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Friday, 09/10/2004

Streaking Higher
By Nich Sheldon
LHO - LaSalle Hotel Properties

Company Description

LaSalle Hotel Properties is a leading multi-tenant, multi- operator real estate investment trust, which owns interests in 19 upscale and luxury full-service hotels, totaling approximately 6,400 guest rooms in 14 markets in 11 states and the District of Columbia. LaSalle Hotel Properties focuses on investing in upscale and luxury full-service hotels located in urban, resort and convention markets. The Company seeks to grow through strategic relationships with premier internationally recognized hotel operating companies including Marriott International, Inc., Westin Hotels & Resorts, Sheraton Hotels & Resorts, Crestline Hotels and Resorts, Inc., Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, White Lodging Services Corporation, Sandcastle Resorts & Hotels, and the Kimpton Hotel & Restaurant Group, LLC.

[Source: Company Press Release]

Reasons to Invest:

This weeks DOTW has been trending higher for nearly two years now, pegging new highs almost on a monthly basis. What's even more enticing is the fact that the stock is still trading under $30/share. The stock's Point-and-Figure chart shows the company on an ascending triple top breakout, which bodes well for a continuation in the uphill trend. Furthermore, the annual dividend yield is over 3%.

Without further ado, this week's drip of the week is LaSalle Hotel Properties (NYSE:LHO). LaSalle invests its time and money in upscale luxury full-service hotels. Over the first two quarters of 2004, LHO saw revenues increase by 73%, and their net loss from continuing operations decrease by 96%. The company noted that these figures were a direct reflection of high sales from newly acquired properties and improved operating margins. Maybe it's just me, but I speculate that when a company can turn its net losses around and nearly erase that entire debt over the course of six months, that they are on course to start raking in the cash.

On August 26th, LHO successfully completed a $34.4 million secured loan through Wells Fargo Bank at a fixed rate of 4.98%. The five-year loan is collateralized by the company's 241-room Hilton Alexandria Old Town Hotel, and proceeds from the financing are going to be used to reduce LaSalle's outstanding balance on its credit facility.

Nearly a month earlier, citing strong performance from its business-orientated hotels, LaSalle raised its fiscal 04 outlook to 6.5% from 5.5%. This would mean that LHO's earnings are forecasted to be between, $8.2 to $9.6 million for the year, or $1.73 to $1.78/share, which is up from their previous forecast of $1.62 to $1.70/share.

LHO has gained more than ten points in the first nine months of the year. Why is this important to note? One thing to keep in mind is that the average trading volume per day for shares of LHO is a measly 60,200. In most cases where trading volume is light on a given stock, there is generally more insider trading than outsider trading. If this were the case for LaSalle, I find comfort in knowing that those insiders are buying stock as opposed to selling it. This means that they have confidence in their company and that they see the stock in undervalued territory. On the other hand, regardless of who is buying/selling shares, a gain of a point a month on light volume is commonly viewed as bullish sentiment.

A quick look at LHO's quarterly chart and I note six consecutive quarters of gains for the stock. The MACD indicator on the quarterly chart is obnoxiously bullish, and I would speculate to see it grow even stronger over the next year or two, especially if LHO can erase its net losses.

The monthly chart shows 16 out of the past 20 months in higher territory. It doesn't take a mathematician to note that this means that 80% of the time LHO is going to close higher. I'm not sure about you, but I am willing to lay some risk capital on the line for an 80% chance of a positive return. Again I note the MACD on a buy signal.

Let's move onto the short-term outlook. While I like the chances of this DRIP providing us some solid returns over the next year or two, I am not ready to enroll just yet. Why is that? First and foremost, the daily chart looks phenomenal. But, how much of a good thing is too good to be true? LHO broke over the top line of its February 03 regression channel during the last week of trading in August. Upon doing this, the stock has trended higher, using its underlying moving averages as support for further gains. On that note, I think that we should brace ourselves for a few sessions (maybe even a week or two) of profit taking. Historically speaking, I can't recall a stock that remained overtop of a long-term channel for more than a few weeks. With that said, I think that the mid-August push higher, urged the stock into overextended territory. Generally when a stock gets overextended, it rolls over and retests support before repeating the trend all over again. While the simple 10-DMA has served as strong support for just about a month now, I believe we are going to see a return to the channel and quite possibly a retest of the 100-DMA. Coincidentally the 100-DMA is right at the bottom bar of the channel, which should help to provide a double-support-line, and push the stock back into positive territory.

Basically, I would put the call into my broker and order one share of LHO. I would have the stock shipped to me in my name, and then sit on the sidelines. Once I see where LHO finds support (inside its channel - not overtop of it), I will put the call into their Agent and get enrolled. I would hope to see the stock pullback to the $25-$27 range before I initiated my plan, but that's just me.

LaSalle offers an annual dividend of $0.96/share owned, which tallies out to an annual yield of 3.33%. The next dividend installment is due to be paid out on October 15th.

Editors Note *CORRECTION TO 08/20/04 DOTW!*
Busted! One of our loyal readers pointed out an error in my Kimco (NYSE:KIM) Drip of the Week article. It appears that while our site states that KIM does not charge any dividend reinvestment fees, the company has added fees to their DRIP. The following few paragraphs are from the company's website.

(a) Charges for investments made for Participants (other than for reinvestment of dividends).

The Plan Administrator will deduct a service charge for investments made for the Participant, other than a reinvestment of dividends. In addition, Participants will be charged their proportionate share of brokerage commissions on each purchase transaction, other than a reinvestment of dividends, for purchases made in the open market. The Participant's share of brokerage commissions on small transactions may be less than usual since the Plan Administrator will buy or sell shares in volume for all Participants and that commission savings will be passed on to each Participant.

Subsequent Purchases through optional cash payments: $5

Subsequent Purchases through monthly automatic deductions: $2 (b) Charges for investments made for Participants for reinvestment of dividends.

Generally, Kimco will pay all brokerage commissions and other administrative charges on behalf of the Participants with respect to the reinvestment of dividends. In the event such fees exceed 5% of the cash dividends Participants reinvest, Participants will be required to pay the entire amount of such fees. The brokerage commissions and other administrativecharges currently do not, and are not expected to in the future exceed 5% of the cash dividends Participants reinvest.

---End Editor's Note---

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Remember:
Plan your trade, and trade your plan.

Until Next Week,
Nich Sheldon
Editor In Chief
www.dripadvisor.com
questions@DripAdvisor.com

Broker Recommendations

Strong Buy         3
Buy                3
Hold               3
Sell               1
Strong Sell        0

Brokers Covering  10


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $100-$5,000/month


Reinvestment Fees - 
Dividend investment fees: $0.00
Cash investment fees: $0.00
Auto reinvestment fees: N/A


Transfer Agent:
ComputerShare Investor Svcs.
312-360-5100


Corporate Headquarters:
LaSalle Hotel Properties
4800 Montgomery Lane, Suite M25
Bethesda, MD 20814
Phone: (301) 941-1500
Fax: (301) 941-1553



 
 

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