Seeking Alpha
Profile| Send Message| ()  

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 returning 25.86%, 8.88%, -26.72%, 132.72% and 22% in 2006, 2007, 2008, 2009 and 2010 respectively.

The following is a list of Appaloosa's top 10 new buys and position increases in the last quarter, as released in its most recent 13F filing with the SEC:

Top New Buys

Stock

Symbol

Shares Bought Last Quarter

Shares Held - 03/31/2011

Metlife Inc

MET

1,500,000

1,500,000

Apple Inc

AAPL

200,000

200,000

Valero Energy Corp

VLO

2,564,890

2,564,890

CVR Energy Inc

CVI

1,556,374

1,556,374

KB Home

KBH

1,388,900

1,388,900

Frontier Oil Corp

FTO

611,055

611,055

Pultegroup Inc

PHM

1,637,112

1,637,112

DR Horton Inc

DHI

1,119,740

1,119,740

Marathon Oil Corp

MRO

250,000

250,000

Tesoro Corp

TSO

400,000

400,000

Top Position Increases

Stock

Symbol

Shares Bought Last Quarter

Shares Held - 03/31/2011

Goodyear Tire & Rubber Co

GT

5,169,939

15,248,003

US Airways Group Inc

LCC

9,545,724

12,447,139

Macy's Inc

M

1,488,602

6,712,625

CF Industries Holdings Inc

CF

282,493

930,196

United Continental Holdings

UAL

1,886,203

5,737,753

Delta Airlines Inc

DAL

2,035,872

3,592,656

Hewlett-Packard Company

HPQ

487,582

6,330,726

Dean Foods Co

DF

2,352,712

13,119,145

Mueller Water Products Inc

MWA

6,867,623

9,322,792

Navistar International Corp

NAV

229,809

691,008

Here is my take on Appaloosa's top five buys by market value:

US Airways provides scheduled service throughout North America and Europe. It utilizes hubs in Philadelphia, Charlotte, Pittsburgh, Phoenix and Las Vegas. US Airways merged with America West Airlines in September 2005.

My Take: Hold

US Airways reported a net loss, excluding special items of $110 million or a loss of $0.68 per diluted share. This compares to a net loss, excluding special items of $89 million or $0.55 per share a year ago. The major contributor to the loss was the increase in fuel prices.

On the other hand, total passenger RASM (revenue per available seat mile) increased 8.7% in 2011 versus first quarter 2010. Mainline cost per ASM (available seat mile) was $.0876 in the quarter, a decrease of 1.3% versus 2010. As per the US Airways conference call, April unit revenue is estimated to increase by 6%; May and June are estimated to increase by about 10%. US Airways relative lack of international exposure helped it report a smaller than expected 1Q loss. Thus far demand has not been affected as most air travelers buy far in advance that they are able to find good deals

Capacity adjustments have been done and the airline would need to raise fares to cover high fuel costs. As US Airways does not hedge its fuel costs, it will be exposed to the vagaries of the oil market.

Goodyear Tire and Rubber Company is one of the largest tire manufacturing companies worldwide, selling its products under the Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other “house” brands as well as private-label brands.

My Take: Buy

The company posted a threefold increase in profit to $127 million or 51 cents per share in the first quarter of 2011 from $41 million or 18 cents per share in the same quarter of 2010. Rising commodities prices and tight supply are giving tire makers – including GT – an opportunity to push through larger and quicker price increases than ever before. Dealers, Distributors and Automakers increasingly express concerns about tire shortages (dealer fill rates for certain brands have recently declined to 45%) and as tire manufacturers implement frequent and increasingly large price increases.

The company has targeted $1 billion of gross savings by 2012. In addition, the company expects to benefit from its focus in the emerging markets of Latin America, Eastern Europe and Asia. The company's guidance on sales volumes is an expectation of an increase at the higher end of the previously announced range of 3%–5%.Goodyear anticipates raw material costs for the remainder of 2011 to increase 25%–30% compared with the prior year.

Valero Energy Corporation is the largest independent petroleum refining and marketing company in the United States. The company operates through three segments: Refining, Retail and Ethanol. The company own and operates 13 refineries, which were located in the United States, Canada and Aruba.

My Take: Buy

Net income was 17 cents per share in the January-March quarter, compared with a loss of $113 million, or 20 cents per share, in the same part of 2010. Revenue increased 42 percent to $26.3 billion.

Export markets remain strong. Supply/demand imbalances in Mexico, Latin America and Europe have lead to sustainable opportunities for Gulf Coast refiners to fill the gap with exports. Lower crude runs in Venezuela and the Caribbean have led to decreased supply of products in the South America markets; in addition the absence of Libyan crude has hindered European Distillate production, thereby tightening the market further.

VLO slightly increased its planned spending for 2011 to $3-3.2 billion. This increase reflects overruns on turnaround costs, as well as the decision to complete the hydrocracker projects quickly in an effort to capture the economic benefits of the projects.

Apple Inc, together with subsidiaries, designs, manufactures and markets personal computers, mobile communication and media devices and portable digital music players, as well as sells related software, services, peripherals, networking solutions and third-party digital content and applications worldwide.

My Take: Buy

The company posted record second quarter revenue of $24.67 billion and record second quarter net profit of $5.99 billion, or $6.40 per diluted share. These results compare to revenue of $13.50 billion and net quarterly profit of $3.07 billion, or $3.33 per diluted share, in the year-ago quarter.

Apple sold 3.76 million Macs during the quarter, a 28 percent unit increase over the year-ago quarter. The company sold 18.65 million iPhones in the quarter, representing 113 percent unit growth over the year-ago quarter. Apple sold 9.02 million iPods during the quarter, representing a 17 percent unit decline from the year-ago quarter. The company also sold 4.69 million iPads during the quarter.

During the company's WWDC held from June 6-10, Apple introduced new software initiatives Mac OS X Lion, iOS 5 and iCloud. The software innovations announced at WWDC are laying the foundation for the next round of share gains in mobile phones, tablets and computers, especially with 4G connectivity going mainstream next year. With the new software offerings and increasing sales of Apples products there are bound to be new converts to the “Apple way” and stronger revenue growth.

MetLife Inc is the leading provider in the U.S. of individual and group life insurance, retirement savings products, dental, disability and group auto & home insurance.

My Take: Buy

The company possesses the strongest long-term growth potential of any U.S. life insurer owing to its leading market positions, household brand-name awareness and solid financial strength. With the announced acquisition of ALICO (AIG foreign life subsidiary), international markets will become the company's biggest business.

Below is a brief business description (Source: Reuters) for other companies in the Appaloosa's top buy list:

CVR Energy Inc is an independent petroleum refiner and marketer of transportation fuels. It operates in two segments: petroleum and nitrogen fertilizer

KB Home is a homebuilder. The company constructs and sells homes through its operating divisions across the United States under the name KB Home.

Frontier Oil Corporation is an independent energy company. The company is engaged in crude oil refining and the wholesale marketing of refined petroleum products.

PulteGroup Inc is a holding company. The company's subsidiaries are primarily engaged in the homebuilding business.

DR Horton is a homebuilding company in the United States. It constructs and sells homes through its operating divisions in 26 states and 72 metropolitan markets of the United States, primarily under the name of D.R. Horton, America's Builder.

Marathon Oil Corporation is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas and refining, marketing and transportation.

Tesoro Corporation is an independent petroleum refiners and marketers in the United States. The company's subsidiaries, operating through two business segments: manufacture and sell transportation fuels.

Macy's Inc is a retail organization operating retail stores and Internet Websites under two brands (Macy's and Bloomingdale's) that sell a range of merchandise, including men's, women's and children's apparel and accessories, cosmetics, home furnishings and other consumer goods in 45 states, the District of Columbia, Guam and Puerto Rico.

CF Industries Holdings is a manufacturer and distributor of nitrogen and phosphate fertilizer products.

United Continental Holdings formerly UAL Corporation, is a holding company and its, wholly owned subsidiaries are United Air Lines, Inc. (United) and Continental Airlines, Inc. (Continental). United and Continental transport people and cargo through their mainline operations.

Delta Air Lines provides scheduled air transportation for passengers and cargo throughout the United States and around the world. The company's route network gives it a presence in every domestic and international market.

Hewlett-Packard Company is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors.

Dean Foods Company is a food and beverage company. The company operates through two segments: Fresh Dairy Direct and WhiteWave-Morningstar.

Mueller Water Products manufactures and markets products and services that are used in the transmission and distribution of safe, clean drinking water and in water treatment facilities throughout North America. Its product portfolio include engineered valves, fire hydrants, pipe fittings, water meters and ductile iron pipe, which are used by municipalities, as well as the residential and non-residential construction for heating, ventilation and air conditioning, fire protection, industrial, energy and oil and gas industries.

Navistar International Corporation is a holding company, whose principal operating subsidiaries are Navistar, Inc. and Navistar Financial Corporation. The company is a manufacturer of International brand commercial and military trucks, IC Bus brand buses, MaxxForce brand diesel engines, Workhorse Custom Chassis brand chassis for motor homes and step vans and Monaco RV recreational vehicles, as well as a provider of service parts for all makes of trucks and trailers.

Source: A Look at the Top Buys of Appaloosa Management's David Tepper