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David Tepper founded Appaloosa Management in 1993. Tepper is a prominent value investor who primarily invests in distressed securities. In 2003, he returned148.8% and became one of the most internationally renowned investors on Wall Street. He also returned 132.7% and made $4 billion in 2009. He is the 258th richest man in the world. Tepper’s stock picks returned 30% in 2010. He currently manages $16 billion.

At the end of first quarter, Tepper’s 13F portfolio was valued at $4.2 billion. It had a total of 65 stock holdings. A major chunk of his portfolio is made up of stocks from the financial and technology sectors. Currently, Appaloosa Management has the largest positions in Delta Airlines (NYSE:DAL), United Airlines (NYSE:UA), and American Airlines (AMR). AMR and UAL returned 6% while DAL gained more than 4% after the recent announcement by International Energy Agency (IES).

Unfortunately, Tepper’s top 25 stocks lost 7.9% since the end of March while S&P 500 lost 2.4%. In the first quarter of 2011, Appaloosa reduced its shares in Citigroup (NYSE:C) , Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Fifth Third Bancorp (NASDAQ:FITB) and SunTrust Banks (NYSE:STI) by an average of 43 percent. After seeing the performance of these companies since March, “I wish it was 80 percent, because they’ve been absolute crap since we sold them,” Tepper said.

He reduced his stakes in Wells Fargo by 59%, Citigroup by 35%, and Bank of America by 31%. All of them underperformed the market since the end of March. Wells Fargo lost 12%, Citigroup lost 13%, and Bank of America lost 26%.

Here are Tepper’s top 25 stock picks at the end of March:

CompanyName

Ticker

Value

Return

CITIGROUP INC

C

338647

-13%

PFIZER INC

PFE

313170

-6%

HEWLETT PACKARD CO

HPQ

259370

-14%

BANK OF AMERICA CORP

BAC

229487

-26%

GOODYEAR TIRE & RUBR CO

GT

228415

7%

INTERNATIONAL PAPER CO

IP

173188

-1%

MACYS INC

M

162848

21%

MICRON TECHNOLOGY INC

MU

139845

-35%

UNITED CONTINENTAL

UAL

131911

-22%

DEAN FOODS CO NEW

DF

131191

8%

C F INDUSTRIES HOLDINGS

CF

127242

15%

APPLIED MATERIALS INC

AMAT

124087

-21%

MICROSOFT CORP

MSFT

121269

8%

U S AIRWAYS GROUP INC

LCC

108415

-32%

WELLS FARGO & CO NEW

WFC

98002

-12%

LAM RESH CORP

LRCX

78145

-28%

VALERO ENERGY CORP

VLO

76485

-16%

K L A TENCOR CORP

KLAC

75748

-15%

MERCK & CO INC NEW

MRK

74210

2%

APPLE INC

AAPL

69690

14%

METLIFE INC

MET

67095

-8%

E TRADE FINANCIAL CORP

ETFC

66630

-1%

UNITEDHEALTH GROUP INC

UNH

63750

7%

MEDTRONIC INC

MDT

60444

-10%

ROYAL BANK SCOTLAND

RBS

57163

-8%

Macy’s returned 21% since the end of March. During the first quarter, Tepper increased Macy’s by 28%. Appaloosa currently has the largest position in the company with 6.7 million shares valued at $162.85 million. Macy’s makes up 3.86% of his 13F portfolio. The second largest holder of the company is Curtis Macnguyen’s Ivory Capital. Macnguyen purchased 5.2 million shares of Macy’s during the first quarter of 2011 worth $128 million.

Appaloosa Management also has the largest holding in Micron Technology Inc. The company lost 35% since March 2011. Tepper reduced his stake in Micron Technology by 31% during the first quarter of 2011. He now has 12 million shares of the company which is worth $139 Million. Michael Karsch’s Karsch Capital Management purchased 8 million shares of Micron Technology during the first quarter. Karsch is the fourth-largest holder of the company.

In 2009, Tepper invested heavily in the banking sector, which contributed towards the 132% return that year. However,, this year Tepper does not seem as bullish. He reduced 35% of Citigroup, and rightly so. Citigroup returned -13% since the end of March. As of March, Appaloosa Management has the sixth-largest position in the company with 76 million shares worth $338.6 billion. John Paulson’s Paulson & Co. has the largest position in Citigroup with a $1.82 billion investment.

Despite the fact that Tepper’s top 25 holdings underperformed the market by 5.5 percentage points, the loss is short-term. We believe in the long-run his stock picks will beat the market as Tepper clearly knows when to sell or reduce his holdings.

Source: David Tepper's Favorite Stock Picks