Billionaire James Dinan’s Most Promising Stock Picks Include United Rentals

MetroPCS Communications Inc (NYSE:PCS) was another of Dinan and his team’s stock picks. MetroPCS’s P/E multiple based on expected earnings for 2013 is 13, with the sell-side projecting enough earnings growth over the next several years to generate a five-year PEG ratio of 0.7. John Paulson was also buying the stock in the third quarter of 2012, as Paulson & Co. reported a position of almost 24 million shares in its own 13F (check out Paulson’s stock picks).

York increased its holdings of Corrections Corp Of America (NYSE:CXW) by 13% to 1.9 million shares. The company is a private owner and operator of correctional and detention institutions in the United States. Its earnings multiples are fairly high, in the 23-25 range, as the markets anticipate high earnings growth over the next several years. Marcato Capital Management had Corrections Corp of America as its largest holding at the end of September (research more stocks Richard McGuire and the Marcato team like).

Dinan and the rest of the investment team sold shares of United Rentals, Inc. (NYSE:URI) but the construction and industrial equipment company was still one of its top five small-cap stocks. Sales and net income have been up, and the sell-side is optimistic here as well with the $4.4 billion market cap coming in at 10 times expected 2013 earnings. Like Manitowoc, United Rentals has a high beta (3.1 in this case, unsurprising given that its business is dependent on the demand for equipment). Short interest is high with 16% of outstanding shares held short. Point State Capital initiated a position of 3 million shares during Q3 2012 (see more stock picks from Point State Capital).

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