Capital Growth Management’s Small Cap Picks Include Jones Lang LaSalle Inc (JLL)

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Sunstone Hotel Investors Inc (NYSE:SHO), another hotel-focused REIT which primarily owns upscale hotels, was another of Capital Growth Management’s small cap picks. This shows that the fund is quite interested in hotels and in real estate related companies in general- we can see a number of larger-cap stocks related to the same thesis in its portfolio as well. Currently common shareholders of Sunstone Hotel Investors Inc (NYSE:SHO) are not receiving dividends, but we’d note that some industry peers have been increasing their payments and we suppose the dividend could be reinstated if conditions are strong.

According to the 13F, the asset manager added another hotel REIT, Strategic Hotels and Resorts Inc (NYSE:BEE), to its portfolio between January and March. Strategic Hotels and Resorts Inc (NYSE:BEE) owns properties across the U.S. and in a few locations in Europe. As with Sunstone, the company suspended its common dividends during the financial crisis. The company’s most recent 10-Q showed a net loss for the quarter with cash flow from operations being barely positive, and while it’s also possible that the company could start paying dividends again we think that we’d avoid it for now.

We’d rather not speculate on these two hotel REITs reinstating their dividends, and while RLJ does currently offer an attractive yield it might be better to look for blue-chip companies in the 3.5% yield range. Jones Lang LaSalle Inc (NYSE:JLL) also looks to be of questionable value, given its recent financial performance. We’re interested in looking into homebuilders, though investors should be aware of the risks in the industry and we also aren’t sure that NVR would prove to be a better value than its peers.

Disclosure: I own no shares of any stocks mentioned in this article.

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