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LRT Capital Management, an investment management firm, published its first-quarter 2021 investor letter – a copy of which can be downloaded here. A net return of +5.12%% was recorded by the LRT Economic Moat strategy for the Q1 of 2021, while the LRT Market Neutral strategy returned +2.4% for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
LRT Capital Management, in its Q1 2021 investor letter, mentioned Hilton Worldwide Holdings Inc. (NYSE: HLT), and shared their insights on the company. Hilton Worldwide Holdings Inc. is a McLean, Virginia-based hospitality company that currently has a $35 billion market capitalization. Since the beginning of the year, HLT delivered a 12.89% return, extending its 12-month returns to 58.37%. As of May 27, 2021, the stock closed at $126.27 per share.
Here is what LRT Capital Management has to say about Hilton Worldwide Holdings Inc. in its Q1 2021 investor letter:
"Hilton is the second largest hotel company in the world after Marriott International (MAR). The company owns a portfolio of brands from the low end (Hampton Inn, Hilton Garden Inn), through the mid-tier (DoubleTree, Hilton, Curio, Embassy Suites, Homewood Suites), to the luxury high end (Waldorf Astoria, Conrad, LXR). Hilton’s portfolio is almost perfectly balanced between the three categories, while the majority (73%) of the company’s EBITDA geographic exposure is in the United States with Asia Pacific and Europe each contributing another 10%. Hilton today is almost exclusively a manager and franchisor of hotels, not a hotel owner. The company owns 61 hotels, manages 715 and franchises 5,702 – in total 6,478 properties with over 1 million combined rooms.8 Like all franchise based businesses Hilton requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Hilton currently faces a difficult operating environment due to the covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure – if pent-up demand for travel materializes post-Covid, as we expect it will, the company will quickly go from losing money to raking in profits.