Wyndham (NYSE:WYN) FBR's Top Pick in Real Estate/Lodging & Gaming

FBR Capital sees the Real Estate/Lodging & Gaming continue to rise in 2011, and their favorite in the overall sector remains Wyndham (NYSE:WYN), based primarily on cash flow management.

"The combination of history and recent operating results leads us to the conclusion that lodging stock outperformance should last at least another two years. Rate-driven RevPAR growth and margin expansion are in their early stages. In our view, the sector offers 10%-20% upside in both 2011 and 2012. For the lodging sector, we believe history continues to be an excellent guide as to when stocks will peak. This lodging stock cycle is nearly two years into its upswing, which compares to the six years from trough to the early 1998 peak and to the six years to the mid-2007 peak. The upward portion of the lodging stock cycle has lasted for several years, and there has been plenty of opportunity to ride the up-cycle even if one was unable to time the bottom (on average, lodging stocks climbed 75% in 2003, 62% in 2004, and 56% in 2005 from trough to peak)," said FBR.

"Our FBR Top Pick remains Wyndham WW (NYSE:WYN), although we expect a rising tide to lift all boats. We continue to recommend overweighting the sector at this time. Reasons for WYN as our FBR Top Pick include management’s commitment to managing for cash flow plus the ongoing transition to “asset-lite”—the latter, we believe, could lead to continued valuation multiple expansion."

Wyndham closed Monday at $30.21, down $0.20, or 0.66 percent.