Billionaire James Dinan’s Small Cap Picks Include Corrections Corp Of America (CXW)

Manitowoc Company, Inc. (NYSE:MTW), a $2.6 billion market cap company which manufactures cranes and other construction equipment as well as food service equipment, was another of York’s small cap picks. The emphasis on construction equipment ties Manitowoc particularly closely to the broader economy, and so the stock’s beta is 3.9. Revenue was up 10% in the fourth quarter of 2012 versus a year earlier, contributing to high earnings growth in percentage terms. Citadel Investment Group, managed by billionaire Ken Griffin, was buying Manitowoc and closed 2012 with about 3 million shares in its portfolio (check out more stocks Griffin was buying).

The fund owned just under 2 million shares of Corrections Corp Of America (NYSE:CXW), an operator of prisons and other detention facilities. Revenue was flat in its most recent quarter compared to the same period in the previous year but net income grew 12% on higher margins. Corrections Corp Of America (NYSE:CXW) is priced for growth at trailing and forward P/Es of 25 and 19, respectively, so it would need to sustain its good growth rates for some time to justify the current valuation. Richard McGuire’s Marcato Capital Management also had a large position in the stock (research more stocks Marcato likes).

Dinan added shares of Brookdale Senior Living, Inc. (NYSE:BKD) to York’s portfolio and owned 2.5 million shares at the beginning of January. Brookdale operates a range of senior living facilities, including retirement centers and assisted living communities. The company has been unprofitable in recent quarters- and has underperformed expectations to boot- and revenue growth has been only modest. The bull case is that Brookdale will either get bought or convert to a real estate investment trust (which would allow the company to pay a favorable tax rate).

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