When the coronavirus outbreak spread across the United States and the stock market crashed in March, it was certainly a scary time. But it was also a great opportunity for long-term investors to add great companies to their portfolios at fire-sale prices.
As Warren Buffett says, when it rains gold, you put out the bucket, not the thimble. And that's exactly what I did. I added some excellent stocks to my portfolio, several of which have already doubled or more in the relatively short time since. But the biggest winner of my COVID crash investment activity is Ryman Hospitality Properties (RHP -0.08%), a hotel real estate investment trust (REIT) that owns the massive Gaylord hotels as well as some iconic entertainment venues.
I bought shares of Ryman in mid-March and added to the position several times over a period of a week or so. My average cost basis in Ryman is just over $17 per share. As of this writing, Ryman is trading for $66.36, which means my shares are up by nearly 300% in less than nine months. But instead of cashing out and taking my gains, I'm not planning to sell even a single share. Here's why.
Why Ryman's stock got crushed in March
Ryman's primary business is owning and operating large-scale hotels that focus on group events such as conventions and conferences. Ryman owns five massive properties under the Gaylord Hotels brand, and just to give you an idea of the scale, the company owns four of the five largest noncasino hotels by meeting space in the U.S. For example, the flagship Gaylord Opryland property has 2,900 rooms, 640,000 square feet of meeting space, 19 separate food and beverage outlets, over a dozen retail stores, and more. These are big properties.
In addition, Ryman's entertainment segment owns the iconic Grand Ole Opry and Ryman Auditorium entertainment venues, the up-and-coming Ole Red restaurant and entertainment chain, and the Circle streaming-entertainment brand.
Obviously, these were terrible businesses during a pandemic. Group events simply haven't been happening since March, and for a few months, Ryman's business was so awful that the company decided it would be better off simply closing. Concerts and other live entertainment were largely shut down as well, and Ryman has just started hosting some live events (at a very limited capacity).
In short, its business ground to a halt as the pandemic started, and there was simply no way of knowing if and when the group events and live entertainment businesses would ever return to normal.
Massive properties with lots of demand
Ryman's stock rebounded significantly in April and May, as investors seemed to realize the company wasn't exactly about to go bankrupt. In fact, it has the financial strength to not only make it through the tough times, but to capitalize on opportunities that arise. With roughly $750 million of liquidity, Ryman is in a great position to grow in the post-pandemic world.
Speaking of a post-pandemic world, it doesn't look like demand for group events is going anywhere. Ryman has already rebooked more than 1 million of its COVID-cancelled room nights for 2021 and beyond. And CEO Colin Reed recently said that business could even get a boost in the coming years, as the greater number of employees working remotely could make occasional in-person events even more valuable.
Now that we know there's a vaccine, and the end of the pandemic is in sight, Ryman's stock has skyrocketed over the past month or so. And it's easy to see why. Demand certainly exists for group events and live entertainment. And now it looks like those things will become possible once again, sooner rather than later.
How will Ryman do in 2021 and beyond?
With all of the above in mind, it's important to remember that the pandemic is still ongoing and there's a big question mark about when things can start to get back to normal. For example, if most Americans are vaccinated by March, it would have a very different impact on Ryman's business than if it takes until August. So it's difficult to say how the business (or the stock) could perform in 2021.
But Ryman is in a position to do quite well over the long run. Demand is strong, and once the pandemic is over, the company is in an excellent position to get back into growth mode. With the stock still down about 25% in 2020, it could still be a bargain for long-term investors.