Billionaire James Dinan's Latest Stock Picks
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James Dinan's York Capital Management is a 20-year-old fund with an impressive performance record—the fund lost value in only three of those years. Unfortunately, 2011 was one of those years, one of the worst in recent memory for hedge funds generally, as the fund posted a loss of 5.93 percent. Dinan, a self-made billionaire and avid sailor, presently manages about $15 billion in his York Capital Management fund.
The fund filed its 13F form for the second quarter on August 14, disclosing its holdings. Below is a discussion of the major changes.
The single most valuable item in the fund's portfolio remains Dollar Thrifty Automotive (NYSE: DTG), with $428 million in shares or a 17 percent stake. Pentwater Capital Management recently increased its stake in Dollar Thrifty by 35 percent, now holding a total of 11.5 percent of the company. So this rental car company seems pretty interesting to both of these hedge funds, and it is up 11.2 percent year-to-date. Cost per vehicle fell to $162 in the second quarter, down $26 year-over-year, due to the increasing strength of the used car market. Revenue was essentially flat year-over-year in the second quarter at $378.9 million. Hertz (NYSE: HTZ) placed a bid for the company at $40 a share two years ago; shares presently trade in the high $70s.
Notably, and in line with many other hedge funds, York Capital dumped a bit over 85 percent of its position in Citigroup (NYSE: C). The company’s shares have been floundering as net revenue fell in 2011 to $78 billion, down from $86.6 billion in 2010. The company's capital plan was denied by the Fed in March, and investors are still wondering whether the company can execute on its return on investment goals. We are long-term bullish about the stock.
Hertz is another member of the fund's top ten, with 12.5 million shares of common stock and an additional 1.1 million in call options. This represents a decrease from the 19.6 million shares held in the first quarter. Hertz shares lost 20 percent of their value in May and, as we noted elsewhere, the company is rather sensitive to the broader market. Additionally, though management has noted that it “continue[s] to believe that a merger is in the best interest of both Dollar Thrifty and Hertz”, we are still yet to see signs that the two will be merging any time soon.
York Capital also sold shares in Tyco International (NYSE: TYC), which specializes in filtration systems and electronic security solutions. The fund's holdings have decreased by about 1 million shares since the first quarter. This comes as Tyco shares trade at their highest levels in the past decade, likely preparing for the three-way split that is set to occur within the next year. This will result in three entities: ADT (a security system service), a pipes and valves company, and commercial security and fire business. Optimistic sum-of-the-parts valuations put the total value of the three businesses at $65 a share.
York has retained its significant call positions in Bank of America Corp (BAC) and General Motors Company (GM). In all, the company's overall portfolio is balanced and diverse, with weighting in a variety of different sectors.
This article is written by Brian Tracz and edited by Meena Krishnamsetty. Meena has a long position in Citigroup.The Motley Fool owns shares of Citigroup Inc and Hertz Global Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.