In this article we take a look at billionaire James Dinan's top 10 stock picks. You can skip our detailed analysis of Dinan's performance and his portfolio moves to read Billionaire James Dinan's Top 5 Stock Picks.
Billionaire hedge-fund manager James Dinan has been struggling to generate lofty returns for investors over the past couple of years, forcing him to get out of the hedge fund business. The collapse of a three-decade-old hedge-fund business indicates challenges for the hedge fund businesses that are focusing on special situations like mergers and acquisitions.
Meanwhile, hedge funds that turned their focus towards technology companies and digital platforms have chalked up massive gains in the last couple of years. York Capital Management founder and chief executive officer Mr. Dinan recently said that he is closing York’s European hedge funds while the flagship U.S. hedge fund will mainly run internal money. York Capital Management anticipates managing almost $8.5 billion in private equity, private debt, and other investment strategies.
Established in 1991 by James Dinan, York Capital saw massive successes and reached $16 billion in assets before the 2007-08 financial crisis. After posting losses during the financial crisis, York generated gains in the following years and grew its assets to $26 billion in 2015. The firm ended last year with $17 billion in assets under management, which is expected to decline to almost $8.5 billion amid a strategy of returning money to investors. Its credit hedge fund lost $700 million on energy bets last year and fell 50% since 2018. Other York hedge funds were also in the red. York Capital announced to spin off its Asia-Pacific business, which manages $2.7 billion.
Billionaire James Dinan's US hedge fund stock portfolio value fell to just over $1 billion from $1.7 billion in the previous quarter. The firm sold out 35 stock positions during the fourth quarter and reduced its stake in 27 stocks. BHP Group (NYSE: BBL), China Biologic (NASDAQ: CBPO), CoreLogic (NYSE: CLGX), and Walt Disney (NYSE: DIS) were the largest stock sales in the fourth quarter. All these stocks were in the list of billionaire James Dinan's top 10 stock picks in Q3 of 2020.
On the other hand, York Capital Management initiated brand new positions in 18 stocks and spread its investments across several sectors including information technology, consumer discretionary, finance, and energy.
After receiving a degree in economics from the University of Pennsylvania and completing MBA from Harvard Business School, James Dinan started his career working as an investment banker and continued until 1983. After that, he joined merger arbitrage at Kellner DiLeo & Co. Later, he founded his own investment firm York Capital in 1987 with $3.6 million in initial capital.
James Dinan isn't alone. The entire hedge fund industry is going through tough times amid losses, increasing financial volatility and the rise of retail investors. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
James Dinan of York Capital Management
Let's start examining billionaire James Dinan's top 10 stock picks to gauge whether the restructuring actions are helping him in gaining profitability momentum in 2021.
10. GDS Holdings (NYSE: GDS)
Billionaire James Dinan's York Capital reduced his stake in GDS Holdings (NYSE: GDS) by 7% in the latest quarter. Despite that, the Chinese information technology company represented 2.26% of the overall portfolio at the end of the latest quarter. GDS stock price saw a huge selloff lately, losing 12% year to date.
Hedge funds look less bullish over GDS stock. The number of long hedge fund positions was cut by 8 recently. It was in 39 hedge funds’ portfolios at the end of December compared to the all-time high for this statistic is 47.
9. The TJX Companies, Inc. (NYSE: TJX)
The off-price apparel and home fashion retailer TJX Companies, Inc. (NYSE: TJX) is on the list of billionaire James Dinan's top 10 stock picks for 2021. Shares of TJX are struggling to trade in the green this year despite a substantial rally in the past twelve months. York Capital sold 31% of its TJX position during the fourth quarter to capitalize on share price gains. The firm first initiated a position in apparel and home fashion retailer early in 2020.
Bretton Fund, which returned 11.52% for the fourth quarter, highlighted a few stocks including TJX in the Q4 investor letter. Here is what Bretton Fund stated:
“Not surprisingly, Ross and TJX were among the hardest hit in our portfolio. In spring, almost all of their stores were closed. As health officials found that masks and distancing could significantly reduce transmission, the stores were able to reopen and continue operating during the recent winter surges. We estimate earnings per share declined roughly 80% for both companies. Most of the losses came from the second-quarter shutdowns, yet by the third quarter, sales were roughly the same as pre-crisis levels, which was honestly a little surprising to us. People really love their off-price apparel. Ross’s stock returned 5.8% and TJX’s 12.3%.”
8. Mastercard Inc. (NYSE: MA)
York Capital reduced its position in Mastercard (NYSE: MA) by 34% during the fourth quarter to 66,809 shares. The firm first initiated a position in the payment technology company early in 2020. MA stock is trading in the green year to date and recovered the share price losses it incurred during the pandemic-related selloff in 2020.
Other hedge funds are also bullish over the future fundamentals of the payment technology company. The number of bullish hedge fund bets went up by 21 recently. Mastercard was in 154 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to the previous all-time high for this statistic of 147. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high. Our calculations also showed that MA ranked 8th among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 133 hedge funds in our database with MA holdings at the end of September.
7. Boston Scientific Corporation (NYSE: BSX)
Billionaire James Dinan looks bullish over the performance of Boston Scientific Corporation (NYSE: BSX) in 2021. His hedge fund had increased its position in the healthcare equipment provider by 8% during the fourth quarter to 2.59% of the overall portfolio. The share price of Boston Scientific is up 7% so far this year, accelerating the twelve-month gains to 26%.
Artisan Partners Limited Partnership, a high value-added investment management firm, stated in their Q4 investor letter that Boston Scientific Corporation will perform better in the future. Here is what Artisan Partners stated:
“Among our bottom contributors in Q4 was Boston Scientific. Shares of Boston Scientific were pressured in Q4 alongside the cancellation of its transcatheter aortic valve product Lotus Edge. We acknowledge the modest disappointment, but we believe it will be slightly accretive to earnings in the near term. Longer term, we believe the company’s investments over the past five years in higher growth categories—structural heart, peripheral interventions, international oncology, atrial fibrillation in particular—position it well to improve its margins and grow revenue at a rate on the higher end of its peer group. Given this backdrop and the Lotus news more than accounted for in the share price, we added to our position at an attractive valuation.”
6. JD.com (NASDAQ: JD)
York Capital sold 65% of its stake in Chinese e-commerce platform JD.com (NASDAQ: JD) during the fourth quarter to capitalize on the stunning rally in the pandemic year. Despite that, JD is ranked sixth in the list of Billionaire James Dinan's top 10 stock picks for 2021.
In the Q4 2020 investor letter, Argosy Investors’ highlighted a few stocks and JD.Com is one of them. Here is what Argosy Investors’ said:
“JD.com (JD) is worth spending some time on because it is doing some very interesting things and there are some risks worth mentioning. As a refresher, JD.com is a leading Chinese eCommerce retailer that competes with Alibaba, Pinduoduo, and others. Most large tech-oriented businesses globally operate as conglomerates. Think about Google. They own YouTube, Waze, Google Cloud, and Waymo Self-Driving, just to name a few. Amazon owns its first-party retail division, its third-party marketplace, Amazon Video, Kindle, Audible, Amazon Web Services, and Alexa, to name a few. Alibaba has Taobao, TMall, Alibaba Cloud, Alipay, Ant Financial, and more.”
Click to continue reading and see Billionaire James Dinan's Top 5 Stock Picks.
Disclosure: None. Billionaire James Dinan's Top 10 Stock Picks is originally published on Insider Monkey.