Finding good stocks to buy sometimes requires putting pieces together as in a puzzle. However, when you do it (and sometimes it takes time), you can come up with a potentially profitable picture for a stock.

Take the case of hotel stocks. They are a group that got hit hard after the 9-11 terrorists’ attack in 2001. That’s when airline travel slowed and the economy declined. Travel ground to a snail’s pace.

Now, however, hotel issues, such as Four Seasons Hotels Inc. (FS), Hilton Hotels Inc. (HLT) and Host Hotels and Resorts Inc. (HST), and even hotel-casino stocks, such as Las Vegas Sands Corp. (LVS) and the new Wynn Resorts Ltd. (WYNN), are doing very well.

If an investor were to sit down and put the pieces together like a puzzle, the hotel issues would look very good, and he or she would see that the group is moving into the forefront of price performance in the stock market.

Piece number one: The hotel business is good.
Industry reports say the hotel industry this year will show its best gains in more than 25 years. The forecast is that revenue-per-available room, or REVPAR, will be up 8.7percent in 2006 -- its best gain since 1980.

REVPAR is a key lodging metric used to measure occupancy and room-rate growth. Earlier in the year, analysts were expecting only a 7.7 percent gain. So, business is better than expected.

Piece number two: Profits for many hotel stocks will be up sharply. That is because the economy is strong and demand for rooms is robust. This year, occupancy should be 64.2 percent -- the highest level since 1996. Overall, analysts say hotel capacity is not keeping up with demand.

Four Seasons’ earnings this year should jump 48 percent and next year 24 percent. Hilton’s net should rise 32 percent this year and 13 percent next year while Hosts’ profits should soar 554 percent this year and 19 percent next year.

Among hotel-gaming issues, Las Vegas Sands, which runs the Venetian Resort Hotel Casino in Las Vegas, should post a 59 percent increase in net this year and a 35 percent gain next year. Wynn, which operates the Le Reve luxury hotel in Las Vegas, is expected to rack up a 208 percent gain in net income this year and a 449 percent surge next year.

Piece number three: Takeover developments. This wildcard piece shows that some see certain hotel stocks as undervalued.
Four Seasons’ stock soared from 64 to 82.50 on November 3rd. That’s when it received a buyout valued at $82. The offer came from Isadore Sharp and Triples Holdings Limited (the controlling shareholder of Four Seasons), Kingdom Hotels International (a company owned by a trust created by His Royal Highness Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud) and Cascade Investment, L.L.C. (an entity owned by William H. Gates III).

So, there are some big money wants in the hotel industry now. That says something.

Piece number four: Several hotel stocks are breaking out of bases and hitting new highs.
Technical analysts perk up when they see many stocks breaking out to new highs, and they all belong to the same industry group. It is well known that, when an industry move is underway, it is a powerful driver for many of the stocks in the industry because it usually means some powerful economic force is at work in a bullish way.

Besides the blow-out move by Four Seasons, Hilton has climbed from 24 in August to 31. It broke out from a base at 29 in mid-November. Host broke out from a base at 23.50 in November. It is a slower-moving stock but appears poised to hit a new high. Also, Marriott (MAR) has hit a new high at 44.76 as of mid-November. It is up from 35 in August.

Las Vegas Sands soared from 60 in August to a new high of 92. It broke out from a base at 80 in early November. Wynn is hot. It gapped out from a base at 74 in November and is now at 91 as of mid-November.

So, the picture for hotel stocks looks bright for the bulls. Also, eSignal subscribers should be on the lookout for any new stock offerings in the hotel industry. If business remains good, a new issue could do well.

So, when looking for stocks to buy, eSignal subscribers should always look to see if there is a “puzzle that can be put together” that can provide either a bullish or bearish picture. That will give you a big edge when searching for good stocks to go long, or even short.