Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Billionaire Steve Cohen’s New Stock Pick

SAC CAPITAL ADVISORSBillionaire Steven Cohen disclosed a 2.5 million share position in Gaylord Entertainment (GET) on Friday. Steve Cohen bought 2.1 million shares on behalf of SAC Capital and 350 thousand shares on behalf of Sigma Management. Neither of these funds had positions in GET at the end of March. Gaylord Entertainment returned around 20% since the end of the first quarter.

Billionaires Ken Fisher and John Paulson’s funds are the two largest holders of Gaylord Entertainment among the nearly 400 funds we are tracking. Ken Fisher had $66 million, or 4.4% of outstanding shares, and John Paulson had $42 million, or 2.8% of outstanding shares, invested in the company (see John Paulson’s new stock picks).

This is a reorganization play. Last week Gaylord announced the sale of its Gaylord Hotels brand and the rights to manage its four hotels to Marriott Intl (MAR) for a total of $210 million. Gaylord will subsequently reorganize as a REIT. The company expects to save about $15 million at the corporate level. Net property level savings are estimated to be between $19 million and $24 million. Gaylord will retain Iconic Grand Ole Opry and its Nashville based attractions and operate them under the REIT structure. The company will also distribute a special dividend totaling about $2 per share.

We think Gaylord is an attractive investment right now. The company’s 2013 funds from operations (FFO) will be around $225 million. Currently Host Hotels & Resorts (HST) trade around 14 times its 2012 FFO. LaSalle Hotel Properties (LHO) trades at 13 times its 2012 FFO, Diamond Rock Hospitality’s  (DRH) P/FFO ratio is around 12.5. Sunstone Hotel Investors (SHO), another John Paulson and Steve Cohen holding, trades at 10 times its 2012 FFO. Using a conservative P/FFO ratio of 10 gives Gaylord a market value of $2.25 billion or nearly $46 per share. Gaylord’s total debt to 2012 EBITDA ratio of 4.5 is on the lower side compared to its peers whereas its interest coverage ratio of 6 is on the higher side.

The stock will have an upside potential of 25% after accounting for the special dividend. However, this is a highly cyclical stock which lost more than 90% its value between June 2007 and March 2008. Steve Cohen disclosed a 5% stake in the company but he isn’t required to disclose how he hedged these bets. Investors concerned about a slowdown in US economy should consider hedging their risks by shorting other lodging REITs.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.