5 Overvalued Stocks to Watch

4. DiamondRock Hospitality Company (NYSE:DRH)

Number of Hedge Fund Holders: 22

P/E Ratio as of September 19: 40.01

DiamondRock Hospitality Company (NYSE:DRH) is a real estate investment trust that owns geographically diversified hotels and destination resorts. Trading at a price-to-earnings multiple of 40.01 as of September 19, DiamondRock Hospitality Company (NYSE:DRH) is categorized as an overvalued stock. 

On August 29, Wells Fargo analyst Dori Kesten downgraded DiamondRock Hospitality Company (NYSE:DRH) to Equal Weight from Overweight and lowered the price target to $10 from $11. DiamondRock Hospitality Company (NYSE:DRH) has the second largest exposure to leisure demand among the lodging REITs, which will create prominent headwinds relative to peers, the analyst told investors in a research note. Additionally, relative to its peers, DiamondRock Hospitality Company (NYSE:DRH) has greater refinancing needs after 2023 maturities, which could serve as a “talking point/headwind for investors in a recessionary environment,” said the analyst. 

According to Insider Monkey’s Q2 data, 22 funds were bullish on DiamondRock Hospitality Company (NYSE:DRH), compared to 18 funds in the earlier quarter. Richard S. Pzena’s Pzena Investment Management is the leading position holder in the company, with 6.4 million shares worth $52.65 million.