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Summary

  • David Tepper’s US long equity portfolio increased 13.55% from $7.98B to $9.06B this quarter.
  • The largest two positions continue to be SPDR S&P 500 Index ETF and PowerShares QQQ ETF. Combined, they account for just over 36% of the entire portfolio.
  • Appaloosa built significant positions in Halliburton and Priceline while harvesting large gains from United Continental, MGM Resorts, and Prudential Financial.

This article is the first in a series that provides an ongoing analysis of the changes made to David Tepper's US stock portfolio on a quarterly basis. It is based on Appaloosa Management's regulatory 13F Form filed on 05/15/2014. David Tepper founded Appaloosa Management in 1993. His investment style focuses on distressed businesses (both equity & debt) all over the world - a risky proposition but the long-term returns are just stunning.

David Tepper is considered one of the most successful managers in the hedge fund world. Since inception in 1993, his annual returns are estimated in the 30% range. The firm currently has over $20B in Assets Under Management (AUM). They are also known to return significant capital periodically in order to keep AUM "optimal" - in 2013, Appaloosa returned around $2B. The US long equity portfolio that are represented in the 13F reports typically account for only around one-third of the total AUM. The rest of the fund is invested in debt and other instruments (exchange warrants, options, futures, etc.). Tepper also holds significant cash although the percentage amount can vary widely quarter-to-quarter.

This quarter, Tepper's US long equity portfolio increased 13.55% from $7.98B to $9.06B. The number of holdings decreased from 70 to 58 as several very small positions were eliminated. The largest holding is SPDR S&P 500 ETF (NYSEARCA:SPY) Trust (and calls) at 22.33% of the entire 13F portfolio followed by PowerShares QQQ ETF (NASDAQ:QQQ) Trust (and calls) at 13.84%. Largest five positions also include Google Inc. (5.44%), Citigroup Inc. (5.29%), and American Airlines (3.48%). Combined, the largest five positions are at just over 50% of the US long portfolio.

New Stakes:

Priceline Group Inc. (NASDAQ:PCLN) and Expedia Inc. (NASDAQ:EXPE): PCLN is a 2.41% of the US long portfolio position established this quarter at prices between $1113 and $1370. The stock currently trades at $1177. EXPE is a small 0.56% of the US long portfolio position established this quarter at prices between $63 and $80. The stock currently trades at $70.84. The activity indicates a bullish bias toward these businesses.

Stake Disposals:

Fluor Corporation (NYSE:FLR): FLR was a 1.23% of the US long portfolio position as of last quarter. It was eliminated this quarter at prices between $73.79 and $83.65. The stock currently trades at $74.10. The bulk of the position was purchased in Q2 2013 at prices between $54 and $65.

Hartford Financial (NYSE:HIG): HIG was a 1.17% of the US long portfolio position that was disposed of this quarter at prices between $32 and $36. Most of the stake was established in Q3 2012 and Q4 2012 at prices between $16 and $22. The stock currently trades at $34.35. Tepper harvested large long-term gains from this position.

EMC Corporation (NYSE:EMC), Foster Wheeler AG (FWLT), Freeport McMoRan (NYSE:FCX) & Calls, and Transocean Inc. (NYSE:RIG): These small positions (less than ~1% of the US long portfolio) were eliminated this quarter. Most of the FWLT & FCX positions were established in Q3 2013. EMC & RIG have had significant presence in the portfolio since Q1 2012 and Q4 2012 respectively. The activity indicates a mild bearish bias toward these businesses.

Stake Increases:

Google Inc. (NASDAQ:GOOG): GOOG is Appaloosa's largest individual stock position at 5.44% of the US long portfolio. The position was increased by 87% this quarter at prices between $550 and $610 (split-adjusted). The stock currently trades at $539. GOOG has been a significant presence in the portfolio since Q1 2012. The original purchase was at prices between $290 and $325. The position size has wavered although the last two quarters saw a 200% stake increase at prices between $425 and $610.

Citigroup Inc. (NYSE:C): C is Tepper's second-largest individual stock position after Google at 5.29% of the US long portfolio. This quarter saw a 4% stake increase at prices between $46.34 and $55. The original position consisted of around 6M shares purchased in Q1 2012 at prices between $27 and $37 and another 3M shares purchased in Q2 2012 at prices between $25 and $37. The current position is at just over 10M shares and the stock currently trades at $46.85.

American Airlines (NASDAQ:AAL): AAL is a top-five position at 3.48% of the US long portfolio. The position was established when the newly merged airline (US Airways & American Airlines) started trading in Q4 2013 - Tepper bought into US Airways in Q1 2012 at much lower prices. He is sitting on large gains on this investment. The stake was increased by ~23% this quarter at prices between $25 and $39. The stock currently trades at $38.32.

Apple Inc. (NASDAQ:AAPL): AAPL became a significant presence in the portfolio in 2011 although the stock was also purchased in 2009. In Q1 2012, around 500K shares were purchased at prices between $420 and $610 and the stake represented around 10% of the US long portfolio at the time. The next quarter saw some selling at prices between $530 and $634. In Q4 2012, another ~400K shares were purchased at prices between $510 and $660. The stock was consistently sold from the next quarter onwards and by last quarter the position was at 215K shares. Most of the selling happened in Q1 2013 and Q2 2013 at prices between $390 and $527. This quarter saw a 16% stake increase at prices between $500 and $560 and the position is at 1.48% of the US long portfolio.

General Motors (NYSE:GM): The 3% of the US long portfolio GM position was increased by almost 60% this quarter at prices between $34 and $41. The bulk of the original stake was purchased in Q1 2012 and Q2 2012 at prices between $21 and $27. The stock currently trades at $33.40.

Halliburton Company (NYSE:HAL): HAL is a 3.27% of the US long portfolio position that was increased by around four times this quarter at prices between $48 and $59.50. The stock currently trades at $63.57. The aggressive stake build up indicates a clear bullish bias.

PowerShares QQQ ETF & Calls: QQQ & Calls at 13.84% of the US long portfolio is Tepper's second-largest 13F position after SPDR S&P 500 ETF. The position was established in Q2 2013 at prices between $68 and $75 and was more than doubled in the last two quarters at prices between $77 and $91. The large stake build-up indicates a bullish bias toward the technology sector in the US.

Whirlpool Corporation (NYSE:WHR): WHR stake was increased by just over 125% this quarter at prices between $127 and $159. The stock currently trades at $146 and the stake is at 1.68% of the US long portfolio.

Walt Disney (NYSE:DIS): DIS was a minutely small 0.26% position last quarter. It was increased to a significant 1.22% position this quarter at prices between $70 and $83.34. The stock currently trades at $82.50. The activity indicates a mild bullish bias.

Delta Airlines (NYSE:DAL), HCA Holdings (NYSE:HCA), and Owens Corning (NYSE:OC): These positions saw marginal buying (less than ~5% stake increase each) this quarter. The activity indicates a mild bullish bias toward these businesses. DAL & OC became significant positions in the portfolio in Q1 2012 and HCA in Q4 2012.

ASML Holding N V (NASDAQ:ASML), CBS Corporation (NYSE:CBS), Comcast Corporation (NASDAQ:CMCSA), Du Pont E I De Nemours & Co (NYSE:DD), Eastman Chemical (NYSE:EMN), Ingredion Inc. (NYSE:INGR), Masco Corporation (NYSE:MAS), Schlumberger Ltd. (NYSE:SLB), and Triumph Group (NYSE:TGI): These are very small positions (less than ~1% of the US long portfolio) that were increased this quarter. As the position sizes are still very small, the activity does not indicate any clear bias.

Stake Decreases:

American International Group (NYSE:AIG): AIG is a small 0.68% of the US long portfolio position that was reduced by more than half this quarter at prices between $46.88 and $52.22. It has seen consistent selling every quarter since the stake establishment in Q3 2012. The original 6.75% of the portfolio position was purchased at prices between $31 and $35.

Goodyear Tire & Rubber (NASDAQ:GT): GT is a very long-term position that has been in the portfolio since before the financial crisis. In 2007, the stake stood at 2.7M shares (~5% of portfolio). The position size peaked at 22M shares in Q2 2013 when a large increase happened at prices between $12 and $15.50. Since then, the stake saw consistent reductions every quarter and the pattern continues this quarter: ~7% reduction at prices between $22.67 and $28.12. The stock currently trades at $24.67.

MetLife Inc. (NYSE:MET): The small 0.65% of the US long portfolio MET position has seen consistent selling since Q3 2013. It was reduced by more than half this quarter at prices between $47 and $55. The original position was built up in Q4 2012 and Q1 2013 at prices between $31.50 and $40.20. The stock currently trades at $50.49.

MGM Resorts (NYSE:MGM), Prudential Financial (NYSE:PRU), and United Continental Holdings (NYSE:UAL): These three stakes were all reduced by ~46% this quarter. They now represent 1.03%, 0.71%, and 2.29% of the US long portfolio respectively. The MGM position was sold at prices between $23 and $28.39. The bulk of the original MGM position was established in Q3 2012 at prices between $9.26 and $11.41. PRU was sold at prices between $80.45 and $92.22. That position was originally purchased in Q1 and Q2 2013 at prices between $55 and $73. The UAL stake was sold at prices between $37.73 and $49.18 and the bulk of the original position was established in Q1 2012 at prices between $18.21 and $25. Tepper is harvesting large gains from these positions.

SPDR S&P 500 ETF & Calls: This is the largest position in the portfolio at 22.33%. It saw a ~5% trimming this quarter at prices between $174 and $188. The majority of the stake was established last quarter when around 7M shares were purchased at prices between $165 and $185.

Chicago Bridge & Iron (NYSE:CBI) & Calls & Huntsman Corporation (NYSE:HUN): CBI and HUN at 1.18% and 1.97% of the US long portfolio respectively saw marginal (less than ~5% change) stake reductions this quarter. The activity is too minor to signify a change in bias. CBI has been in the portfolio since Q2 2013 and HUN since Q1 2012.

Axial Corporation (NYSE:AXLL), Broadcom Inc. (NASDAQ:BRCM), Qualcomm (NASDAQ:QCOM), Terex Corporation (NYSE:TEX), and Trinity Industries (NYSE:TRN): These are small positions (less than ~1% of the US long portfolio) that were reduced further this quarter.

Kept Steady:

Ford Motor (NYSE:F): The 1.25% F stake was kept steady this quarter. The original position was a 6.5M share stake from Q1 2012 purchased at prices between $10.76 and $12.80 and the current position is at 7.3M shares. The stake has waved in the interim: it peaked at almost 12M shares in Q1 2013 but since then has been sold.

Celanese Corporation (NYSE:CE), Delphi Automotive (NYSE:DLPH), JP Morgan Chase (NYSE:JPM), and KBR Inc. (NYSE:KBR) & Calls: These are small positions (less than 1% of the US long portfolio) that were kept steady this quarter.

The spreadsheet below highlights changes to Tepper's US stock holdings in Q1 2014:

(click to enlarge)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Tracking David Tepper's Appaloosa Management Portfolio - Q1 2014 Update