Option Trade - Wyndham Worldwide Corporation
Thursday, July 12, 2012

**OPTION TRADE: Buy the WYN Nov 2012 55.000 call (WYN121117C00055000) at or under $1.90, good for the day. Place a protective stop limit at $0.70 and a pre-determined sell at $3.60.

by Ian Harvey


In general, hotel stocks have been among the strongest performers over the past year. Consumer confidence has been rising, and people have started traveling more often. With the economy slowly recovering, companies are increasing their travel budgets and this too is creating higher demand for hotel rooms. During the recession, the hotel industry was hit hard and as a result there were a lot of construction deals canceled. This has resulted in a shortage of rooms now that demand is picking up. As with any business, when demand outpaces supply, prices start to rise, and we are already seeing that take place in the hotel industry.

Therefore, Wyndham Worldwide Corporation (WYN), certainly fulfils this situation!

Wyndham Worldwide (WYN), is headquartered in New Jersey. The company operates hotels and time shares in the U.S. as well as internationally, under names such as REI, Wyndham Hotels and Resorts, Ramada, Days Inn, and Howard Johnson.

The stock has been very strong over the past year, gaining over 55% during the past twelve months. The company's timeshare business is a major driving force for its operations, accounting for around one half of the company's annual earnings. Timeshare revenue is mostly fee driven, which makes it more stable than normal hotel income and has much deeper margins. Also working in Wyndham's favor is that the majority of its hotels are franchised, which takes away a lot of the risk and costs for Wyndham and assigns them to the franchisee.

The company has a long streak of topping analyst estimates, having posted better than expected earnings figures for each of its past seventeen quarters. It will report second-quarter results later this month, with analysts expecting earnings of $0.84 per share, up from $0.64 during the same period last year. We like the stock, but with it trading so near its 52-week high, with a P/E of 22, we would prefer to use any pullback in the stock as a buying opportunity.

**OPTION TRADE: Buy the WYN Nov 2012 55.000 call (WYN121117C00055000) at or under $1.90, good for the day. Place a protective stop limit at $0.70 and a pre-determined sell at $3.60.

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