Billionaire James Dinan’s Latest Stock Picks Include Citigroup

Selling Yahoo. York trimmed its holdings of Yahoo! Inc. (NASDAQ:YHOO) from about 11 million shares at the beginning of October to 6.3 million at the beginning of this year. The Web portal trades at 17 times forward earnings estimates, and is up 41% in the last year due to the removal of its former CEO by an activist campaign led by billionaire Dan Loeb (find Loeb’s favorite stocks) and his replacement with former Google Inc (NASDAQ:GOOG) employee Marissa Mayer. Yahoo may be in the process of selling off some of its assets, which could create shareholder value directly and also improve its concentration on the company’s core business.

Big bank, not small bank. York sold all of its shares of regional bank Regions Financial Corporation (NYSE:RF) while increasing its stake in Citigroup Inc. (NYSE:C) from about 430,000 shares at the end of September to 2.7 million shares at the beginning of 2013. Citigroup was the fourth most popular stock among hedge funds in the fourth quarter of 2012 (see hedge funds’ five favorite stocks last quarter) and it trades at a discount to book value with a P/B ratio of 0.7 as many investors do not trust the quality of its assets. Regions actually carries a very similar discount to the book value of its equity, and forward earnings multiples for the two banks are in the 8-9 range (roughly even with at least the other large banks we have looked at).

We think that both Regions and Citigroup are cheap enough to be worth consideration as value stocks, regardless of Dinan’s moves. Yahoo and Sprint investments are likely dependent on the specifics of their respective deals, and it might be best to wait for more information in both cases. We aren’t very familiar with Realogy due to its short time as a public company, but with York interested it could be used as a housing play in substitute to homebuilders or other stocks which are tied to the weight of real estate transactions.

Disclosure: I own no shares of any stocks mentioned in this article.