New Models and New Mid Cap Signal

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Northlake’s Market Cap model shifted from large cap to mid cap for December. As a result client positions following this model were shifted from the S&P 500 (SPY) to the S&P 400 Mid Cap (MDY). There is no change to the growth signal in the Style model. Client positions in the Russell Growth (IWF), initiated for the first time last month, will be held at least until January.

As a reminder, November marked the debut of revisions to the Market Cap and Style models. Each model has new inputs and has shifted to a formal set of internal and external indicators. The internal and external indicators replace the former use of “economic, interest rate, and stock market indicators” with the stock market indicators now becoming the internal indicators.

Before looking more at the latest signals, here is recap of how the models work. The Market Cap model continues to recommend either large, mid, or small cap. The Style model has undergone greater change and now has six possible outcomes: large cap growth, small cap growth, large cap value, small cap value, large cap neutral, and small cap neutral.

Further analysis completed by Ned Davis Research (NDR), the original developer of the models, indicated that adding a neutral option produced value added (i.e. better returns in the long run). Northlake worked with NDR to see if linking the style signal to the market cap signal would also add value. We determined that when the Market Cap model was on a small cap signal, the model produced a greater return if the style exposure was also in small cap.

We are in the process of completing a “white paper” describing the models and the changes in detail. It should be in your inbox within the next week.

Going back to the new December signals, the Market Cap model shifted to mid cap primarily due to shifts in internal indicators. Three indicators moved from the large cap to small cap column: Stocks Above 50 Day Moving Average, Net New Highs, and Adjusted Advance-Decline Line. These indicators confirm a broadening advance in the market, historically a time when small and mid cap stocks perform better than large cap stocks. The shift in these indicators moved the overall internal indicator recommendation from large cap to mid cap. In turn, the move of the internal indicator to mid cap when balanced against a weak large cap signal from the external indicators, shifted the entire Market Cap model to mid cap.

The Style model had a lot less volatility this month. Only one underlying internal indicator shifted, as the Moving Average Cross now favors growth. The internal indicators in the Style model strongly favor growth reflecting good performance from a wide array of growth stocks over the past few months. The external indicators are a split decision and rest on a neutral reading. The combination of growth internal and neutral external leads to a solid growth signal.

Last month was the first using the newly updated models and the results were good. The Market Cap model was recommending large caps (SPY) that gained almost 3%, while mid cap was up less than 2% and small cap was barely positive. The large cap signal has been in place since August 1st during which time large caps have gained over 7% compared to a rise of over 5% for mid cap and small cap. The Style model completed its first month on a growth signal in November and growth outperformed value across large cap and small cap.

MDY and IWF 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.

Activision Blizzard: Attractive Play on Video Game Cycle

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Activision Blizzard, Inc. (ATVI) is a new buy for Northlake clients. Now is a good time to invest in ATVI following recently announced better than expected third quarter results. In addition, there have been concerns about growth at ATVI for 2015, but the worries seem to be easing due to the just reported better than expected sales and recent announcements about the pipeline of games in 2015. ATVI is trading at a meaningful discount to its peers. As growth expectations pick up, we believe ATVI could experience expansion in its P-E to match the industry average.

An additional positive is that there could be upside to 2015 EPS estimates as Vivendi sells the last tranche of ATVI stock it received in the sale of Blizzard to Activision. Over the years, ATVI has been opportunistically buying back its own shares, and more share buybacks could drive 2015 EPS estimates higher.

The bottom line is that Northlake has taken a new long position in ATVI at what we see as a low valuation on conservative earnings estimates. We believe that the P-E multiple could expand from 14x to 16x 2015 earnings of $1.50 per share, giving us an price target of $24, for a gain of 20%. At 16x earnings, ATVI would still trade at a discount to its closest peer, Electronic Arts, which trades at over 18x 2015 estimates presently. Should the story evolve as we expect, especially success in recently introduced games and the game releases in 2015, a secondary target in the upper $20s is achievable in the next 12 months.

The video game industry as a whole is looking strong as a new generation of game consoles has been selling briskly and well ahead of initial expectations. Gamers should now shift their spending to software for their new consoles. ATVI has a strong pipeline of next generation games to drive growth during the hardware to software shift, starting this holiday season.

Key titles include the recently released Destiny and Call of Duty: Advanced Warfare, and the upcoming expansions to World of Warcraft , Starcraft, and Skylanders. Additionally, the Blizzard unit announced their first new Intellectual property in 17 years, Overwatch. The initial beta of the game offered to attendees at last week’s Blizzcon convention has been met favorably. Another new title for 2015 that has received good buzz is Heroes of the Storm.

Overall, we believe that ATVI is well positioned for a successful holiday season and for growth in 2015 and beyond. The shares are currently undervalued with positive catalysts lined up from now through 2015.

ATVI is 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. ATVI is a net long position in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.

Signs of Bottoming at CBS

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CBS Corporation (CBS) reported third quarter results in line with or very slightly ahead of recently lowered Wall Street estimates. CBS shares have performed quite poorly this year, down almost 20%, as earnings have steadily fallen due to weaker than expected advertising trends at the CBS Network and the company’s owned and operated TV stations. In addition, investors are worried about a collapse in the TV network business model if TV begins to be delivered via the internet (over the top or OTT) rather than through the cable or satellite set-top box. CBS shares have also probably been a victim of high expectations as the stock entered the year up about 10 times from the summer of 2009 when Northlake first began buying the shares.

I had hoped that the current quarter would set a bottom for the shares if the quarter served to stabilize estimates. My hope was only partly rewarded. Earnings were pretty solid against lowered expectations, a good first step. However, TV advertising, particularly at the CBS Network was a little weaker than expected, especially considering the benefit of the broadcast of September’s Thursday night NFL games. Management did signal better ad trends in the current quarter but many other TV networks have stated that the TV ad market is still sluggish at best.

One positive coming from the quarter is that for the first time ever advertising revenues as a percent of total company revenue fell below 50%. CBS is among the most exposed companies to ad trends since it does not own cable networks that get a large portion of their revenue from monthly affiliate fees paid by cable and satellite companies for the rights to provide the network signal to their customers. CBS is beginning to receive fees from cable and satellite companies for the rights to its main network and management reiterated the growth path of this revenue stream over the next five years. Another factor lowering ad exposure is the big success at Showtime and CBS selling its content to other networks in the U.S. and abroad and to OTT providers like Netflix. The potential to sell Showtime OTT, as HBO has announced, could be a positive spark to the shares.

Overall, I think it pays to stick with CBS. Some signs that TV advertising growth has bottomed, a better advertising outlook on lower expectations for 2015, possible hidden value at Showtime, and continued strength in monetization of TV content should capture investor attention over the next few months and return CBS shares to favor. If earnings estimates have indeed bottomed and advertising growth picks up, CBS shares offer 20-30% upside over the next six months. Supporting the stock in the meantime is an aggressive share repurchase plan and one the best management teams I know of in any industry.

CBS is 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. CBS is a net long position in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.

High Expectations and Timing Issues Should Not Hold Back Disney

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In a very tough year for media stocks, Disney (DIS) has been a standout performer. At recent highs, the shares were up over 20% for the year, more than twice the gain in the S&P 500. DIS was a victim of its own success after reporting its latest quarterly earnings. The results were slightly above expectations but not as big a surprise as the last few quarters. The company also reminded investors that higher sports rights costs at ESPN would slow earnings growth in the cable network segment in 2015 before it accelerates again in 2016. These two factors plus higher corporate wide pension costs and lack of detailed clarity on the company’s share buyback plans in 2016 led to a 2% decline in DIS shares following its latest earnings report.

I believe the recent pullback will prove temporary as ESPN growth is locked in over the next several years as sports rights costs are known and higher affiliate fees paid by cable and satellite companies to cover the added expense have already been negotiated. In addition, sports should continue to prove attractive to advertisers and not vulnerable to loss of advertising dollars to online video.

More importantly, DIS is an incredible roll with its films. Frozen drove much of the upside to earnings expectations over the past year. Guardians of the Galaxy far outperformed expectations and is now another franchise. The next year plus brings another Avengers film, the first Pixar film in two years, the first of the new Star Wars films, and the just opened hit Big Hero Six. In its recent history, DIS earnings and shares have outperformed expectations when the content is humming as the company has incomparable synergies throughout its operating divisions including TV networks, theme parks, consumer products, and video games. Growth will get a further boost in 2017 with the opening of Shanghai Disneyland. DIS shares trade at well deserved premium to the market and peers but remain an excellent core holding with upside of 15-20% over the next year. Showing patience against any of the temporary issues mentioned should prove rewarding.

DIS is 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. DIS is a net long position in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.

Liberty Media Splits in Two to Drive Value Creation

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The big news surrounding Liberty Media’s (LMCA/LMCK)) quarterly earnings was the split of LMCA into two companies as shareholders received one share of Liberty Broadband (LBRDA/LBRDK) for every four shares of LMCA/LMCK.

LMCA/K now is dominated by its 57.5% ownership stake in Sirius XM Satellite Radio. Sirius now represents over 7% of LMCA/K net asset value. Another 10% is a 35% ownership stake in Live Nation Ticketmaster. Sirius and Live Nation had both reported good quarterly results prior to LMCA/K’s report so there was little new information in the latest earnings report from LMCA/K. The reasoning behind splitting Liberty into two companies is so that each new Liberty more closely tracks its underlying asset value. LMCA/K trades at about a 15% discount to its net asset value, an unwarranted large discount given the lack of complexity now that Sirius dominates the asset value. Closing of that discount and continued 20% growth in cash flow at Sirius should produce a superior return for LMCA/K shareholders over the next year. LMCA/K shares are unchanged this year and catch up move now that the split is complete should take place. Future plans for the stake in Sirius – a possible merger or spin-off could become clearer at Liberty’s analyst meeting later this month. We plan to attend.

LBRDA/K holds a 27% stake in Charter Communications (CHTR) and a few other assets. CHTR represents 95% of the net asset value of LBRDA/K. CHTR has been leading cable industry growth this year and is poised for continued gains after it sells, swaps, and buys subscribers from Comcast post the completion of the Comcast-Time Warner Cable merger in the first half of 2015. LBRDA/K trade at a 9% discount to net asset value which I expect to grow nicely as CHTR continues to operate well and then benefits form the transactions with Comcast. Additional upside will come from a rights offering of LBRDA and LBRDK shares coming in December when shares holders will receive for every five LBRDA and LBRDK shares entitling purchase of additional shares at a 20% discount. Northlake intends to exercise those rights and increase ownership of LBRDA and LBRDK in client accounts.

LMCA, LMCK, LDRBA, and LBRDK 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. LMCA, LMCK, LDRBA, and LBRDK are net long positions in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.

Liberty Global Ready for Liftoff

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Liberty Global (LBTYK) had an eventful week. The company closed on its acquisition of Ziggo, giving it nationwide coverage in the Netherlands for its broadband and cable network, reported third quarter earnings, and restarted its share repurchase program. Each item is positive and complements the other which should set the stage for strong performance from LBTYK shares.

Earnings were in line with Wall Street expectations and the company reaffirmed all of its growth guidance for 2014. Revenues grew 3% and operating cash flow growth gained 5%. The best performances were in Germany and the United Kingdom. After a slow start for LBTYK’s acquisition of Virgin Media in the U.K., growth has accelerated with revised promotions and bundles and cost synergies that are running ahead of expectations. Wall Street did not like the Virgin Media acquisition so this should relieve some pressure on the shares.
Ziggo had been the larger cable company in the Netherlands with Liberty as #2. There was no geographic overlap. Netherlands has been a tough market for LBTYK for the past year with negative growth in revenue and cash flow as the national telco, KPN, has been very aggressive with pricing and promotions. The Ziggo acquisitions should yield unusually large synergies and put Liberty on better competitive footing in the Netherlands. Hopefully, in 2015 this should return this important country to growth.

Ziggo was pending before European regulatory authorities for about six months. During this time, LBTYK was unable to repurchase any of its own shares. LBTYK is a prodigious buyer of its own shares, having repurchases $13 billion since 2005. With Ziggo closed, LBTYK has restarted its repurchase program and promised a catch up for the lost six months. This will lead to $2.6 billion in repurchases by year end 2015, representing over 7% of the current shares outstanding.

LBTYK shares had lagged the market’s gains significantly this year until recently. Much of the news just discussed was expected so as closing of the Ziggo deal approached the stock began to firm up. Since earnings were reported the shares have continued to rise and are not up 7% this year. With merger synergies and solid organic growth driving slightly accelerated operating cash flow growth, stable capital spending, and a large share repurchase in place, free cash flow per share is set to explode higher through 2017. I think this can drive LBTYK shares north of $70 in next 18 months making it a very attractive investment.

LBTYK is 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. LBTYK is a net long position in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.

Tweaking the Models and Switching from Value to Growth

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Over the past couple of months I have been working with Ned Davis Research on updates to Northlake’s Market Cap and Style models. Ned Davis originally developed these models about 20 years ago and I began using them around 1999. During this time, I have periodically worked with Ned Davis to analyze the models.

The update to the models has led to some changes in the underlying factors and the potential outputs. However, the basic theory behind the models is unchanged. The models are designed to capture incremental returns by investing in the best performing themes based on company size (Market Cap) and type of company (Style). While the models have been updated, I consider the current changes to be incremental.
The goal of the current updates is to improve the accuracy of the model signals and enhance performance in client accounts. Beyond using some new inputs, the biggest change is that the Style model will now have three possible outcomes: growth, value, or neutral. Neutral will lead to portfolio positons in value being evenly divided between the growth and value ETFs.

I will provide a lengthier update on the changes in the models later this month. I will be able to see the old models through March to help keep a check on how the changes are working out.

For November, the Style model has shifted from value to growth. The Market Cap model is still recommending large cap. As a result of the new signals, client positions in the Russell 1000 Value (IWD) have been sold and proceeds reinvested in the Russell 1000 Growth (IWF). With no change in the Market Cap model, client holdings in the S&P 500 (SPY) will be held.

SPY and IWF 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.

Another Good Quarter and Maybe Regulatory Clarity for Comcast

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In a tough year for media and entertainment stocks, Comcast (CMCSK) has been a good performer rising 11% through October, a bit ahead of the S&P 500. As the just reported third quarter revealed, performance would be even better if not for the headwinds that have buffeted media and entertainment stocks. The good news is that the headwinds for the group and specific to Comcast are likely to diminish in the months ahead. Comcast remains one of the most attractive large cap stocks Northlake follows with upside of 20-30% looking out one year.
In the quarter ending September 30, 2014, Comcast reported results right inline or a bit better than analyst estimates. Overall, revenues grew 4%, operating cash flow rose 7%, free cash flow rose 27%, and EPS gained 12%. This is the math that works for Comcast shareholders as the free cash flow is used to sustain the company’s dominant competitive position through (1) investment in the business or acquisitions, (2) payment of a healthy dividend, and (3) aggressively repurchasing shares. The math gets even better after Comcast’s acquisition of Time Warner Cable closes next spring.

The acquisition of Time Warner Cable is one of headwinds Comcast and the media and entertainment stocks are facing this year. The regulatory review of the merger is closely related to net neutrality debate, which in turn is tied to the fears about the competitive threat and business model interruption surrounding emerging over-the-top (OTT) video services. Over the past few weeks, investors began to fear that the government might block the merger as part of increased regulatory oversight of the media and entertainment industries. This was evident as the spread on the between the value of the merger and Time Warner Cable’s stock price rose form 5% to 10%. However, late last week the spread narrowed back to under 8% after the FCC floated a trial balloon.

I believe that the trial balloon floated last week by the FCC is the first concrete step toward resolving these issues in a way that should not greatly impact Comcast’s long-term growth and releases the upside related to the acquisition of Time Warner Cable. It appears the FCC is looking at a compromise solution on net neutrality where the interconnection between Comcast and other internet service providers (ISPs) and large websites or web services would be under FCC jurisdiction but the relationship between ISPs and their subscribers (that would be you and me) would remain unregulated.

This compromise is important to Comcast because it also signals that approval of the merger with Time Warner Cable is likely. The FCC can use the new net neutrality rules and apply other constraints when it approves the Comcast-Time Warner Cable merger including prohibiting the new larger company from charging websites and service providers for interconnection. Applying conditions to Comcast post-merger also is a good signal to the rest of the industry as to what the FCC is looking to accomplish as it applies regulation in the future. More regulation is never welcome o Wall Street but this compromise probably works for all players and will ease investor and uncertainty. Comcast can thrive under this regulatory framework, which is why I think another quarter of solid earnings can allow the shares to continue to outperform.

CMCSK is 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. CMCSK is a net long position in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.

ClubCorp Holdings: On The Tee For Gains

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ClubCorp Holdings (MYCC) is the largest owner-operator of private country clubs and business clubs in the United States. MYCC recently completed the acquisition of Sequoia Golf, the third largest owner-operator of country clubs, and now owns or operates over 200 clubs in more than 26 states. Clubs are somewhat clustered in warmer clients with Texas and Georgia providing a strong regional presence. MYCC has been around since 1957 and prior to its IPO was controlled by private equity firm KSL Advisors. KSL still owns just over 50% of MYCC but has indicated its desire to sell down the remainder of its ownership over the next three years. MYCC came public via an IPO during the second half of 2013.

MYCC shares look very attractive trading at just over 8 times 2015 estimated EBITDA. This is a sharp discount to somewhat similar companies in the lodging and leisure industries. The multiple should expand as the company continues to generate steady organic growth and adds more clubs via acquisition. At 10 times 2015 estimated EBITDA, the shares would trade at $23 for a gain of 20%. MYCC also pays a very secure dividend adding a current yield of 2.6%.

More dramatic upside could occur if MYCC converts into a real estate investment trust (REIT). This has been suggested by shareholders and management has acknowledged that it is exploring this option. REITs pay no federal taxes and return most of their cash flow to shareholders. Current valuations on comparable REITs suggest that a conversion could realize value at $30 or above for MYCC with a near doubling of the dividend. Recently, two activist hedge funds sent a letter to the MYCC advocating for REIT conversion. On its most recent conference call, MYCC management indicated it would provide further detail on its Board level discussion about REIT conversion, possibly as soon as December.

MYCC reported slightly better than expected third quarter results last week. The results did a nice job of supporting the long-term economic model for MYCC: 1-2% membership growth, upselling an enhanced membership granting privileges at other MYCC owned clubs, continued acquisitions of country clubs, and occasional start-ups of business or alumni clubs. This model should drive mid-single digit revenue growth. MYCC reinvests heavily to upgrade many of the clubs it purchases limiting operating leverage. Nevertheless, some margin expansion should occur as the company integrates its acquisitions. Sequoia, in particular, should offer some operating leverage given economies of scale in purchasing and much greater regional concentration it provides in several markets.

Besides the general risk related to a weaker economy, I think the biggest obstacle for the stock in the near-term will be secondary offerings as KSL reduces its ownership. KSL has a lot of stock to sell but one offset to the added supply is that KSL has to own less than 50% to allow the REIT conversion. As a result, if a secondary is announced, it will likely trigger speculation that a REIT conversion could happen sooner rather than later, helping to support the shares against the added supply.

MYCC is 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 regulatory filings can be found at www.sec.gov. MYCC is a net long position in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, communications, leisure, and related technologies. Steve Birenberg is the portfolio manager of Entermedia, has personal monies invested in the funds, and controls Entermedia’s General Partners.

Google and Apple: A Tale of Momentum

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Google (GOOG) and Apple (AAPL) reported in the past week, kicking off another round of quarterly earnings reports for stocks held in Northlake client accounts. GOOG and AAPL compete directly on operating systems (iOS vs. Android) and the desire to control the largest ecosystem of online consumers. Northlake will continue to hold both stocks in client portfolios, although as explained below there is currently a divergence in the near-term outlook for the two stocks.

GOOG’s earnings were slightly below Wall Street expectations for revenue and EPS with the major concern being a slowing in paid click growth to less than 20%. The stock fell about 3% after the report adding to the decline in the shares that was part of the larger correction in the market revolving around fears of slowing global growth, Ebola, collapsing oil prices, and ongoing geopolitical tensions related to ISIS and Russia.

AAPL had an excellent quarter and the stock is trading up about 2% after rising 2% the day of the report. Revenues and EPS came in above expectations driven by better than expected shipments of the new iPhones and continued strength in Mac sales. Guidance for the upcoming quarter was inline with analyst expectations. In Apple’s world that is better than expected guidance given the company’s history of providing a conservative outlook.

Both of these stocks are quite sensitive to the trend in growth. AAPL shares pulled back as earnings growth stalled and even went negative. The share recovery in the stock this year coincides with a return to earnings growth, up about 20% in the last two quarters. The outlook for continued double digit growth is good given the gradual global rollout of the new iPhones and the likelihood that margins benefit form economies of scale as the product transition matures.

GOOG has 20% growth and, in my opinion, reported a quarter that had little impact on the overall bullish thesis. However, GOOG is seeing slowly moderating growth as search battles for ad dollars with Facebook and in app searches on mobile devices. GOOG also continues to invest heavily to sustain its growth but that is serving to depress margins while new businesses develop.

Investors in growth companies like AAPL and GOOG pay for growth and are especially sensitive to momentum in growth in the short-term. For now, that means investors are willing to be optimistic toward AAPL but cautious approaching GOOG. Over the balance of this year, I think that likely means that GOOG shares continue to struggle while AAPL breaks out to new all-time highs.

For the long-term, I see both companies well positioned, with GOOG arguably in a better position given a clearer path to sustained and consistent double digit growth in revenue and earnings.

I see AAPL trading to north of $120 as earnings estimates for 2015 move toward $8.00. A 15X multiple plus a little credit for over $20 in pre-tax cash per share should support another 20% upside in the shares over the next six months.

GOOG now trades at 17X 2015 earnings estimates without given any credit to over $100 in pre-tax cash on its balance sheet. I believe it will take a slight reacceleration in growth for GOOG shares to move significantly higher and the catalyst for that is likely next quarter’s earnings report. If growth expectations firm up, investors will look ahead to 2016 earnings of around $35 and give the P-E multiple a boost, setting up a move to $600-700 over the next 18 months.

GOOG and AAPL 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 regulatory filings can be found at www.sec.gov. GOOG and AAPL are net long positions in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, communications, leisure, and related technologies. Steve Birenberg is the portfolio manager of Entermedia, has personal monies invested in the funds, and controls Entermedia’s General Partners.