Billionaire James Dinan’s Latest Stock Picks Include Citigroup

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Six to seven weeks after the end of a fiscal quarter, hedge funds and other major investors are required to file 13Fs with the SEC. These filings disclose many of their long equity positions as of the end of the quarter (December in the case of current filings). We track this information in the course of developing investment strategies based on hedge fund activity; for example, on average the most popular stocks among hedge funds have outperformed the S&P 500 by 18 percentage points per year (read more about our small cap strategy). We also provide coverage of individual filings for investors who are interested in knowing how top managers have been trading the markets, even with a moderate delay.

James Dinan founded York Capital Management in 1991 and has since become a billionaire due to the fund’s strong performance even as its assets under management have grown. We have gone through York’s 13F for the end of December and picked out some trends that might help illuminate what Dinan and his team were thinking last quarter. Read on for our analysis and review York’s previous filings.

YORK CAPITAL MANAGEMENTRealogy. One big buy in the fourth quarter of 2012 was Realogy Holdings Corp (NYSE:RLGY), which York built up to a total of 5.3 million shares. Realogy is a $6.2 billion market cap real estate brokerage company which franchises Coldwell Banker and Century 21 (it does operate some of these franchises itself as well). This is clearly a bullish play on the housing market. The company went public in October 2012 and is up 33% from its levels shortly after its IPO. Analyst consensus is for it to earn $1.39 per share this year, implying a current-year P/E multiple of 32.  Housing has been stronger over the last year (likely inspiring the IPO), and the market is assigning high multiples to other stocks tied to real estate and homebuilding.

Sprint. Dinan and his team were also buying shares of Sprint Nextel Corporation (NYSE:S), whose stock has risen 155% in the last year due to optimism about its competitive position and due to a plan to buy Clearwire Communications with help from Softbank. At this point Sprint is unprofitable, and sales have been up only slightly, but we have tracked other hedge funds buying in who are apparently convinced by these arguments. Billionaire John Paulson, for example, initiated a large position in Paulson & Co. during the fourth quarter of 2012 (see Paulson’s stock picks).

Find more trades Dinan and his team were making:

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