2 Stocks to Watch in 2019

TL;DR

Matt recommends Apple Hospitality REIT for its strong position in the recession-prone hotel industry, while Jason suggests keeping an eye on Ellie Mae, a mortgage software provider facing challenges in the housing market.

Transcript

Jason Moser: Matt, let's clear this week out here and wrap it all up with One To Watch. I'm going to let you go ahead and start here. What's your One To Watch for the coming week? Matt Frankel: I'm going to name one of my REITs. I don't personally own this one yet, but it's jumped to the top of my watchlist. Over the past couple of months, hotel st... Read More

Key Insights

• 😨 Hotel stocks, including Apple Hospitality REIT, have been heavily impacted by recession fears and offer potential value for investors.
• 🖕 Mid-market hotels, like those in Apple Hospitality REIT's portfolio, tend to fare better during economic slowdowns due to their business-oriented clientele.
• 😮 Ellie Mae, a mortgage software provider, faces challenges due to factors like tight inventory, rising interest rates, and uncertain economic conditions affecting home buying.
• 💪 Despite the current market challenges, Ellie Mae is a profitable business with strong cash flow and has potential as a long-term investment.

Questions & Answers

Q: What makes Apple Hospitality REIT a compelling investment option?

Apple Hospitality REIT invests in mid-market hotels, which tend to perform better during recessions. With a well-covered dividend yield of 8.2%, investors can be paid generously while waiting for a potential recovery.

Q: Why does Ellie Mae face challenges in the housing market?

Ellie Mae relies on the volume of mortgage purchases and refinances, which is influenced by sentiment, inventory, pricing, and interest rates. The company has faced downward pressure due to tightening inventory and rising interest rates.

Q: Does Ellie Mae offer a good investment opportunity?

Despite current challenges, Ellie Mae is a profitable business with strong cash flow and competent management. Trading at around 22X free cash flow, it presents a good deal for investors interested in a solid business within the housing market.

Q: How does the housing market impact Ellie Mae's business?

Ellie Mae is closely tied to the housing market, as it relies on the volume of mortgage transactions. In times of low sentiment or economic uncertainties, such as a recession, the company's performance may be affected.

Summary & Key Takeaways

• Matt recommends Apple Hospitality REIT, which invests in mid-market hotels and has held up well during recessions. The stock has been beaten down and offers a high dividend yield.

• Jason suggests considering Ellie Mae, a mortgage software provider, despite current challenges in the housing market. The company has a strong business model, profitability, and a low valuation.