8 Best Stocks to Buy According to Billionaire Jamie Dinan

In this article, we discuss the 8 best stocks to buy according to billionaire James Dinan.

York Capital Management is an investment firm founded in 1991 by James “Jamie” Dinan. The firm is headquartered in New York City, with offices in London and Hong Kong. York Capital Management employs a multi-strategy approach to investing, focusing on event-driven and special situation investing. Apart from hedge funds, York Capital Management also runs private equity and debt funds. Mr. Dinan has been a leading figure in the hedge fund industry for over two decades and is widely respected for his investment acumen and risk management skills.

Mr. Dinan graduated from the Wharton School of the University of Pennsylvania in 1981 with an undergraduate degree in economics and began his career in the investment banking division of Donaldson, Lufkin & Jenrette (DLJ). After receiving his MBA from Harvard University in 1985, he joined the merger arbitrage firm Kellner DiLeo & Company, where he rose to the rank of General Partner. In 1991, Mr. Dinan founded York Capital Management with $3.6 million in seed capital raised mostly from his former DLJ colleagues. In the following years, York Capital Management grew into one of the world’s largest and most successful hedge funds, with assets climbing up to $26 billion in 2015.

However, since then, the fund’s assets under management have come down significantly as it has struggled to generate alpha for investors amidst a broader market rally in the late 2010s led by tech stocks. As a result, the fund started winding down several of its hedge funds at the end of 2020 to focus mostly on private equity and distressed asset funds that lock in investors’ money for an extended period.

York Capital Management’s Portfolio

With York Capital Management cutting down on its hedge fund operations, the value of its 13F portfolio has also witnessed a drastic decline. At the end of June this year, the aggregate value of York Capital Management’s 13F holdings stood at just $307.2 million, in stark contrast to almost $1.8 billion at the end of Q3 2020. Its latest 13F filing shows that during the second quarter, the fund added three new stocks to its 13F portfolio and increased its holdings in two companies. In addition, York Capital Management didn’t reduce or sell its entire stake in any of the securities it carried from the first quarter. The most important information one could glean from the fund’s latest filing was the aggregate value of its top three holdings, namely Cedar Fair, LP (NYSE:FUN), NextDecade Corporation (NASDAQ:NEXT), and Humacyte, Inc. (NASDAQ:HUMA) surpassed 95% the value of its 13F portfolio at the end of Q2.

Our Methodology

Insider Monkey has a database of 895 hedge funds whose movements we track closely to identify the top consensus stock picks of hedge funds on a regular basis. We selected the eight stocks discussed in this article based on the 13F regulatory filing submitted by York Capital Management with the SEC for the quarter ending June 30.

8 Best Stocks to Buy According to Billionaire James Dinan

8. Diebold Nixdorf, Incorporated (NYSE:DBD)

York Capital Management’s Stake Value: $1,982,000

Percentage of York Capital Management’s 13F Portfolio: 0.64%

Number of Hedge Fund Holders: 18

Diebold Nixdorf, Incorporated was a new entrant in York Capital Management’s 13F portfolio during the second quarter. Diebold Nixdorf, Incorporated is a tech company that provides connected commerce solutions to retailers and financial institutions primarily in Europe, Asia and Africa. The company’s stock has lost over 90% of its value in the last ten years and is trading down by 67% year-to-date.

A few days after Diebold Nixdorf, Incorporated reported its second-quarter earnings, JPMorgan Chase & Co. analyst Paul Chung released a note on August 12 in which he downgraded the stock to ‘Underweight’ from ‘Neutral’, citing the company’s reported numbers as “low quality.” According to Mr. Chung, the company is lowering its revenue guidance but keeping its EBITDA and free cash flow guidance unchanged, which should concern investors. He noted, “We see elevated risks to hitting guidance, in another heavily back end loaded year.”

7. Paysafe Limited (NYSE:PSFE)

York Capital Management’s Stake Value: $2,671,000

Percentage of York Capital Management’s 13F Portfolio: 0.86%        

Number of Hedge Fund Holders: 27

York Capital Management initiated its stake in Paysafe Limited during the last quarter of 2021 and boosted it by 75% in the next quarter. However, the fund could have been averaging down its position when it increased its stake during this year’s first quarter as Paysafe Limited shares (NYSE:PSFE) have fallen hard since late last year. Paysafe Limited’s  stock fell from a cliff in November 2021 after the company reported numbers below expectations for its fiscal 2021 third quarter and lowered its forward guidance.

Paysafe Limited became an independent publicly traded company in late 2020 after it merged with Foley Trasimene Acquisition Corp. II, a SPAC floated by billionaire William P. “Bill” Foley. Smart money investors have been fleeing Paysafe Limited’s stock since mid-2021. This can be gauged by the number of hedge funds among those tracked by Insider Monkey disclosing a stake in the company dropping to 27 at the end of Q2 this year versus 55 for the same period in the previous year. Here’s what billionaire Dan Loeb’s Third Point Management had to say about Paysafe Limited in its fourth-quarter 2021 investor letter:

“The top five losers for the quarter (includes) Paysafe Ltd. The fourth quarter marked the beginning of a market rotation from growth to value that accelerated into January of 2022. One of the most stinging losses for the quarter was our investment in Paysafe Ltd, which was down 49% in Q4 and 74% for the year due to its failure to execute the plan articulated in its 2020 IPO (via a SPAC transaction, in which we participated.) We exited the position in its entirety following the company’s Q3 earnings report, and the shares have languished since then.”

6. Hanger, Inc. (NYSE:HNGR)

York Capital Management’s Stake Value: $3,853,000

Percentage of York Capital Management’s 13F Portfolio: 1.25%

Number of Hedge Fund Holders: 13

While York Capital Management didn’t make changes to its holdings in Hanger, Inc. during Q2, Jim Simons’ Renaissance Technologies raised it by 3% to 143,291 shares, and Ken Griffin’s Citadel Investment Group boosted its stake by 137% to 203,741 shares. Austin, Texas-based Hanger, Inc. provides orthotic and prosthetic (O&P) services under its two operating segments – Patient Care and Products & Services. The company was founded in 1861 and currently employs over 5000 individuals.

Hanger, Inc. stock jumped more than 20% in a day after the company announced that it would be taken private by a healthcare investment firm, Patient Square Capital, in a deal which pegged the former’s enterprise value at $1.25 billion. As part of the deal, Hanger, Inc.’s stockholders will receive $18.75 in cash per share when the deal closes. John W. Rogers’ Ariel Investments had this to say about Hanger, Inc. in the fourth quarter 2021 performance letter it sent to its investors:

“A reopening of the global economy with a reduction in the severity of the pandemic has led us to invest in companies that would perform well with an end to Covid restrictions such as canceled sports and entertainment events or companies that would benefit from pent-up demand for consumer products. Healthcare holdings such as Hanger Inc. (HNGR) saw demand for their “elective” healthcare services decline sharply as hospitals lost capacity for non-essential surgeries or orthotics. We believed those companies should see a rebound in their business as cases decline. Unfortunately, two new Covid variants turned this theme from a tailwind to a headwind in the second half of the year. First, Delta then Omicron sent Covid cases higher and both companies saw their businesses slow again. Hanger declined -17.44%. As we write, we believe Omicron cases could be nearing a peak which would allow our thesis to better play out this year.”

5. NCR Corporation (NYSE:NCR)

York Capital Management’s Stake Value: $4,667,000

Percentage of York Capital Management’s 13F Portfolio: 1.51%

Number of Hedge Fund Holders: 47

NCR Corporation became a favorite of hedge funds, especially those that practice special-situation investing, during the second quarter of 2022. As a result, the number of hedge funds tracked by Insider Monkey that disclosed having a stake in the software company jumped to 47 at the end of June from 36 at the end of March. Apart from York Capital Management other hedge funds that disclosed initiating a stake in the company included Sander Gerber’s Hudson Bay Capital Management and Jacob Rubin’s Philosophy Capital.

In April, reports emerged that NCR Corporation had received interest from six bidders looking to buy parts of the business or the entire company. After talking with multiple suitors, the Wall Street Journal reported in July that NCR Corporation was in exclusive talks with private-equity firm Veritas for a buyout. However, those talks ended abruptly, and on September 15, NCR Corporation announced through a press release that it had ended the sale process. In addition, the company also revealed that its board had approved splitting the business into two independent publicly traded companies – one focusing on ATMs and the other on digital commerce. In the press release, Frank R. Martire, executive chairman of NCR’s board of directors, was quoted saying:

“It has become clear that NCR has the opportunity to unlock value for our shareholders by separating our digital commerce business and our ATM business. We have made significant strides over the past four years in creating a leading software-as-a-service business while continuing to strengthen and grow the ATM business. By creating two best-in-class independent companies, we should be able to accelerate the pace of transformation by enabling each to execute its own growth strategies and better capture the value-creation opportunities ahead.”

4. PGT Innovations, Inc. (NYSE:PGTI)

York Capital Management’s Stake Value: $6,019,000

Percentage of York Capital Management’s 13F Portfolio: 1.95%

Number of Hedge Fund Holders: 12

PGT Innovations, Inc. was the third stock – apart from Diebold Nixdorf, Incorporated and NCR Corporation – that made its debut in York Capital Management’s 13F portfolio during the second quarter. Founded in 1980, PGT Innovations, Inc. manufactures and sells impact-resistant aluminum frame windows and doors. Shares of PGT Innovations, Inc. have been far more resilient than most industrial stocks amid a selloff in broader markets this year. They are trading at the same levels as they were at this time last year and also near the same levels they traded in Q3 2018 when 26 hedge funds among those we track disclosed having a stake in the company.

For its fiscal year 2022 second quarter, PGT Innovations, Inc. reported non-GAAP earnings per share of $0.67 on revenue of $407 million, beating analysts’ consensus estimates by $0.22 and $42.27 million, respectively. Despite this, on August 15, analysts at JPMorgan Chase & Co. lowered their price target on the stock to $19 from $22, representing a potential downside of 5.8% from the stock’s last closing price.

3. Humacyte, Inc. (NASDAQ:HUMA)

York Capital Management’s Stake Value: $7,355,000

Percentage of York Capital Management’s 13F Portfolio: 2.39%        

Number of Hedge Fund Holders: 9

Biotech firm Humacyte, Inc. became a public company last year by merging with Alpha Healthcare Acquisition Corp., a SPAC, in a deal that valued the former at $1.1 billion. However, since becoming public Humacyte, Inc.’s stock has been on a consistent downward path and has lost over 70% of its value in the last one year alone. Based in Durham, North Carolina, the company develops and manufactures implantable, off-the-shelf, and bioengineered human tissues for the treatment of diseases and conditions.

Analysts on Wall Street who track the stock have drastically divergent views on its trajectory. For example, BTIG Research’s analysts, who earlier had a price target of $12 on the stock, reduced it to $10 on July 15, which still represents a potential upside of over 150% from the stock’s current trading price. In comparison, analysts at Piper Sandler, who already had a low $4 price target on Humacyte, Inc.’s stock, reduced it further to $3.5 on August 12, representing a potential downside of 11.4%.

2. Cedar Fair, LP (NYSE:FUN) 

York Capital Management’s Stake Value: $26,576,000

Percentage of York Capital Management’s 13F Portfolio: 8.63%

Number of Hedge Fund Holders: 12

Amusement and water parks operator Cedar Fair, LP’s stock saw a huge bull run starting from late 2009 up until mid-2017, during which it multiplied seven times. However, it cooled off in the next three years and plunged heavily when the world went into lockdown in March 2020. Though it has recovered significantly since then, it is yet to touch the 2017 highs.

Last month, Deutsche Bank analyst Chris Woronka penned a note to clients after he and his team visited two Cedar Fair, LP’s sites and met the company’s management. In his note, Mr. Woronka wrote:

“Net, we continue to view FUN and SEAS as being well positioned to benefit from a healthy consumer wallet for out-of-home leisure experiences and anticipate that momentum should continue for the balance of the year. We view both of these stocks as being attractively valued and note that both are now actively returning capital to investors. At SIX, as we mentioned in our 2Q takeaways note, we acknowledge a lack of conviction in the premiumization strategy’s ability to succeed on the scale it needs to, but continue to think risk/ reward in the stock skews to the upside from here.”

On September 9, analysts at Rosenblatt Securities reiterated their ‘Neutral’ rating on Cedar Fair, LP’s stock while upping their price target on it to $41 from $40, representing a potential downside of 8.1% from the stock’s last trading price.

1. NextDecade Corporation (NASDAQ:NEXT)

York Capital Management’s Stake Value: $254,499,000

Percentage of York Capital Management’s 13F Portfolio: 82.73%      

Number of Hedge Fund Holders: 8

York Capital Management disclosed a stake in NextDecade Corporation for the first time in its 13F filing for the third quarter of 2017. At the end of June, not only was the energy company the fund’s top stock pick but also accounted for almost 83% of the aggregate value of York Capital Management’s entire 13F portfolio. NextDecade Corporation has also been among the best performers amongst the fund’s stock picks, with the company’s shares surging by 165% in the last 12 months.

Despite the run-up in NextDecade Corporation’s stock, it seems several fund managers don’t believe this run will continue. The number of funds covered by Insider Monkey that disclosed holdings in the company declined to 8 at the end of June from 14 at the end of March this year. Funds that sold their entire stake in NextDecade Corporation during Q2 included Dmitry Balyasny’s Balyasny Asset Management and Ari Zweiman’s 683 Capital Partners. On September 15, NextDecade Corporation announced a private placement of its common stock whereby it will sell shares worth $85 million to 10 institutional investors for $5.50 per share.

You can also look at 9 Best Cheap Dividend Kings To Buy and 10 Best Robotics Stocks To Buy Now.

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This article is originally published at Insider Monkey.