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Appaloosa Management, L.P. is a Short Hills, NJ-based hedge fund management firm founded by David A. Tepper. The firm manages over $4 bn in equities and has beaten the S&P 500 consistently by a large margin.

Year

Return (%)

S&P500 (%)

Excess Gain (%)

2010

22

15.1

6.9

2009

132.72

26.5

106.2

2008

-26.72

-37

10.3

2007

8.88

5.61

3.3

2006

25.86

15.79

10.1

Investment Strategy: David Tepper is a contrarian investor; his boldest move was to snap up investment bank stocks in 2009 while they were at the very bottom. His bet proved correct and his portfolio returned a stunning 132.72%, beating S&P 500 by over 106 percentage points.

The following is a list of Appaloosa’s top five new buys and position increases in the last quarter, as released in its most recent 13F filing with the SEC:

Top New Buys by Market Value

Company Name

Ticker

MV Change (USD $)

Current Position

Change In Position

Valero Energy Corp

VLO

76,485,020

2,564,890

2,564,890

Apple Inc

AAPL

69,701,500

200,000

200,000

MetLife Inc

MET

67,095,000

1,500,000

1,500,000

CVR Energy Inc

CVI

36,045,622

1,556,374

1,556,374

Frontier Oil Corp

FTO

17,916,133

611,055

611,055

Top Position Increases by Market Value

Company Name

Ticker

MV Change (USD $)

Current Position

Change In Position

Goodyear Tire & Rubber Co

GT

108,990,027

15,248,003

5,169,939

US Airways Group Inc

LCC

79,371,417

12,447,139

9,545,724

United Continental Holdings

UAL

40,167,020

5,737,753

1,886,203

CF Industries Holdings Inc

CF

39,704,451

930,196

282,493

Dean Foods Co

DF

36,016,182

13,119,145

2,352,712

Here are some of the specifics about these companies, including a brief description of their business, growth expectations (topline and bottomline) and Valuation:


New Buys

Valero Energy Corporation is a North American independent petroleum refiner and marketer. As of December 31, 2010, it owned 14 petroleum refineries, which were located in the United States, Canada and Aruba. Appaloosa purchased 2,564,890 shares of Valero last quarter. Valero’s EPS forecast for the current year is $3.61 and next year is $3.71. According to consensus estimates, its topline is expected to grow 27.30% in the current year and 2.70% next year. It is trading at a forward P/E of 7.02. Out of 20 analysts covering the company, 11 are positive and have buy ratings and nine have hold ratings.

Apple Inc. designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players, and sells a range of related software, services, peripherals, networking solutions, and third-party digital content and applications. Appaloosa purchased 200,000 shares of Apple last quarter. Apple’s EPS forecast for the current year is $24.62 and next year is $28.49. According to consensus estimates, its topline is expected to grow 58.10% in the current year and 20.40% next year. It is trading at a forward P/E of 11.65. Out of 44 analysts covering the company, 41 are positive and have buy ratings and three have hold ratings.

MetLife, Inc. is a provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 60 countries. Appaloosa purchased 1,500,000 shares of Metlife last quarter. Metlife’s EPS forecast for the current year is $5.18 and next year is $5.80. According to consensus estimates, its topline is expected to grow 22.30% in the current year and 5.60% next year. It is trading at a forward P/E of 7.62. Out of 20 analysts covering the company, 18 are positive and have buy ratings and two have hold ratings.

CVR Energy, Inc. is an independent petroleum refiner and marketer of transportation fuels. In addition, the Company owns interest in CVR Partners, LP, a limited partnership which produces nitrogen fertilizers in the form of ammonia and UAN. Appaloosa purchased 1,556,374 shares of CVR last quarter. CVR’s EPS forecast for the current year is $2.38 and next year is $2.12. According to consensus estimates, its topline is expected to grow 17.00% in the current year and 10.00% next year. It is trading at a forward P/E of 9.49. All four analysts covering the company are positive and have buy ratings.

Frontier Oil Corporation is an independent energy company. The Company is engaged in crude oil refining and the wholesale marketing of refined petroleum products. Appaloosa purchased 611,055 shares of Frontier Oil last quarter. Frontier’s EPS forecast for the current year is $3.97 and next year is $2.76. According to consensus estimates, its topline is expected to grow 24.60% in the current year and 6.90% next year. It is trading at a forward P/E of 10.35. Out of 15 analysts covering the company, eight are positive and have buy ratings and seven have hold ratings.

Position Increases

The Goodyear Tire & Rubber Company is a manufacturer of tires. The Company, along with its subsidiaries, is principally engaged in the development, manufacture, distribution and sale of tires and related products and services worldwide. Appaloosa purchased 5,169,939 shares of Goodyear last quarter and now holds a total of 15,248,003 shares. Goodyear’s EPS forecast for the current year is $1.07 and next year is $2.16. According to consensus estimates, its topline is expected to grow 17.00% in the current year and 8.60% next year. It is trading at a forward P/E of 8.13. Out of 9 analysts covering the company, eight are positive and have buy ratings and one has a hold rating.

US Airways Group, Inc. is a holding company whose business activity is the operation of network air carrier through its wholly owned subsidiaries US Airways, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., Material Services Company, Inc. and Airways Assurance Limited. Appaloosa purchased 9,545,724 shares of US Airway’s last quarter and now holds a total of 12,447,139 shares. US Airways’ EPS forecast for the current year is $1.19 and next year is $1.91. According to consensus estimates, its topline is expected to grow 10.70% in the current year and 4.30% next year. It is trading at a forward P/E of 5.32. Out 12 of analysts covering the company, seven are positive and have buy ratings and five have hold ratings.

United Continental Holdings, Inc. is a holding company and it’s wholly owned subsidiaries are United Air Lines, Inc. and Continental Airlines, Inc. United and Continental transport people and cargo through their mainline operations, which utilize full-sized jet aircraft, and regional operations, which utilize smaller aircraft that are operated under contract by United Express, Continental Express and Continental Connection carriers. Appaloosa purchased 1,886,203 shares of United Continental last quarter and now holds a total of 5,737,753 shares. United Continental’s EPS forecast for the current year is $3.74 and next year is $5.08. According to consensus estimates, its topline is expected to grow 9.10% in the current year and 4.60% next year. It is trading at a forward P/E of 5.22. Out of 12 analysts covering the company, 10 are positive and have buy ratings and two have hold ratings.

CF Industries Holdings, Inc. is a manufacturer and distributor of nitrogen and phosphate fertilizer products. Appaloosa purchased 282,493 shares of CF Industries last quarter and now holds a total of 930,196 shares. CF Industries’ EPS forecast for the current year is $15.46 and next year is $13.41. According to consensus estimates, its topline is expected to grow 36.50% in the current year and decline 2.70% next year. It is trading at a forward P/E of 10.37. Out of 16 analysts covering the company, 11 are positive and have buy ratings and five have hold ratings.

Dean Foods Company is a food and beverage company. The Company operates through two segments: Fresh Dairy Direct and WhiteWave-Morningstar. Appaloosa purchased 2,352,712 shares of Dean Foods last quarter and now holds a total of 13,119,145 shares. Dean Foods’ EPS forecast for the current year is $0.70 and next year is $0.93. According to consensus estimates, its topline is expected to grow 4.40% in the current year and 1.60% next year. It is trading at a forward P/E of 14.37. Out of 14 analysts covering the company, one is positive and has a buy rating, 12 have hold ratings and one has a sell rating.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Buys of David Tepper's Appaloosa Management