HGV - Hilton Grand Vacations: Best Near-Term Price Gain Leisure Stock

Summary

• Leisure delivered by design from experienced arrangers.
• Not a buy-to-hold because the objective is competitively met in seasonally moving circumstances, with price action near-term.
• The Active Investment strategy employs time productively, not defensively, because compounding gains is the best means of building wealth most assuredly and rapidly when good forecasts are in hand.
• The specific stock selections identified are from price forecasts of the current competitive moment, not from some idea of historic averages.
• HGV ranks high now in reward-to-risk tradeoffs from coming-price expectations made by best-informed investing professionals, evidenced by prior similar-to-today forecasts.

The primary focus of this article is Hilton Grand Vacations ( HGV ).

Investing Thesis

Market-makers [MM] everyday are called on to balance buyers and sellers’ share volumes in transactions. For typical small, regularly appearing individual investor trades, no problem. Markets are automated to quickly adapt from electronic “offer books” with little to no help.

But when systems are surprised by irregularly-appearing, huge volume transaction orders from “institutions” adjusting billion-$ portfolios, they choke, needing MM help to get in balance. Where sufficient protection from subsequent price change in a subject stock can be found at a reasonable cost, then MMs will borrow shares lent (usually by other institutions for a fee) to be delivered to the buy-side of the big trade order.

The structure and prices of the derivative-securities’ contracts providing the underlier-stock price-change protection reveal the MM-community and institution expectations of the stock’s higher and lower price limits. Those limits define price risk and rewards seen in the next few months for the subject stock, making comparisons of investment prospects between similar alternatives in the next few months viable.

This article compares the prospects for Hilton Grand Vacations with other leisure services stock alternative investments, and equity market indexes.

Description of Subject Company

“Hilton Grand Vacations Inc., a timeshare company, develops, markets, sells, and manages vacation ownership resorts primarily under the Hilton Grand Vacations brand. The company operates in two segments, Real Estate Sales and Financing, and Resort Operations and Club Management. It sells vacation ownership intervals and vacation ownership interests; manages resorts and clubs; operates points-based vacation clubs and resort amenities; and finances and services loans provided to consumers for their timeshare purchases. The company also manages and operates the points-based Hilton Grand Vacations Club and Hilton Club exchange programs, and Diamond Clubs, which provide exchange, leisure travel, and reservation services, as well as engages in the rental of inventory made available due to ownership exchanges through its club programs. The company was founded in 1992 and is headquartered in Orlando, Florida.”

Source: Yahoo Finance

Reward~Risk Comparison with Alternatives

Figure 1

(used with permission)

The tradeoffs here are between near-term upside price gains (green horizontal scale) seen worth protecting against by Market-makers with short positions in each of the stocks, and the prior actual price drawdowns experienced during holdings of those stocks (red vertical scale). Both scales are of percent change from zero to 25%.

The intersection of those coordinates by the numbered positions is identified by the stock symbols in the blue field to the right.

The dotted diagonal line marks the points of equal upside price change forecasts derived from Market-Maker [MM] hedging actions and the actual worst-case price drawdowns from positions that could have been taken following prior MM forecasts like today's.

Our principal interest is in HGV at location [9]. A "market index" norm of reward~risk tradeoffs is offered by SPDR S&P500 index ETF at [11].

Those forecasts are implied by the self-protective behaviors of MMs who must usually put firm capital at temporary risk to balance buyer and seller interests in helping big-money portfolio managers make volume adjustments to multi-billion-dollar portfolios. The protective actions taken with real-money bets define daily the extent of likely expected price changes for thousands of stocks and ETFs.

This map is a good starting point, but it can only cover some of the investment characteristics that often should influence an investor's choice of where to put his/her capital to work. The table in Figure 2 covers the above considerations and several others.

Comparing Alternative Investment Details

Figure 2

(used with permission)

Column headers for Figure 2 define elements for each row stock whose symbol appears at the left in column [A]. The elements are derived or calculated separately for each stock, based on the specifics of its situation and current-day MM price-range forecasts. Data in red numerics are negative, usually undesirable to “long” holding positions. Table cells with pink background “fills” signify conditions typically unacceptable to “buy” recommendations. Yellow fills are of data for the stock of principal interest and of all issues at the ranking column, [R].

Readers familiar with our analysis methods may wish to skip to the next section viewing price range forecast trends for HGV.

Figure 2’s purpose is to attempt universally comparable answers, stock by stock, of a) How BIG the price gain payoff may be, b) how LIKELY the payoff will be a profitable experience, c) how SOON it may happen, and d) what price drawdown RISK may be encountered during its holding period.

The price-range forecast limits of columns [B] and [C] get defined by MM hedging actions to protect firm capital required to be put at risk of price changes from volume trade orders placed by big-$ "institutional" clients.

[E] measures potential upside risks for MM short positions created to fill such orders, and reward potentials for the buy-side positions so created. Prior forecasts like the present provide a history of relevant price draw-down risks for buyers. The most severe ones actually encountered are in [F], during holding periods in effort to reach [E] gains. Those are where buyers are most likely to accept losses.

[H] tells what proportion of the [L] sample of prior like forecasts have earned gains by either having price reach its [B] target or be above its [D] entry cost at the end of a 3-month max-patience holding period limit. [ I ] gives the net gains-losses of those [L] experiences and [N] suggests how credible [E] may be compared to [ I ].

Further Reward~Risk tradeoffs involve using the [H] odds for gains with the 100 - H loss odds as weights for N-conditioned [E] and for [F], for a combined-return score [Q]. The typical position holding period [J] on [Q] provides a figure of merit [ fom ] ranking measure [R] useful in portfolio position preferencing. Figure 2 is row-ranked on [R] among candidate securities, with HGV in top rank.

Along with the candidate-specific stocks these selection considerations are provided for the averages of over 3,000 stocks for which MM price-range forecasts are available today, and 20 of the best-ranked (by fom ) of those forecasts, as well as the forecast for S&P500 Index ETF (NYSEARCA: SPY ) as an equity market proxy.

The present uncertainties in the equities market at large are seen in the [T] column of the SPY row, some of its background shaded in pink where the Reward~Risk tradeoff of columns [E] and [F] are an unusually high level of price drawdown exposure for the broad market index. The high level of world uncertainty from Russia’s invasion of Ukraine is likely the cause.

Recent MM Price-Range Forecasts Trends for HGV

Figure 3

Used with permission)

This picture is not a “technical chart” of past prices for HGV. Instead, it is the past 6 months of daily price range forecasts of market actions yet to come in the next few months. The only past information there is the closing stock price on the day of each forecast.

That data splits the price range’s opposite forecasts into upside and downside prospects. Their trends over time provide additional insights into coming potentials, and helps keep perspective on what may be coming.

The small picture at the bottom of Figure 3 is a frequency distribution of the Range Index’s appearance daily during the past 5 years of daily forecasts. The Range Index [RI] tells how much the downside of the forecast range occupies of that percentage of the entire range each day, and its frequency suggests what may seem “normal” for that stock, in the expectations of its evaluators’ eyes.

Here the present level is near its least frequent, lowest-cost presence, encouraging the acceptance that we are looking at a realistic evaluation for HGV. With many past RIs above the present RI there is more room for an even more positive outlook.

Conclusion

Among these alternative investments explicitly compared Hilton Grand Vacations appears to be a logical buy preference now for investors seeking near-term capital gain.

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