York Capital Management is a hedge fund with over $20 billion in assets under management. Employing the event-driven strategy, the fund managed to return around 14% since its foundation in 1991, versus the S&P 500 gain of 9%. On Thursday, the manager and founder of York Capital, James Dinan, came to CNBC‘s Squawk Box to discuss his three of its largest bets and share his three rules for investing.
Earlier, we discussed the top five largest holdings from York’s most recent 13F filing. The most valuable long position has been reported in General Motors Company (NYSE:GM), followed by W.R. Grace & Co (NYSE:GRA), Hertz Global Holdings Inc (NYSE:HTZ). However, the 13F portfolio represents only a part of the fund’s investments, that’s why it is important to see which picks are in fact, Mr. Dinan’s most favorite.
American Airlines Group Inc (NASDAQ:AAL) is James Dinan’s favorite stock, which he also discussed before Christmas last year. In its latest 13F, York Capital reported adding the company to its equity portfolio, the stake amassing over 8.0 million. American Airlines has been bought by U.S. Airways, the merger creating the largest airline in the world. York is clearly bullish on the stock, which already managed to gain over 50% since the beginning of the year. As Dinan says, American Airlines Group Inc (NASDAQ:AAL) is a “$60 plus potential stock.”
On the back of the merger, many investors placed their bets on the newly formed airline. For example, Paulson & Co, led by John Paulson also has initiated a stake in American Airlines Group Inc (NASDAQ:AAL), reporting 8.5 million shares of the company, in its latest 13F.
The Men’s Wearhouse
The Men’s Wearhouse, Inc. (NYSE:MW) was another stock mentioned by Dinan, during his intervention on CNBC. The company is currently on the radars amid its attempts to buy Jos. A. Bank Clothiers Inc. (NASDAQ:JOSB), a deal which The Men’s Wearhouse, Inc. (NYSE:MW) has been pursuing since November, and recently increased its bid to $1.8 billion, from the initial $1.5 billion. One of the main interesting points in this “hostile” takeover is the cost savings, which might result from it, Dinan said.
“The remarkable thing here is the amount of cost-savings that could potentially come from this transaction: $100 million to $150 million are the so-called synergies from this merger”
Overall, Dinan considers that The Men’s Wearhouse, Inc. (NYSE:MW) is still a buy at $55, and it can advance by around $6-$7 over the next couple of years, which together with a multiple, makes MW a “$75-$90 type stock.”
In the latest round of 13F filings, York Capital reported ownership of around 880,700 shares of MW. Kenneth Mario Garschina‘s Mason Capital Management, is another investor that recently went bullish on MW and disclosed a 6.4% position in the company. Ricky Sandler’s Eminence Capital also pursues the merger of The Men’s Wearhouse, Inc. (NYSE:MW) and JOSB, being a shareholder of both companies.
Dinan is also bullish on Hertz Global Holdings, Inc. (NYSE:HTZ), in which it owns over 12 million shares, according to the 13F filing. The position worth $345.3 million, is the fourth largest in York’s equity portfolio. At the end of 2012, Hertz acquired Dollar Thrifty, a car rental service, in which York was the largest shareholder. Since the end of 2012, the stock of Hertz Global Holdings, Inc. (NYSE:HTZ) almost doubled. Aside from that, Dinan also considers that Hertz has a great equipment rental business, which could become a spin-off later.
The whole discussion of these three picks can be watched below:
Moreover, Mr. Dinan also presented some tips that should be applied by all investors. One of them is diversification of the portfolio, because “you never know when the dangers will hit.”
“Make your position size more a function of not how much you can make, but how much you can lose”
At the same time, the manager of York Capital advises investors to avoid leverage, and to focus on liquidity, because in this way, “you can get out when you’re wrong.”
Check out this sequence below: