Ayesha Faridi and Avanne Dubash are well aware of the fact that the novices of Dalal Street are only interested in one thing and that is multibagger stocks.
So, after exchanging a few customary pleasantries with Porinju Veliyath, they came straight to the point.
“Which are the multibagger stocks to buy in 2019?”
Naturally, Porinju had anticipated the question and had come well prepared.
“I am bullish on hotel stocks. They are a safe and good long-term bet and will deliver multibagger gains,” Porinju replied with a sparkle in his eyes.
Signs of recovery from an oversold environment. See a rewarding Samvat for new investors. Bullish on hotel cos; a good long term bet. Hotel sector a safe bet for next 2-3 years: Porinju Veliyath (@porinju) to @avannedubash #Diwali #Diwali2018 #Samvat2075 #HappyDeepavali pic.twitter.com/wttO0awLgD
— ET NOW (@ETNOWlive) November 6, 2018
(Ayesha Faridi & Avanne Dubash look resplendent in Diwali finery)
Porinju’s recommendation is not surprising because he and Ashish Chugh have already given a clean chit to hotel stocks and certified that they are excellent stocks to buy.
It mat be recalled that during the tumultuous times of November 2017 when GST was wrecking havoc with businesses, Porinju and Ashish Chugh had homed in on hotel stocks as potential beneficiaries of the turmoil.
“The industry is turning around after a decade … 3&4 Star hotel operators are in a sweet spot … Few listed companies in the space look attractive,” Porinju had opined.
3&4 Star hotel operators are in a sweet spot. F&B at 5% GST. Room rates are mostly below Rs.7500 (18% GST). Margins to go up. Advantage at the expense of 5 Stars. Few listed companies in the space look attractive. Am I missing something?
— Porinju Veliyath (@porinju) November 10, 2017
The industry is turning around after a decade, despite disruptive @Airbnb etc. High cost and crack down on black money could moderate supply going forward. Lower GST is tailwind for 3&4 Stars @safiranand @hiddengemsindia
— Porinju Veliyath (@porinju) November 11, 2017
This theory was endorsed by Ashish Chugh.
It is a case of “operating leverage with higher occupancy,” he said.
Industry has seen a down cycle followed by multi year consolidation – leading to a a leaner structure & cost rationalisation. Case of operating leverage with higher occupancy. https://t.co/4pjbmrkSOW
— Ashish Chugh (@hiddengemsindia) November 11, 2017
Needless to say, hotel stocks took off like rockets soon thereafter.
Royal Orchid, which is the favourite of experts owing to its high promoter holding, low asset model and other virtues, surged from Rs. 131 on 9th November 2017 to an ATH of Rs. 240 in May 2018, posting massive gains of 83% in just 6 months.
Unfortunately, thereafter, the accursed Bear attack has taken its toll on the stock and it is now languishing uncared and unloved at Rs. 115.
(Porinju with family in his palatial bungalow)
Which are the best hotel stocks to buy?
Technically speaking, Ayesha Faridi and Avanne Dubash ought to have grilled Porinju to the fullest extent and demanded that he also give a list of the best hotel stocks to buy.
However, they did not do this probably because they are aware that we already have all the best research reports on the subject.
HDFC Securities, for instance, has issued a comprehensive research report in which the fundamentals of the 5 best hotel stocks have been discussed threadbare.
These five stocks are Indian Hotels, Lemon Tree Hotels, EIH Ltd, EIH Associated Hotels and TajGVK Hotels & Resorts.
Lemon Tree Hotels has been described as the “best in the pack” owing to its dominance in the mid-market segment (2-star to 4-star) and superior execution abilities.
Indian Hotels has also been recommended as the best stock in the luxury 5-star segment.
IIFL has also issued a detailed research report in which the fortunes and prospects of the hotel sector are discussed in detail.
It is emphasized that the Hotel industry has witnessed overall improvement in occupancy ratio over last four quarters with demand outpacing supply growth.
IIFL has put its finger of Royal Orchid Hotels and assured that the stock has a target price of Rs. 211 (reduced from Rs. 264).
The experts are unanimous that hotel stocks are a great buy owing to various macro-economic factors. These stocks are also a safe investment given their high-quality management and long track record. The present correction is a golden opportunity for us to load on to these stocks!