David Tepper is a billionaire philanthropist and the hedge fund manager of Appaloosa Management, a hedge fund he helped found in 1993. As of the end of 2012, Appaloosa had $4.6 billion under management, much of which was in airline and automobile companies. Below is a look at Appaloosa's big transportation bets for 2013:
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Appaloosa's largest airline holdings was in United Continental (UAL). As of Dec. 31, 2012, the fund held $213 million of United shares, which was slightly up in value even though 7% of the shares held at the end of September were sold. If this sale is an indication that Tepper felt United Continental was being fairly valued, I hope he held on because the shares have increased close to 50% this year, as the graph shows below.
US Airways (LCC) was Appaloosa's second-largest airline bet going into 2013 and, like its United shares, the value in the portfolio rose slightly over Q4 2012 despite the sale of 11% of the fund's US Airway shares during that time. US Airways has been in the news lately for its massive upcoming merger with American Airlines that is expected to close in the third quarter of 2013. As of today, US Airways sells for $15.90 per share, which is up close to 15% YTD.
The last and smallest airline holding for Appaloosa as of year-end 2012 was in Delta Air Lines (DAL). As seen below, Delta's shares have also moved up significantly in the past few months. YTD, shares have increased over 35% and, with a forward P/E of 5.34, it might not require much for them to continue this streak or at least hold at this valuation. Having been valued at depressed prices for many years, the airlines' industry-wide move seen recently reminds me of what happened to the rail industry starting shortly after Warren Buffett's first purchase of shares in Burlington. Despite Appaloosa's massive airline bet, shares of all three companies decreased over the fourth quarter of 2012 and the fund completely sold out of its JetBlue (JBLU) position.
Appaloosa ended 2012 with close to same amount (in value and percentage of portfolio) of shares in Ford (F) and General Motors (GM). The fund sold 4% of its shares in Ford and 10% of its shares in GM, but the prices of shares in both companies went up enough to hold both at 3% of the portfolio despite the sales. Shares of Ford continued their rise in 2013 and currently trade at $13.37 per share, up 4.12% YTD. GM's shares trade slightly down, 1.6% YTD, for $28.25 per share.
Opposite to the decrease in all of the holdings above Appaloosa purchased over 600,00 shares in its smallest car manufacturer, Delphi Automotive (DLPH). As shown below, this has been a good move for Appaloosa as shares are up 12.5% YTD and trade for $43.06 per share. With a forward P/E of 8.96, this $13.57 billion company doesn't look like it's being too overvalued and may continue to rise with the market short term.
Unrelated to automobiles and planes, I noticed this last quarter that Tepper sold his holding in Marvell Technology (MRVL). I found this interesting because the Carnegie Mellon School of Business is named after him and Carnegie Mellon was just awarded over $1 billion, in the same period of Appaloosa's sale, for a patent infringement done by Marvell. I wonder if Tepper sees this as a win or a lose? Since the sale, Marvell is up over 45% YTD.