I reckon there’s a good chance the stock market will emerge from the doldrums of 2023 to rise in 2024. With that in mind, a FTSE 100 stock I’d snap up if I had the investable cash before this happens is InterContinental Hotels Group (LSE: IHG). Here’s why!
Hotels and resorts for all
InterContinental – best known as IHG – is one of the leading hotels businesses in the world. It caters for all budgets and getaway types and some of its best known brands include Crowne Plaza, Holiday Inn, and InterContinental to name a few.
Despite markets struggling, IHG shares have performed well in the face of macroeconomic and geopolitical issues. The shares currently trade for 6,994p. They’re up 40% over a 12-month period from 4,961p at this time last year.
The investment case
Before I go into why I’m a fan of IHG shares, I’ll share my concerns and risks first. The obvious risk is increased economic instability, which could hurt demand for hotels, holidays, and leisure experiences. After all, if people are more focused on paying for essentials, these types of expenses aren’t always a possibility. Performance and potential returns at IHG could be hurt.
The other issue I’ve encountered is IHG’s current valuation. The shares trade on a forward looking price-to-earnings ratio of 18. The FTSE 100 average is closer to 14. As the shares have been on a great run already, they’ve increased. If any negative trading or pull back were to occur, the shares could tumble. However, sometimes I reckon you’ve got to pay a premium for a quality company.
Moving to the bull case then, IHG’s profile and position is enviable, and something that should maintain performance as well as help growth. I really like the fact it operates at all ends of the spectrum, from luxury to budget. There’s something for everyone. This has helped the business grow and perform well historically too.
Plus, as global wealth is only rising, the propensity for holidays and leisure experiences is only set to increase as people have more money to spend. However, I do understand shorter-term issues could slow this trend.
Finally, IHG shares would boost my passive income stream at the moment. A dividend yield of just under 2% is not the highest. However, growth is high on the agenda of the business so I could see payouts increase in line with the business. Of course, I’m conscious dividends are never guaranteed.
IHG could soar
The way I look at IHG’s investment viability right now is that if the business and shares can perform well during a global economic downturn, imagine what it could do once macroeconomic and geopolitical instability dissipates.
I reckon IHG could be a shrewd – albeit pricey – buy right now. However, I fully expect the shares to soar once issues subside in the longer term.
