Our top pick for conservative investors for 2014 is a real estate investment trust that owns 61 upper-scale hotels around the US, explains George Putnam, editor of The Turnaround Letter.
Going into the recession in 2008, FelCor Lodging Trust (FCH) had too many hotels in weaker markets and too much debt.
Over the last few years, FelCor has refocused its portfolio on premier properties in the stronger hotel markets. Since 2010, the company has sold 24 hotels and currently has three more under contract to sell.
The company has used the proceeds from these sales to upgrade many of the hotels in its portfolio, as well as reducing debt. In addition, it has been able to add a few marquee properties.
The company has also refinanced much of its debt to reduce interest costs. All of these actions now have FelCor's financial results heading in a positive direction.
Furthermore, macro industry conditions remain very favorable. Demand for hotel rooms has been growing steadily for the last few years, as both business and leisure travel rebounds. However, the supply of hotel rooms has been relatively flat, with very few new hotels being built.
Both, the broad industry trends, and the company's strategic moves, bode well for FelCor stock. Moreover, the company has just reinstated a small dividend and we expect the payout to grow, as FelCor's results continue to improve.
