York Capital's Latest Moves

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James Dinan founded his York Capital investment firm in 1991 with a mere $3.6 million; his firm now has some $15 billion in assets under management. Prior to starting York Capital, Dinan worked at DLJ  for two years, and in merger-arbitrage at Kellner DiLeo. Outlined below are some of the buys and sells that York Capital made during the first quarter that I found interesting (check out York's portfolio).

Losing interest

York sold off General Growth Properties, which was 3.8% of the fund's portfolio. General Growth is one of the oldest and most experienced shopping center owners, developers and managers in the U.S. However, the dividend yield for the REIT is a mere 2.6%.
 
Going into the second quarter, there were a total of 22 hedge funds long on the stock. This includes the top hedge fund owner by market value, billionaire investor Bill Ackman, who has been a big owner of General Growth since it spun off Howard Hughes in 2010. Ackman's position is worth close to $1.5 billion and accounts for 14.8% of Ackman's portfolio (check out Ackman's latest picks).
 
Another one of York's big selloffs was Citigroup, which had been 2.6% of York's portfolio. One problem with Citi is the recent run up in the stock. Citi is up more than 100% in the last 12 months and now trades with a P/E of 18.7, well above Wells Fargo at 11.6 and JPMorgan Chase at 9.7. 

Dumping tech 

Yahoo! (NASDAQ: YHOO) saw York sell off its entire position during the first quarter, which had been 3.1% of the fund's portfolio. This comes after Yahoo! has run up 32% year-to-date. The growth is related to a boost in valuation from the sell-off of part of its Asian assets; however, the robust competition in online advertising still presents headwinds for the company, as Google continues to dominant the majority of Yahoo!'s markets. 

In other big news, Yahoo! snatched up Tumblr, which has more than 100 million users and little revenue, for $1.1 billion late last month. This is another reason I would be hesitant about the stock. The $1.1 billion price tag is sizable and the success of the acquisition will be in large part a result of how Yahoo! goes about monetization. 

The wrong route would be trying to squeeze revenue out of Tumblr immediately. The platform has a solid user base, but has much more room to grow and could be just what Yahoo! needs to break into mobile. Thus, Yahoo! must be willing to bide its time, much like Google has done with YouTube. Yahoo! is also one of the stocks that Passport Capital added to its portfolio last quarter (check out the others).

New additions
 
A couple of notable new additions for York Capital were CBRE Group (NYSE: CBG)  and Vulcan Materials (NYSE: VMC), making up 3.3% and approximately 1.7% of York's portfolio, respectively, at the end of Q1. CBRE is one of the leading commercial real estate services firms, providing valuation, real estate investment management, tenant representation and property leasing services.

The poor economic environment and real estate crisis put a strain on CBRE over the past few years, but the company is rebounding nicely. The real estate servicer saw year-over-year EPS growth of 14% for 1Q 2013, 20% for 4Q 2012, 8% for 3Q 2012 and 20% for 2Q 2012. 

Given the rebounding real estate market, improving vacancy rates and low-cost credit, the company should reward investors nicely over the interim. From a returns standpoint, CBRE has a return on equity that's impressive, at 25.5%, compared to the industry average of 20.7%. During the first quarter of 2013, CBRE signed 46 contract in its global corporate services, of which 22 were with new clients.

Infrastructure bet

Vulcan is the largest producer of construction aggregates in the U.S. Aggregates include crushed stone, sand and gravel. Aggregates shipments are expected to grow by 1% to 5% in 2013, an increase from the 1% decline in 2012. One of the big tailwinds for Vulcan is the growing demand for highway construction, thanks to increased funding with a new highway bill. The 2012 multi-year highway bill is expected to provide the state transport departments with highway funding and increase demand for highway construction. Another positive for the company includes an improvement in residential housing.

In 2012, publicly funded construction accounted for approximately 54% of total aggregate shipments. Overall, this is a positive, where public spending tends to be more stable than the private sector. I think the focus on infrastructure spending will get more attention going forward, especially following the recent Washington bridge collapse

Bottom line 

York Capital made some key bets on a housing recovery by adding CBRE and Vulcan to its portfolio last quarter. I think both stocks appear to be solid buys for the long term. Meanwhile, one of York Capital's biggest sell-offs was General Growth Properties, which offers investors an under-impressive dividend compared to other REITs. 
 
In addition, Citi has seen a run up in its stock following the financial crisis and could now be a bit overvalued. York's sell-off of Yahoo! comes as the tech company just spent $1.1 billion for Tumblr and is now in the running to purchase the streaming content company Hulu. Although these acquisitions could be long-term positives, I would hold off on investing in Yahoo! until we get more color on its strategy for implementation and growth. 
 

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Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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