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TWST: Jason, I understand that you recently upgraded the lodging industry. What were the reasons behind this decision?

Mr. Ader: We upgraded the lodging industry back in January, and we came into this year with lodging stocks trading at a 10-year low in terms of valuation. Historically, lodging stocks have traded between 5 and 12 times EBITDA, and we began this year with lodging stocks trading right at that 5 times EBITDA level. Additionally, we saw evidence that supply growth was shrinking. Last year there was 4.2% growth in hotel rooms; this year it looks like it will be 3.7% growth, and next year 3.2%. Lastly, given the strength of the economy and how low earnings expectations had been for many of the public lodging companies, we thought that the likelihood of upside earnings surprises was quite high in the first half and, if at any point during the first half there was to be a rotation out of new economy stocks into the old, the lodging industry would screen quite well. That was really the rationale behind our upgrade back in January. The first quarter was a very strong one for the industry, and the stocks, for the most part, have done quite well. And the second quarter is shaping up to be even stronger than the first.

TWST: We talked about the extended-stay sector a little earlier, in regard to Accor’s possible interest in Extended Stay America (NYSE:ESA). What is your current rating on Extended Stay America?

Mr. Ader: I’ve got a buy rating on Extended Stay America. And the reason is that I think somebody will buy them. I also believe that their asset value and book value are higher in price than where the shares are currently trading. The principals of this company are financially oriented, and there will be a point in time when they just get frustrated with the lack of interest their stock attracts and the lack of credit the company receives for continuing to exceed earnings expectations. I just think, for that name, if you can be patient — and you may not have to be patient for too long — the upside potential is quite compelling — with very limited downside.