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Billionaire James Dinan’s Top New Stock Picks This Quarter

At the beginning of 2016, York Capital Management sent a letter to its investors announcing that one of its top partner Michael Weinberger would be leaving the fund to start his own hedge fund later in the year. The New York-based fund was started by billionaire James Dinan in 1991 and, in the last 25 years, it has grown from $3.6 million to $23 billion in assets under management. Although York Capital Management has consistently outperformed the market, 2015 turned out to be a really bad year for the firm. Its flagship fund, which has provided annualized returns of 13% since inception, was down 12% for the year through mid-December. Moreover, calculations done by Insider Monkey show that 56 long positions held by York Capital Management in companies worth at least $1 billion delivered a weighted average loss of 11% in 2015. The recently submitted 13F filing reveals that York Capital Management made some notable changes in its portfolio during the last quarter of 2015, selling its entire stakes in 44 stocks and initiating 41 new positions. In this article we are going to take a closer look at

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).

James Dinan
James Dinan
York Capital Management

#5 Pfizer Inc.(NYSE:PFE)

– Shares Owned by York Capital Management (as of December 31): 4.12 million

– Value of Holding (as of December 31): $133.15 million

Shares of Pfizer Inc. (NYSE:PFE) have been on a gradual decline since the company announced that it would be merging with Allergan plc Ordinary Shares (NYSE:AGN) in a $160 billion deal. However, after the company received an expanded FDA approval for its breast cancer drug Ibrance, on February 19, several investors have become more confident that the stock can start moving higher soon. Due to this approval, there is now a high chance that Ibrance will get registered in Europe by the end of 2016 and will lead to margin expansion for the company. On February 16, Pfizer Inc. (NYSE:PFE)’s Wyeth unit settled a seven-year-old lawsuit against it for overcharging Medicaid for its heartburn medicine ‘Protonix’ by agreeing to pay $784 million in fines. Barry Rosenstein‘s JANA Partners also initiated a stake in Pfizer during the fourth quarter by purchasing nearly 9.17 million shares of the company.

#4 Yahoo! Inc. (NASDAQ:YHOO)

– Shares Owned by York Capital Management (as of December 31): 4.51 million

– Value of Holding (as of December 31): $150.25 million

After having declined by over 30% in 2015, Yahoo! Inc. (NASDAQ:YHOO)’s stock has again lost 10% so far this year. In the last few months, the company has come under pressure from activist investors, who have suggested that it should sell its core business and retain its stakes in Alibaba Group Holding Ltd (NYSE:BABA) and Yahoo! Japan. As a result of that, on February 19, the company informed its investors that it had formed a special committee of independent directors that will look for strategic alternatives and the company has hired financial advisors to reach out to potential investors for the possible sale of its core business. On February 11, analysts at Oppenheimer reiterated their ‘Outperform’ rating on the stock, but lowered the price target to $40 from $49. Billionaire David E. Shaw‘s D. E. Shaw reduced its stake in Yahoo! Inc. (NASDAQ:YHOO) by 23% to 8.12 million shares during fourth quarter.

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#3 Alphabet Inc (NASDAQ:GOOGL)

– Class A Shares Owned by York Capital Management (as of December 31): 200,534

– Value of Holding (as of December 31): $152.18 million

Alphabet Inc (NASDAQ:GOOGL) turned out to be one of the best performing large-cap tech stock last year, as it registered a 43% boost during the second-half of the year. Despite the weakness in the broader market has caused the stock to decline by around 7% so far this year, the company has been rewarding its investors by informing them about positive developments on a regular basis. Recent reports suggest that it is trying to gain a foothold in the virtual reality (VR) space by developing a standalone VR headset, which won’t require being connected to a computer, phone or gaming device. Moreover, it has strengthened its presence in the e-commerce space by announcing that it would include fresh groceries in its same-day delivery service. David Fear’s Thunderbird Partners initiated a stake in Alphabet during the fourth quarter by purchasing 167,355 class A shares of the company.

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#2 Synchrony Financial (NYSE:SYF)

– Shares Owned by York Capital Management (as of December 31): 6.47 million

– Value of Holding (as of December 31): $197 million

Synchrony Financial (NYSE:SYF) became a fully independent company after its separation from General Electric Company (NYSE:GE) at the end of last year. Though the stock is currently trading below the $36.40 high it reached last year, analysts are optimistic about it, due to the impressive quarterly results the company has reported, low valuation, and its plans to return some cash to shareholders, which it revealed in its last earnings call. For the fourth quarter Synchrony Financial (NYSE:SYF) posted EPS of $0.65 on revenue of $3.21 billion, versus analysts’ projections of EPS of $0.63 on revenue of $3.20 billion. On January 13, analysts at Goldman Sachs upgraded the stock to a ‘Conviction-Buy’ from ‘Buy’, while keeping their price target at $37.

#1 EMC Corporation (NYSE:EMC)

– Shares Owned by York Capital Management (as of December 31): 8.44 million

– Value of Holding (as of December 31): $216.88 million

EMC Corporation (NYSE:EMC) represented York Capital Management’s largest new equity stake at the end of the fourth quarter. Shares of the company spiked in mid-October after Dell announced that it will acquire the company in a deal worth $67 billion. However, they have given up most of those gains since then. Since EMC Corporation (NYSE:EMC) owns over 83% of all outstanding shares of VMware, Inc. (NYSE:VMW), Dell recently revealed in a regulatory filing that the value of the deal can decline by $10 billion due to the considerable drop of the VMware, Inc. (NYSE:VMW)’s stock in the past few weeks. Recent reports suggest that Dell is on its way to get unconditional approval for the deal from the European Union antitrust regulators. However, the transaction still faces some hurdles, including a number of lawsuits filed by a large number of EMC Corporation’s shareholders, alleging that it is short-changing investors in its merger with Dell. Billionaire Paul Singer‘s Elliott Management increased its stake in EMC Corporation by 25% to 42.23 million shares during the fourth quarter.

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Disclosure: None

 

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