
      and specialists don't do that.

      I can't imagine
      how warningbells can be correct that the MMs have
      maintained a market 30+ % overpriced than one based purely
      upon supply and demand would be.

      * - There have
      been examples of market makers for a stock simply not
      filling surplus orders to sell. Your local, unlisted
      bank, before it was bought out by BankOne [or
      whomever], had a guy who, whenever he got around to it,
      matched up sellers and buyers. Unapproved buyers' orders
      were misplaced. Sellers would wait years to unload.
      But I don't see how the price could be kept at a
      significantly artificial level without making somebody wait.

    • You may not be a REIT expert yet, but as a former
      security analyst, I agree with your

      Frankly, I question the expertise of the REIT analysts who
      recommend these companies at much higher prices and then,
      when they are selling at 2/3 the price, a 50% higher
      yield and with virtually little or no long-term
      fundamental changes, downgrade the stocks.

      I guess
      analysts have gone the route of mutual fund managers and
      are concerned about what the earnings and stock price
      will be for the next quarter ONLY! What happened to 12
      month price forecasts?

      Oh well, I'll just buy on
      these dips resulting from the irrational instutional
      selling. I'll sleep very well at night buying more FCH at
      less than $17.00.

    • You're an intelligent guy, and you understand
      REITs alot better than I ever will. (I can't give you a
      technical explanation for how a radio works, but I don't
      let that stop me from listening to one.) So here's my
      question: another knowledgable poster on this board, who
      shall remain nameless, said "I am still livid about how
      they kept charging $20+ for FCH shares...." Do you
      have a theory who "they" might be? I thought stocks
      traded auction-style, priced according to what the
      market will bear.
      Are REITs subject to different
      rules? Are REIT shares issued by the 'Trust' at prices
      determined by the 'Trust'?

      I dare not address the
      actual poster, who claimed to have shorted the stock
      'violently', and I abhor all violence. Your speculations would
      be appreciated....

    • <EOM>

    • a nice simplistic approach, and in large part
      correct. To take your points.
      1) Yes the industry is
      slightly out of favor. Note that this has always been the
      time to buy for medium-long term holds. Remember the
      studies demonstrating that industries in favor were among
      the worst plays for the next 1 and 3 year period and
      visa versa. New industrys are the exception, though
      only due to a longer run. (ie tech)of course this is
      industries and not individual comapnies.
      2) true...not
      horrid, but it does suck what little growth is in this
      industry out for now. Its been a while since the pricing
      on these guys has been based on perceived growth
      rates. The table has turned towards yield and
      preservation of capital. Higher PEs to the more visible names
      and MC (for the obvious reasons)and yes, for growth.
      I think this should play a role in pricing (lack of
      growth) but not to this level.
      3) Well this is just
      silly. Seemingly true, but MMs change these rules from
      common sense in their ability to walk to bid/ask quickly
      or hold it up. Sometimes, they just need to beef up
      industry and others take a sure short in the interim. As a
      whole, yes people wanted out, but not to the degree that
      the 15% drop indicates.
      4)I too have a hard time
      seeing the benefit of hike rates. However, the higher
      yields are more immune to these effects. Why? Simply
      because a jump of .5% when your talking long bonds at 6
      with interest risk if rates continue to rise is a bad
      play when you can have a yield of 10% that is a full
      4% above and can exit whenever. I feel that the
      rates wont hurt the balance sheet of the company. True
      the lower and closer the reit yield is to a bond, the
      more effect a rate rise will have, especially if the
      holder plans on seeing it to maturity (which is
      exceedingly rare these days) SO I think the perception of
      rates, if it does play here, allows us to get higher
      yields for our dollar on the reit side. Ill take that
      any day, so long as long term is my horizon.
      5) So
      6) Again true. For this company however, they have
      enough cash to do very limited acquisition, perhaps more
      after renovations are more towards completion. A
      buyabck is unlikely given the CC. Being bought out is
      also unlikely and liquidation would be a challenge
      except for piecemeal over time. You, however, can play
      the role and buy the company at a significant
      discount. and hold. Dont watch the stock for the next few
      months and have a buy order in at 15.50 just in case we
      get lucky.
      getting paid 13% to wait for better
      times is not a bad situation to find yourself in.

    • I DOUBT that FCH is worth $100,000 per

      Higher interest rates will NOT be good for our
      Higher rates may be less bad for FCH than for a
      competitor with floating rates, but it won't be good for
      them and certainly not for FCH


    • I'm not a reit expert yet, but here's my

      1. REITs in general are currently out of favor. I
      have several issues in my portfoilo, and they are all
      declining somewhat. Just look at the charts of some reits
      and you will see similar patterns - down - in

      2. The company is having some problems in Texas.
      Nothing life threatening, but some of the near term
      growth is gone.

      3. The reason for the big decline
      is that some large holders wanted out of FCH and
      just dumped the stock. If there are more sellers than
      buyers, the stock declines. It is as simple as

      4. The FED hiked rates or more importantly the
      market perceives that the FED will hike rates. I don't
      agree with some of the other posters on this board that
      this will help REITs. These stocks compete with bonds
      for investment funds. Rising interest rates will
      force up the yields on REITs and lower the

      5. The current 12.5% dividend will support the
      stock, unless the company falls apart or rates rise.
      Below $17, you will find relatively few large holders
      of FCH that will sell out (give there stock away),
      and only a fool would short a stock paying a 12.5%
      dividend, and selling at 60% of book.

      6. If things
      get worse in this industry, you might see more
      takeovers, management buyouts, stock buybacks, and Warren
      Buffetts stepping in to take advantage.

      Good Luck
      to Everyone who is Long FCH.

    • I e-mailed Felcor the other day, the day of the
      debacle, and received a prompt,personalized, and helpful
      response from a gal named Molly. I also had the ill
      fortune to have been left holding the bag when CRIMIIMAE
      (CMM) tanked. They never responded to any
      corresponence, either e-mail or snail mail. The medium is the

    • fch has apprx. 40,000 rooms. In the call they valued the stock based on recent ssi deal at 28. I don't think 38 is feasible any time soon.

    • It's worth $38.

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