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Accommodations Industry Primer

www.valuedontlie.com

Accommodations Industry Primer

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

Jul 30, 2023
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Accommodations Industry Primer

www.valuedontlie.com
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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%.

chart
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.

chart
20yr crude oil prices

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

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