The Blackstone Group L.P.'s (NYSE: BX) stock is down from about $25 to under $10 during the last 52-weeks. No wonder. It does deals like buying Hilton Hotels According to The Wall Street Journal, "The $26 billion leveraged buyout of Hilton Hotels Corp., with its 2,900 hotels and 490,000 rooms throughout the world."

Travel is likely to be way, way down during the recession.

But, the news has broader implications than that. Most LBOs are done with heavy debt, usually borrowed from major banks. Often that debt carries high interest rates to account for risk. In a slowing economy, a lot of that debt will default. Companies which were taken private will end up in Chapter 11, especially those which depend heavily on consumer spending.

That brings the issue around to bank earnings in 2009. While write-offs for mortgage-backed paper may be improving somewhat, a wave of LBO defaults are likely to hit money center banks hard. More losses, more need for capital.

The Treasury may not be done handing out money yet. Another wave of trouble for banks is just around the corner.

Douglas A. McIntyre is an editor at 247wallst.com.

It looks like Blackstone Group LP (NYSE: BX) will post its smallest profit since becoming a public company in June 2007.

Simply put, the firm relies on transactions -- which have ground to a halt. As a result, fees are likely to plunge. This is what happened to KKR Private Equity Investors LP, which recently reported 15% write-down of its portfolio.

Keep in mind that Blackstone will also need to come to terms with some mega-deals it struck before the credit crunch hit. An example is the firm's $26 billion leveraged buyout of Hilton Hotels.

True, it's a marquee asset. But the transaction was made when debt was dirt cheap. Blackstone raised about $20 billion in financing for the deal.

Now, with the global economy sliding into recession, it's inevitable that there will be cutbacks in travel.

Now that Blackstone (NYSE: BX) has bought Hilton (NYSE: HLT) for $26 billion, The Wall Street Journal is asking [subscription required] whether Marriott (NYSE: MAR) and Starwood (NYSE: HOT) might be next.

The question is reasonable. Hilton has outperformed the other two companies in the stock market over the last two years, with its shares up 50%. Some of that is due to recent takeover speculation.

Marriott's shares are up only 30% over that period and Starwood's only 15%. All three companies have market caps in the $15 billion to $20 billion range, so none is so large as to be outside the financial ability for a private equity firm to take them over.

But, Starwood may make the easier target. Marriott is still controlled by its founding family while Starwood has had a bit of musical chairs in its executive suite. The company's CEO left in April.

Starwood has had virtually no growth in revenue over that last four quarters, and had low operating income in its last reported quarter. If private equity interests think they can improve that, the company becomes an attractive candidate.

Douglas A. McIntyre is a partner at 24/7 Wall St.

With media coverage of Paris Hilton approaching a frenzy, or at least the overload level, you may be wondering how the company and stock to which she is an heiress rates as an investment.

Hilton (NYSE: HLT) has experienced a nice run-up in price in 2007, topping out at about $38 from around $27 in October, before mirroring the market in the last few months: the stock has consolidated in a $33-$36 range; HLT shares closed down $0.52 Tuesday to $34.32.

With both business and leisure travel fundamentals solid, Hilton has been in expansion mode, and the company plans to add 250 hotels and about 35,000 rooms to its 2,800-property and 483,000-room system. Operationally, HLT is solid: analysts expect per room revenue -- the key hotel metric -- to increase 10% in 2007, and 12% in 2008. The company also has a strong presence in higher-margin upscale lodging, a superior global footprint to guard against regional economic downturns, and favorable brand attributes ... the latest publicity regarding Ms. Hilton, notwithstanding, of course.

The Hilton Hotels Corporation (NYSE: HLT) has unveiled a ten year plan that shows its intention to continue aggressive expansion in world markets, especially in the hot economies of India and China. The plan calls for Hilton to build a thousand new hotels in North America and another thousand worldwide, adding to the 2,800 they currently own. Hilton currently offers almost half-a-million beds in 80 countries under a variety of names reflecting different price points, from Hilton to Embassy Suites, Hampton, Doubletree, and more.

The company plans include expanding top-tier hotels under the Waldorf-Astoria and Conrad brands in places such as Thailand and Saudi Arabia. Mid-priced Hampton and Hilton Garden Inn brands will be pushed in North America, taking advantage of their lower development costs.

The company will affiliate with DLF in India to open 50 or more locations with that country. In China, they plan to work with RREEF and H&Q Asia Pacific to build 20 or more hotels.

This expansion program is already well under way, with over 750 hotels currently in development. Hilton properties will open in four new markets this year: Portugal, Poland, Ukraine and Russia.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Hilton Hotels Corp. (NYSE: HLT) is the favorite conservative play from Dylan Jovine, editor of The Tycoon Report. He explains, "During the past two years, while Paris Hilton has been getting all the press, it's been the Hilton Corporation that's truly been doing great things.

"If HLT reaches $35 per share, sit tight and wait for a pullback. Meanwhile, here are the top reasons Hilton is worth owning:

• Hilton wasn't doing anything for a long time but just managing its assets. Last year they decided to buy back their international arm. They got their house in order and are now expanding. From 2001 to present, profit margins have been steadily increasing.
• I've always loved the hotel business: You build something -- which means that your heavy costs are incurred up front -- and then, if you know how to market it, people come. Most risk is in development.
• During the past few years, Hilton increased capacity at their hotels by lowering costs and tightening operations. This is evidenced by the fact that sales have increased 8% from 2005 while operating income increased by 22% over 2004. Net income was up 93%!
• Transformative year in 2005: Acquired Hilton Lodgings PLC and became largest hotel company in the world with 2,800 properties and 475,000 rooms.
• Demand is very strong -- Hilton managed to raise prices above the inflation rate: That means pricing power.
• When Hilton bought the London Hotel, they decided to do an all-cash transaction, which meant they had to issue debt. The reason? They would rather take on debt then issue equity, realizing the upside.
• Increased operating margins: When you increase revenue but lower costs, you increase profitability. They've been doing that to perfection."

To see Dylan's favorite speculative stock pick for 2007, click here.

MOST NOTEWORTHY: Three prominent stocks in the hotel sector along with Analog Devices (ADI) topped today's list of downgrades.

• A.G. Edwards downgraded three hotels, citing valuation for their rationale: Starwood Hotels (NYSE:HOT), Hilton Hotels (NYSE:HLT) and Marriot Int'l (NYSE:MAR) were downgraded to Hold from Buy.
• Bernstein downgraded Analog Devices (NYSE:ADI) to Market Perform from Outperform; they are cautious on the strategy, execution and overall risk/reward profile of the company.

OTHER DOWNGRADES:

• Brean Murry downgraded two retailers to Sell from Hold today: Claire's Stores (NYSE:CLE) and Aeropostale (NYSE:ARO). The firm believes Claire's recent upside was due to speculation of a buyout, which they feel is unlikely, while Aeropostale's downgrade was based on the "50% off-the-store", which should limit the potential benefits.
• Finally, US Steel Group (NYSE:X) was downgraded to Hold from Buy at Soleil, citing valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: American International (AIG), Dow Jones (DJ) and Hilton Hotels (HLT) top today's giant list of initiations.

• Bank of America initiated American International Group, Inc. (NYSE:AIG) with a Buy and $86 target; the firm said investors could now focus on improving fundamentals, especially in foreign life operations, following the company's two-year turnaround.
• Bear Stearns started Dow Jones & Company, Inc. (NYSE:DJ) with a Peer Perform rating based on valuation and secular declines.
• Jefferies initiated Hilton Hotels Corp. (NYSE:HLT) with a Buy rating and $38 target; Hilton is Jefferies' top lodging pick given its favorable valuation and potential balance sheet improvements from selling hotels.

OTHER INITIATIONS:

• Wedbush started Cheesecake Factory, Inc. (NASDAQ:CAKE) with a Buy rating and $38 target, citing expectations for 20%+ revenue growth in 2007.
• CIBC initiated FuelCell Energy, Inc. (NASDAQ:FCEL) with a Sector Performer rating, citing expectations of a likely liquidity event in July 2008 in order to bolster cash and regulatory uncertainty.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).