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David Tepper is one of our favorite hedge fund managers. He made $4 billion in 2009 and currently ranks as the 258th richest person in the world. He outperformed the market in 2010 as well despite managing a very large portfolio. David Tepper’s Appaloosa manages $16 billion and returned around 30% in 2010.

We are very interested in Tepper’s freshest ideas, the stocks that Tepper initiated brand new positions or increased his holdings. We believe these stock picks are more likely to outperform index funds. Here is how these stocks performed since the end of first quarter:

CompanyName

Ticker

value

Activity

Return

HEWLETT PACKARD CO

HPQ

259370

8%

-11%

GOODYEAR TIRE & RUBR

GT

228415

51%

12%

INTERNATIONAL PAPER

IP

173188

6%

0%

MACYS INC

M

162848

28%

21%

UNITED CONTINENTAL

UAL

131911

49%

-2%

DEAN FOODS CO NEW

DF

131191

22%

23%

C F INDUSTRIES

CF

127242

44%

4%

U S AIRWAYS GROUP INC

LCC

108415

329%

2%

VALERO ENERGY CORP

VLO

76485

New

-14%

METLIFE INC

MET

67095

New

-2%

NAVISTAR INTL

NAV

47908

50%

-19%

MUELLER WATER PRODU

MWA

41766

280%

-11%

C V R ENERGY

CVI

36046

New

6%

CON WAY INC

CNW

35361

51%

-1%

DELTA AIR LINES INC

DAL

35208

131%

-6%

FRONTIER OIL CORP

FTO

17916

New

10%

M P G OFFICE TRUST INC

MPG

17483

13%

-23%

K B HOME

KBH

17278

New

-21%

MARATHON OIL CORP

MRO

13328

New

-1%

D R HORTON INC

DHI

13045

New

-1%

PULTE GROUP INC

PHM

12115

New

4%

TESORO CORP

TSO

10732

New

-15%

BEAZER HOMES USA INC

BZH

6250

New

-26%

MASCO CORP

MAS

5493

New

-13%

RYLAND GROUP INC

RYL

3150

New

4%

HOLLY CORP

HOC

2830

New

15%

David Tepper’s bullish stock picks returned 1.8% during the second quarter of 2011. This is 1.7 percentage points better than S&P 500’s 0.1% return. We also calculated David Tepper’s return in large-cap stocks that are constituents of S&P 500 index. Unfortunately those positions lost 3.2% during the second quarter because of its heavy exposure to financial stocks. David Tepper reduced his financial holdings by around 45% during second quarter but that wasn’t enough. Investors imitating Tepper’s bullish stock picks beat investors who are imitating Tepper’s largest stock picks.

David Tepper’s bullish bets outperformed index funds mainly because of his increased positions in Goodyear Tire, Macy’s, and Dean Foods. These were among his largest bullish positions and each of these stocks returned more than 20% during second quarter. David Tepper was the largest holder of GT at the end of first quarter. Steve Cohen’s SAC and Ken Griffin’s Citadel are also among GT investors. David Tepper was also the largest holder of Macy’s among the 300+ hedge funds we track. Ivory Capital’s Curtis Macnguyen and Ken Griffin’s Citadel are also among M investors (See Ken Griffin’s favorite stocks here).

We like David Tepper and believe that investors will be able to beat index funds by imitating his bullish stock picks. Investors can check the changes in Tepper’s portfolio and his favorite holdings here.

Source: David Tepper's Bullish Stock Picks