David Tepper runs one of the most successful, well-known hedge funds, Appaloosa Management. Appaloosa’s portfolio consistently beats the broader market over the longer term and within the majority of calendar years. David Tepper is generally considered a contrarian investor.
Four times a year, hedge funds must file a 13F with the SEC, delineating the main equity transactions made in the prior quarter (just equities, not debt or private placements).On August 8, Appaloosa filed its 13F, so we now know what positions the fund took in the second quarter of 2011, and from which it departed. This article will focus on the largest holdings and transactions.
As of June 30, Appaloosa’s largest holding was Citibank (C), holding over 7.2 million shares. Appaloosa actually sold slightly fewer than 460,000 shares of the bank in the second quarter, which now appears to have been a great time to sell. Due to the recent severe underperformance of financials, pushing the bank down about 25% since the end of the second quarter, Citibank is likely no longer the hedge fund’s largest equity holding.
Appaloosa’s second largest holding as of June 30 was the high yielding large-cap pharmaceutical, Pfizer (PFE), with just under 15 million shares. Appaloosa sold just under 925,000 shares of Pfizer in the second quarter. These sales, too, appear well-timed, as would almost any prior to the recent sell-off. Similarly, the fund sold shares of its third largest holding, Goodyear Tire & Rubber (GT), during the second quarter.
David Tepper sold about 7.2 million of the about 17.2 million shares of Bank of America (BAC) that Appaloosa owned at the start of the second quarter, in advance of the recent substantial sell-off of the stock. This sale, which amounted to about $120 million likely protected the fund from over $30 million in depreciation. Tepper’s remaining 10 million shares, on the other hand, suffered. Tepper also sold almost 3.5 million shares of Hewlett-Packard (HPQ), or about 55% of Appaloosa’s holdings in the tech giant.
Appaloosa's largest new equity purchase was in Mosaic (MOS), the large-cap specialty chemical company. As of June 30, Appaloosa owned just under 2.4 million shares of MOS, or about $161 million worth, placing MOS as the hedge fund’s seventh largest holding. The company has since declined about 10%
David Tepper’s Appaloosa also made significant additional share purchases of Valero Energy (VLO) and CVR Energy (CVI), adding over 5 million shares of each. This accumulation made Valero Tepper’s fourth largest and CVR Energy Tepper’s sixth largest equity positions.
All in all, Tepper’s Appaloosa appears to have sold more than it bough within the last quarter, substantially trimming several of its largest holdings. Additionally, the large purchases were within a specialty chemical company and two oil refiners.
Disclosure: I am long C.
Disclosure: I am long C.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.