Goldman Sachs on Marriott
Marriott operates hotels around the world. It also develops residential properties and provides various services to residents. The hotel industry is a cyclical industry. Many fund managers expect that cyclical industries could provide strong returns in the near term. Bill Miller is investing in cyclical sectors.
Performance of hotel industry
On a yearly basis, the US hotel industry’s revenue has been growing since 2009. In 2009, hotel revenues fell drastically. In the first quarter of 2017, the demand outlook for the industry surpassed supply growth. A stronger US dollar (UUP) (VFINX) (IWM) (SPY) could be a headwind for the hotel industry because a strong dollar increases costs and thus discourages travelers from abroad.
However, in the past six months, the dollar index weakened and it helped the hotel industry. However, the dollar index might strengthen if President Trump fulfills his promises on tax reform, infrastructure spending, and health care reform. On the other hand, lower oil prices also remained a positive factor for the hotel industry.
Marriott International’s performance
Marriott International has provided a return of 22.5% so far this year. The broader market S&P 500 Index (SPY) (QQQ) (IWM) returned nearly 8.9% on a year-to-date basis as of July 14, 2017. Marriott is currently trading at $100.99. The stock returned nearly 29% over a two-year period. Other hotel stocks such as Hilton Worldwide Holdings (HLT), Wyndham Worldwide (WYN), and Hyatt Hotels (H) returned 8.6%, 33.7%, and -0.52%, respectively, on a year-to-date basis, as of July 14, 2017.
Marriott International is currently trading 4% above its 100-day moving average and 1% below its 20-day moving average. In the next part of this series, we’ll analyze the performance of Visa.