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.
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.
.... 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.
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
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.
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.
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
conclussion...buy and hold. Dont watch the stock for the next few
months and have a buy order in at 15.50 just in case we
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.
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