We recently sold La Quinta Holdings (LQ) in all taxable accounts and reinvested the proceeds in Hilton (HLT). This swap was done to capture the loss in LQ to reduce the amount of realized gains for Northlake’s taxable investors without giving up any upside. We see equal potential in LQ and HLT, and we believe that lodging companies in general are better positioned on supply and demand than bearish investors perceive. We may swap back to LQ after the 30-day wash sale period ends.

To see our original thesis for buying LQ, please follow this link: https://northlakecapital.com/wp/2015/04/20/la-quinta-holdings-bigger-in-texas-but-bigger-than-just-texas/

Below are some of the key reasons we like HLT:

-shareholder friendly management team focused on creating value through strategic initiatives

-promising pipeline in underdeveloped markets, with half of pipeline outside of USA

-initiation of capital return through recently announced dividend and expected share buybacks in 2016

-potential to realize value from owned real estate portfolio through asset sales

LQ and HLT are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.  Steve is also portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies. Entermedia currently has no positions in LQ or HLT.