Accommodations Industry Primer

An underfollowed niche in the energy sector plus a few cheap stocks worth adding to your watchlist

There are 3 energy stocks in the VDL portfolio and 2 of them operate in the same industry with a similar investment thesis…

The theses are pretty simple here:

1. Cash flows are remarkably stable (even during the 2015 oil downturn)

2. Multiples are crazy cheap at 5-6x FCF

3. Balance sheets went from >4x levered to 1-2x levered

4. Dividends, buybacks, and M&A are entering the capital allocation conversation

First a few words on oil prices…

Energy stocks are losing steam after an amazing run-up through June 2022. Since then, the S&P 500 is +11% and crude oil is down 34%.

S&P 500 vs. crude oil

Take off the relative performance lens and oil prices went through 3 distinct phases over the past 20 years… a strong upward trend from 2003-2014, a significant fall off in 2015 where prices hung around $30-50/barrel until 2021 where a new $70-80/barrel price range has taken hold.

20yr crude oil prices

With that backdrop, let’s take a closer look at the accommodations industry and a few interesting stocks.