Top Buys of David Tepper's Appaloosa Management

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 |  Includes: CLMT, CVI, GM, GOOG, HFC, MAS, MOS, TSO, VLO, WNR
by: The Analyst Hub

Appaloosa Management L.P. is a Short Hills, NJ-based hedge fund management firm founded by David A. Tepper. The firm manages over $4B 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
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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:

Top New Buys by Market Value
Company Name Ticker MV Change (USD $) Current Position Change In Position
Mosaic Co/The MOS 161,876,529 2,390,027 2,390,027
Western Refining Inc WNR 50,566,618 2,798,374 2,798,374
Google Inc-Cl A GOOG 45,574,200 90,000 90,000
Calumet Specialty Products CLMT 7,885,383 366,762 366,762
General Motors Co GM 5,263,422 173,367 173,367
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Top Position Increases by Market Value
Company Name Ticker MV Change (USD $) Current Position Change In Position
CVR Energy Inc CVI 144,530,605 7,334,534 5,778,160
Valero Energy Corp VLO 121,989,422 7,762,004 5,197,114
HollyFrontier Corp HFC 35,720,164 555,479 508,901
Tesoro Corp TSO 24,325,134 1,530,211 1,130,211
Masco Corp MAS 24,247,491 2,472,196 2,077,582
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My favorite among the above stocks is Mosaic. I would recommend buying it despite of the broader macro concerns. The Mosaic Company is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry. It is a supplier of phosphate- and potash-based crop nutrients and animal feed ingredients.

During the last downturn in 2008, excess inventory in the supply chain coupled with anticipation of decline in fertilizers prices by farmers caused fertilizer producers and retailers to take a hit. However, present situation is different. Due to the hit fertilizer retailers had taken in 2008, they were cautious this time and have not overstocked fertilizer inventories. Thus, supply chain remains very tight. Further, grain prices corrected very sharply along with other commodities during the last downturn. Thus, farmers anticipated that fertilizer prices will come down as well. I don't see a similar commodity correction this time given the excess amount of money supply which has entered the system thanks to bailouts, quantitative easing and stimulus. In particular, when we talk of food grains where demand is inelastic, the trend is likely headed up in the mid-long term even if we consider a prolonged recession scenario. Fertilizer prices are usually correlated with food prices and I believe fertilizer companies like Mosaic are the best bet in the long term to hedge one's portfolio against inflation in these recessionary times.

For other stocks in the above list, here are some of the specifics about these companies, including a brief description of their business, growth expectations (topline and bottomline):

  • Western Refining, an independent crude oil refiner and marketer of refined products and also operates service stations and convenience stores. The Company owns and operates three refineries with a total crude oil throughput capacity of approximately 221,000 barrels per day (bpd). Western Refining's EPS forecast for the current year is $3.08 and next year is $2.83. According to consensus estimates, its top line is expected to grow 8.10% in the current year and 11.50% next year.
  • Google is primarily an internet search company. The Company maintains an index of Websites and other online content, and make it available through its search engine to anyone with an Internet connection. The Company generates revenue primarily by delivering online advertising. Google's EPS forecast for the current year is $35.50 and next year is $41.94. According to consensus estimates, its top line is expected to grow 30.30% in the current year and 22.20% next year.
  • Calumet Specialty Products Partners is a producer of specialty hydrocarbon products in North America. It operates in two segments: specialty products and fuel products. Calumet's EPS forecast for the current year is $1.20 and next year is $1.43. According to consensus estimates, its top line is expected to grow 16.60% in the current year and 11.90% next year.
  • General Motors is a global automotive company. It develops, produces and markets cars, trucks and parts worldwide. GM also provides automotive financing services through General Motors Financial Company, Inc. General Motor's EPS forecast for the current year is $4.01 and next year is $4.87. According to consensus estimates, its top line is expected to grow 8.20% in the current year and 8.60% next year.
  • CVR Energy is an independent petroleum refiner and marketer of transportation fuels. In addition, the Company also owns interest in CVR Partners, LP (the Partnership), a limited partnership which produces nitrogen fertilizers in the form of ammonia, and a solution of urea and ammonium nitrate in water used as a fertilizer (NYSE:UAN). CVR's EPS forecast for the current year is $3.20 and next year is $2.78. According to consensus estimates, its top line is expected to grow 19.60% in the current year and 15.60% next year.
  • Valero Energy is a North America's 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. Valero's EPS forecast for the current year is $3.55 and next year is $4.01. According to consensus estimates, its top line is expected to grow 30.50% in the current year and 8.20% next year.
  • HollyFrontier is an independent petroleum refiner that produces light products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. It has two segments: Refining and Holly Energy Partners, L.P. (NYSE:HEP). Holly's EPS forecast for the current year is $9.31 and next year is $8.52. According to consensus estimates, its top line is expected to grow 65.10% in the current year and 28.00% next year.
  • Tesoro 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. Tesoro's EPS forecast for the current year is $3.51 and next year is $3.15. According to consensus estimates, its top line is expected to grow 25.80% in the current year and 10.30% next year.
  • Masco manufactures, distributes and installs home improvement and building products. It is manufacturer of a range of home improvement and building products, including faucets, cabinets, architectural coatings and windows, and installers of insulation for the new home construction market. Masco's EPS forecast for the current year is $0.11 and next year is $0.41. According to consensus estimates, its top line is expected to grow 0.10% in the current year and 6.30% next year.

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