Dinan and his team liked Yahoo! Inc. (NASDAQ:YHOO), initiating a position of 11.4 million shares. Yahoo seems to have been a popular pick among hedge funds during the quarter; fellow billionaire David Einhorn, for example, also added Yahoo to his portfolio (find more of billionaire David Einhorn’s stock picks). We’re a bit more cautious; the media seems overeager to anoint new CEO Marissa Mayer as the company’s savior, and we’re worried that management will be tempted to engage in some attention-getting but unproductive strategic initiative rather than focus on the core business. In addition, Yahoo trades at 16 times forward earnings estimates- this is actually a small premium to Google’s forward P/E.
York also liked General Growth Properties Inc (NYSE:GGP), which is notable for being one of Pershing Square’s top picks; that fund, managed by billionaire Bill Ackman, reported owning $1.5 billion in GGP stock at the end of September (check out more of Pershing Square’s top stock holdings). General Growth Properties is a real estate investment trust which is focused on shopping malls primarily in the United States. Because the prospects of the mall business are tied to brick-and-mortar retail sales, the stock is exposed to the broader economy and carries a beta of 2.
Dun & Bradstreet Corp (NYSE:DNB) was another of the fund’s largest new stock picks. Dun & Bradstreet is a $3.6 billion market cap company whose services include risk management, marketing data, and business information. Its earnings were up 36% in the third quarter compared to the same period in 2011, though revenue slipped 6%, and in valuation terms it looks good at 13 times trailing earnings. We’re interested in the company as a potential value play, but we would note that the most recent data shows 11% of the shares outstanding held short.
The fund initiated a position of 6.2 million shares in MetroPCS Communications Inc (NYSE:PCS), which is well liked by Wall Street analysts given the fact that their earnings projections imply a forward P/E multiple of 13 and a five-year PEG ratio of 0.7. However, as with Dun & Bradstreet there’s considerable short interest here suggesting that a number of traders are much more pessimistic on the company. While the stock appears cheaper than that of leading peers like Verizon, the difference appears small in terms of forward earnings estimates and we’re not sure that the company is that much better a value.
York was apparently one of the funds which believed that Chinese oil company CNOOC’s purchase of Nexen Inc. (NYSE:NXY) would be approved by the Canadian government, as it also bought shares of Nexen between July and September. CNOOC’s offer is a heavy premium to where the stock had previously been trading, so the fund stands to see significant losses if the deal is rejected (it is controversial in Canada, and the government has already pushed back a date to announce its decision). Nexen is best known for its position the Alberta tar sands, a leading prospect for unconventional oil production. We don’t feel confident enough in the transaction going through to recommend the stock, but it certainly provides a potential profit if an investor decides that Canada will allow a deal to happen.
