Update Home Inns and Hotels (HMIN) in my Jubak’s Picks portfolio

Home Inns and Hotels Management (HMIN) has a slight case of indigestion. Or maybe I’d better say two cases of indigestion since the discomfort that investors are probably feeling at the stock’s drop from $31.92 on March 2 to $22.51 at the close on May 8 comes from two different causes.

First, there’s the indigestion that comes from the company’s incredibly rapid expansion in 2011. Home Inns opened 306 new hotels under the Home Inns brand in 2011 and purchased another 307 hotels under the Motel 168 brand when it acquired that company in October 2011. That makes 615 of the 1,426 hotels that the company ended the year with new to the company in 2011. New hotels take a while to build to capacity and integrating an entire new 300-hotel brand doesn’t get accomplished over night.

You could see the effect in Home Inn’s fourth quarter 2011 earnings report. Read more

Buy Home Inns and Hotels Management (HMIN)

In my March 6 post http://jubakpicks.com/2012/03/06/next-stop-in-the-traveling-global-financial-casino-china/ I suggested waiting until Home Inns and Hotels Management (HMIN) reported fourth quarter earnings on March 8 because the company might well disappoint.

Sure enough it did and the stock is trading today, as of 1:15 p.m. New York time, 14.2% below its March 5 price. (I’m adding it to my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ today.)

What was the Chinese lodging company’s big sin? Not revenue. Revenue for the quarter came in at $208 million, above the consensus estimate of $191 million, and up 64% from the fourth quarter of 2010.

The sin lay in earnings. Read more