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10 Stocks to Sell According to Billionaire James Dinan

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·13 min read
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  • TMUS
  • UNP
  • STNE
  • NCR
  • JD
  • INTC
  • MCD
  • TGT
  • MA

In this article, we discuss the 10 stocks to sell according to billionaire James Dinan. If you want to skip our detailed analysis of James Dinan's history, investment philosophy, and hedge fund performance, go directly to 5 Stocks to Sell According to Billionaire James Dinan.

James Dinan is an American investor, philanthropist, and the founder of York Capital Management. Mr. Dinan's early years were spent in Maryland and Massachusetts, from where he went on to pursue his bachelor's degree in economics from the University of Pennsylvania. Upon graduating from the University of Pennsylvania in 1981, he began his professional career with a stock research firm Donaldson, Lufkin & Jenrette, where he worked as an investment banker until 1983. Mr. Dinan then went on to pursue his advanced degree in business administration from Harvard University in 1985, and then in 1991, the now billionaire founded his hedge fund York Capital Management.

According to Forbes, Mr. Dinan's real-time net worth as of 17th November 2021, is $1.9 billion. The billionaire founded his hedge fund with $3.6 million in the 90s and his hedge fund reached a record high in 2015 of managing over $26 billion in 13F securities. Unfortunately, the hedge fund lost more than $700 million as a consequence of wrong energy bets and has declined by 50% since 2018.

As of the third quarter, Mr. Dinan manages over $947 million in 13F securities through his hedge fund, York Capital Management.

In the third quarter, Mr. Dinan sold his stakes in several companies, including McDonald's Corporation (NYSE:MCD), Target Corporation (NYSE:TGT), Intel Corporation (NASDAQ:INTC), and Mastercard Incorporated (NYSE:MA).

Our Methodology

With this context in mind, let's take a look at 10 stocks to sell according to billionaire James Dinan. We compiled this list according to York Capital Management's 13F portfolio at the end of the third quarter of 2021 and picked the stocks Mr. Dinan exited completely.

10 Stocks to Sell According to Billionaire James Dinan
10 Stocks to Sell According to Billionaire James Dinan

James Dinan of York Capital Management

Stocks to Sell According to Billionaire James Dinan

10. NCR Corporation (NYSE:NCR)

Number of Hedge Fund Holders: 38

NCR Corporation (NYSE:NCR) provides software and services worldwide. It operates through Banking, Retail, Hospitality, and Telecommunications, and Technology segments. NCR Corporation (NYSE:NCR) was founded in 1881 and is headquartered in Atlanta, Georgia.

NCR Corporation (NYSE:NCR) was a new addition to York Capital Management's 13F portfolio in the second quarter of 2021. Mr. Dinan bought over 40,000 shares of the stock that were worth about $1.83 million. The investment covered 0.2% of the billionaire's 13F portfolio. As we moved into the third quarter, Mr. Dinan sold his stake in the company and completely exited NCR Corporation (NYSE:NCR) by the end of September.

At the end of the second quarter of 2021, 38 hedge funds, including York Capital Management, held stakes in NCR Corporation (NYSE:NCR) that were worth $526.4 million. This is compared to 24 hedge funds in the first quarter, with a total stake of $383.04 million.

In addition to NCR Corporation (NYSE:NCR), Dinan sold his stakes in McDonald's Corporation (NYSE:MCD), Target Corporation (NYSE:TGT), Intel Corporation (NASDAQ:INTC), and Mastercard Incorporated (NYSE:MA).

9. StoneCo Ltd. (NASDAQ:STNE)

Number of Hedge Fund Holders: 44

StoneCo Ltd. (NASDAQ:STNE) provides financial technology solutions to merchants and integrated partners to conduct electronic commerce across in-store, online, and mobile channels in Brazil. The company was founded in 2000 and is headquartered in George Town, Cayman Islands.

By the end of the second quarter, Mr. Dinan's stake in StoneCo Ltd. (NASDAQ:STNE) was more than $3.45 million. The investment covered 0.38% of York Capital Management's 13F portfolio. However, in the third quarter, Dinan decided to sell all his shares in the company and completely exited StoneCo Ltd. (NASDAQ:STNE).

JDP Capital Management shared its insights about the stock of StoneCo Ltd. (NASDAQ:STNE) in its second-quarter 2021 investor letter. Here's what they had to say:

StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.

Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.

The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.

The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.

StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”

“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”

“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…

…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”

In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”

8. Union Pacific Corporation (NYSE:UNP)

Number of Hedge Fund Holders: 69

Union Pacific Corporation (NYSE:UNP) engages in the railroad business in the United States. The company was founded in 1862 and is headquartered in Omaha, Nebraska.

For the third quarter of 2021, which ended in September, Union Pacific Corporation (NYSE:UNP) reported an EPS of $2.57, beating estimates by $0.07. The railroad giant generated revenues of $5.57 billion, up 13.15% year over year, and beat estimates by $175.07 million.

On 22nd October, RBC Capital analyst Walter Spracklin raised his price target on Union Pacific Corporation (NYSE:UNP) to $252 from $227 and kept an Outperform rating on the shares due to a profitable third quarter for the company.

By the end of the second quarter of 2021, 69 hedge funds including York Capital Management, held stakes in Union Pacific Corporation (NYSE:UNP). The total value of these stakes was $5.03 billion. This is compared to 75 hedge funds in the first quarter with stakes amounting to $4.68 billion. Mr. Dinan sold all his shares of Union Pacific Corporation (NYSE:UNP) in the third quarter.

Vltava Fund, an investment management firm, published its first-quarter 2021 investor letter in which it mentioned Union Pacific Corporation (NYSE:UNP). Here's what Vltava Fund had to say:

“There was a slight change in Vltava Fund’s portfolio in the first quarter. We sold shares of Union Pacific. It was one of three stocks we bought a year ago at the market bottom. Although from a P/E viewpoint this was one of our most expensive purchases ever, the shares worked out quite well, and, when they were more than 90% higher at the beginning of this year, we decided to take profit and put the money into stocks with more attractive valuations.”

7. JD.Com Inc (NASDAQ:JD)

Number of Hedge Fund Holders: 76

JD.Com Inc (NASDAQ:JD) operates as an e-commerce company and retail infrastructure service provider in the People’s Republic of China. It operates in two segments: JD Retail and New Businesses. The company was incorporated in 2006 and is headquartered in Beijing, China.

Mr. Dinan's stake in the company by the end of the second quarter of 2021 was $54.65 million and the company was among the top 5 holdings of York Capital Management. By the end of the third quarter of 2021, JD.Com Inc (NASDAQ:JD) was not a part of York Capital Management's 13F portfolio. JD.Com Inc (NASDAQ:JD) is one of the 10 stocks to sell according to billionaire James Dinan.

By the end of the second quarter of 2021, JD.Com Inc (NASDAQ:JD) was a part of 76 hedge funds' investment portfolios, including York Capital Management. The total stake value of these hedge funds in the China-based e-commerce corporation was in excess of $10.69 billion. This is compared to 75 positions in the first quarter with stakes as high as $11.30 billion.

On November 2nd Barclays analyst Jiong Shao initiated coverage of JD.Com Inc (NASDAQ:JD) with an Overweight rating and $82.50 price target.

Arisaig Partners mentioned JD.Com Inc (NASDAQ:JD) in its second-quarter 2021 investor letter. Here's their verdict on the company's stock:

JD.com, for example, continues to display impressive operating momentum, with sales on track to grow around 30% this year by our estimates. Looking longer term, this company is making a credible claim to be the dominant player in Chinese grocery ecommerce, an enormous chunk of overall consumption in China, and the last one yet to move online in a big way. We think that JD has a clear advantage over rivals here thanks to its integrated and fully self-managed logistics capabilities. Whereas an offline big box retailer might have 10-20,000 SKUs, JD offers 8 million. 90% of orders fulfilled by JD Logistics can be delivered on the same day or the next day to 500 million customers. The fact that JD has just 30 days of inventory tells us that this is a highly-optimised fulfilment chain. It is very hard to be both fast and efficient, and in order to achieve this it is necessary to know what inventory to hold in which warehouse, and when to hold it (“right place, right time, right person”), a highly information-intensive challenge. The only other retailer that comes close to being able to manage that level of complexity is Amazon, and indeed these are capabilities that are very hard to replicate, taking decades of painstaking investment, trial and error testing, and data accumulation.

Moreover, far from being some sort of ‘victim’, this company is most likely a beneficiary of tighter regulation in this sector. A recurrent message running through JD’s recent investor day was that of “deep purpose”, the objective being to create shared value for a broader ecosystem of customers, merchants and employees. As we describe in the next section on “Navigating China”, this form of alignment with the strategic objectives of the government is a very China-specific way of conceptualising ESG, and essential for all businesses that operate in this country to get right..." (Click here to see the full text)

6. T-Mobile US, Inc. (NYSE:TMUS)

Number of Hedge Fund Holders: 100

T-Mobile US, Inc. (NYSE:TMUS) provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. The company was founded in 1994 and is headquartered in Bellevue, Washington. Mr. Dinan's stake in the company at the end of the second quarter of 2021 was roughly $3.72 million, which accounted for 0.41% of York Capital Management's 13F portfolio.

This November Simon Flannery, an analyst at Morgan Stanley, raised his price target on T-Mobile, US Inc. (NYSE:TMUS) from $148 to $152 and reiterated an Overweight rating on the shares.

Along with York Capital Management, there were 99 other hedge funds that held stakes in T-Mobile US, Inc. (NYSE:TMUS) by the end of the second quarter of 2021. The total value of these stakes was $8.02 billion. This is compared to 98 positions in the first quarter, with stakes totaling $9.05 billion.

Just like McDonald's Corporation (NYSE:MCD), Target Corporation (NYSE:TGT), Intel Corporation (NASDAQ:INTC), and Mastercard Incorporated (NYSE:MA), Mr. Dinan completely exited T-Mobile US, Inc. (NYSE:TMUS) by the end of the third quarter of 2021.

Here's what ClearBridge Investments had to say about T-Mobile US, Inc. (NYSE:TMUS) in its “Large Cap Value Strategy” first quarter 2021 investor letter:

“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where T-Mobile trailed after generating robust returns earlier in the recovery.”

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Disclosure. None. 10 Stocks to Sell According to Billionaire James Dinan is originally published on Insider Monkey.