IHG - InterContinental Hotels Group's Share Price Leaves No Room For Error

2024-04-25 20:55:06 ET

Summary

• InterContinental Hotels Group is a UK-based company that operates hotels and charges fees for hotel management and brand use.
• IHG controls well-known hotel brands, and has a powerful loyalty program with over 130 million members, giving it a strong competitive moat.
• The company has a strong financial position, returning capital to shareholders through dividends and share repurchases, and has a reasonable valuation compared to its US peers.

Lately we have been taking a closer look at UK stocks given the relative undervaluation compared to U.S. markets. Unfortunately the UK is overweight commodity producers and banks, two sectors we prefer to avoid. Still, there are some attractive companies in other sectors, which also appear to be trading at a discount compared to U.S. peers.

One example is InterContinental Hotels Group ( IHG ), which can be thought of as the UK's version of Marriott International ( MAR ) or Hilton Worldwide ( HLT ). The company has a very attractive business model, where it charges fees for hotel management and brand use, controlling some of the most valuable brands in the world, including Holiday Inn. Still, given where we are in the economic cycle and its current valuation, we see shares more as a "Hold" right now....

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