Summary
- I continue to think Hersha Hospitality Trust is undervalued.
- That doesn't change the fact that despite consistent dividends and stock buybacks, I have seen a consistent erosion of capital, and even with reinvested high-single digit yielding dividends, am "underwater."
- Unfortunately, my patience in waiting for "Mr. Market" to recognize the value has cost me, as other REITs have performed better.
- A few external causes have also hurt my investment in Hersha, and I will discuss those briefly too.
- I am still long the common stock but am seriously considering stopping my DRIP if not reducing the position as well.
After I posted a recent article on CBL & Associates (CBL) with positive short-term trade I had made, a commenter challenged the after-the-fact, “crowing” nature of the article. While the follow-on comments were civil, the point was made: Easy to brag about winners, but how often do I (or other SA contributors) admit and post our losing ideas. Well, here's one from my stock investing/trading account that has been disappointing at best. Hersha Hospitality Trust (HT) preferred and common shares have been one of my longest holdings, and while at times I have made profitable trades, long-term I have not made anything, even if I count reinvested dividends. This is questionable, as both my original capital investment and the reinvested dividends have had a real opportunity cost and drag on my over-all performance. This article will retrace my history with HT, the fact that my (and others) patience hasn't been rewarded, and while now tempered by this sobering analysis, some positives I still see in HT that have me remaining long, but with a watchful eye.
I am a long time owner of Hersha Hospitality Trust, from owning a now-retired class of preferred stock and the common over the past 6 years. One of the first articles I wrote for Seeking Alpha was on the retired preferred stock in December of 2013. It has been interesting and yes, frustrating, to see the value of this company stay depressed, despite astute management moves, improving economic trends, and nearly 25% of outstanding shares stock being bought back. My investment in the preferred stock turned out better than I had planned, so I sold it and invested in the common stock. While at times I have profited, overall this investment has suffered from capital erosion in the price of the common stock. The stock price continues to remain depressed, and I am re-evaluating HT as one of my core holdings.
First A Quick Look at HT
While many of you are likely familiar with HT and the hospitality sector, others who have followed me due to other REITs or the odd Chinese company YRIV I've written upon may not be. Hersha Hospitality is a small hospitality REIT focusing on select-service and above quality properties in "gateway cities" clustered on both coasts of the U.S. Growing from a family-owned group of hotels mainly in New York and Pennsylvania, it now has properties along the East Coast and a few in California. Still managed by the founding family, the company is conservatively run like a family business, with these insiders still maintaining large positions in both preferred and common stock. In fact, Hersha Hospitality is named for the founder's wife, the matriarch of the family, so there is ample reason financially and emotionally for good management practices.
Over the past few years, two major themes have been executed by HT management.
