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David Tepper is considered to be contrarian investor who prefers to buy companies that are out of favor. Over the last five years, Appaloosa Management’s cumulative return on investments is over 180%. This article will examine five key stocks that Appaloosa Management purchased in the third quarter of 2011. All data in this analysis comes from Appaloosa's Form 13-F from the SEC's Edgar database.

Holly Frontier Corporation (NYSE:HFC) HFC has a market cap of $4.91 billion with a price to earnings ratio of 3.87. The stock has traded in a 52 week range between $17.91 and $38.90. The stock is currently trading around $23. The company reported third quarter revenues of $5.1 billion compared to revenues of $2.1 billion in the third quarter of 2010. Third quarter net income was $523 million compared to net income of $59 million in the third quarter of 2010.

One of HFC’s competitors is the Valero Energy Corporation (NYSE:VLO). VLO is currently trading around $22 with a market cap of $12.49 billion and a price to earnings ratio of 7.98. VLO pays a dividend which yields 2.7% versus HFC whose dividend yields 1.6%.

Appaloosa Management currently owns 1,599,244 shares of HFC. Appaloosa Management purchased all of these shares in the third quarter of 2011. HFC is an independent oil refiner. The company has done an excellent job of increasing earnings. In the third quarter, the company increased year-over-year revenues by 142% and net income by 786%. As a result of the company’s impressive earnings, the stock price has gone up by 27.6% over the last 52 weeks and 222% over the last three years. In the last month, the stock price has dropped by 41% on heavy volume. I believe that last month’s drop in HFC’s stock price was the result of profit taking. The company’s fundamentals are rock solid and the stock (price to earnings ratio 3.87/price to book ratio 0.98) is cheap. I agree with David Tepper from a valuation standpoint, and rate this stock as a buy.

Calumet Specialties Products Partners LP (NASDAQ:CLMT) CLMT has a market cap of $1 billion with a price to earnings ratio of 29.91. The stock has traded in a 52 week range between $15.99 and $24.95. The stock is currently trading around $19. The company reported third quarter revenues of $777 million compared to revenues of $595 million in the third quarter of 2010. Third quarter net income was $19 million compared to net income of $21 million in the third quarter of 2010.

One of CLMT’s competitors is Tesoro Corporation (NYSE:TSO). TSO is currently trading around $23 with a market cap of $3.32 billion and a price to earnings ratio of 4.97. TSO does not pay a dividend versus CLMT whose dividend yields 10.2%.

Appaloosa Management currently owns 1,333,893 shares of CLMT. Appaloosa Management purchased 967,893 of those shares in the third quarter of 2011. CLMT has been profitable in each of its seven years, but has seen earnings decrease in recent quarters. Third quarter year-over-year revenues were up by 30.5%, but net income was down by 10%. The decrease in net income was primarily due to of non-cash unrealized derivative losses, and $2.1 million in acquisition expenses related to the Superior Wisconsin Refinery purchase. In 2010, the company’s year-over-year net income was down by 209%. Predictably the stock price has suffered and is down by 9.9% over the last 52 weeks. In spite of the decrease in net income, the company’s revenues have been up in each of the last ten quarters. It appears that the company’s net income was down because of non-operational expenses. The company has paid quarterly dividends since 2006. The dividend has varied, but is currently $2.00 with a 10.2% yield. Apparently Mr. Tepper believes that the company will continue to increase revenues and will see its net income increase once it normalizes expenses. The 10.2% dividend yield will make it easy to hold the stock while waiting for the company to increase earnings. I think CLMT’s stock price will make a turnaround, and I like the dividend. I rate the stock as a buy because of its dividend.

E*TRADE Financial Corporation (NASDAQ:ETFC) ETFC has a market cap of $2.6 billion with a price to earnings ratio of 14.78. The stock has traded in a 52 week range between $7.74 and $18.13. The stock currently trades around $9.15. The company reported third quarter revenues of $507 million compared to revenues of $517 million in the third quarter of 2010. Third quarter net income was $71 million compared to net income of $47 million in the third quarter of 2010.

One of ETFC‘s competitors is TD Ameritrade Holding Corporation (NYSE:AMTD). AMTD is currently trading around $16 with a market cap of $9.01 billion and a price to earnings ratio of 14.78. AMTD pays a dividend which yields 1.5% versus ETFC which does not pay a dividend.

Appaloosa Management currently owns 1,181,770 shares of ETFC. Appaloosa Management purchased all 1,181,770 shares of ETFC in the third quarter of 2011. ETFC’s provides online brokerage services as well as other banking services. The company has seen hard times and had losses of $1.3 billion in 2009 and $28 million in 2010. The company seems to have turned things around and has reported earnings of $163 million through the first three quarters of 2011. Throughout 2011, there have been rumors that E*Trade might be acquired by other online brokerage firms such as Charles Schwab (NYSE:SCHW) or TD Ameritrade (AMTD). However, the company recently announced that it was no longer up for sale, and stated that “The continued execution of the company’s business plan is currently the best alternative for increasing stockholder value.” It is still too early to know how investors will react to this news. The good news is that E*Trade is on track to be profitable in 2011, and with the market’s recent volatility, the company should be able to earn higher trading revenues. I think ETFC has turned the corner, and I rate the stock as a buy because of its low valuation.

BP Plc. (NYSE:BP) BP has a market cap of $132.64 billion with a price to earnings ratio of 6.03. The stock has traded in a 52 week range between $33.62 and $49.50. The stock is currently trading around $43. The company reported third quarter revenues of $95 billion compared to revenues of $70 billion in the third quarter of 2010. Third quarter net income was $5 billion compared to net income of $2 billion in the third quarter of e 2010.

One of BP’s competitors is Exxon Mobil Corporation (NYSE:XOM). XOM is currently trading around $81 with a market cap of $387.39 billion and a price to earnings ratio of 9.76. XOM pays a dividend which yields 2.3% versus BP whose dividend yields 3.9%.

Appaloosa Management currently owns 157,227 shares of BP. Appaloosa Management purchased all 157,227 shares of BP in the third quarter of 2011. BP suffered in 2010 because of the oil spill at its Deepwater Horizon drilling sight. In 2010, the company reported net income of $-3.3 billion. In 2011, the company has returned to profitability and has reported net income of $17.6 billion through the first three quarters of the year. In other good news for BP investors, the company reinstated its dividend in 2011 and it is currently $1.68 per share. There is speculation that the company will increase the dividend once it gets past the oil spill disaster. Investors seem to believe that BP has turned things around, and have bid the stock price is up by only 5% over the last 52 weeks, and 18.5% over the last two months. BP is currently (price to earnings ratio 6.03/ price to book ratio 1.26) cheaper than its competitors. BP still faces serious legal problems, but with the stock is selling at a discount, with a hefty dividend, I think it is worth taking a chance on. I agree with David Tepper and rate the stock as a buy because headline risks are overblown for BP.

Dana Holding Corporation (NYSE:DAN) DAN has a market cap of $1.82 billion with a price to earnings ratio of 19.50. The stock has traded in a 52 week range between $9.45 and $19.35. The stock is currently trading around $12. The company reported third quarter revenues of $1.9 billion compared to revenues of $1.5 billion in the third quarter of 2010. Third quarter net income was $110 million compared to net income of $46 million in 2010.

One of DAN’s competitors is Magna International Inc. (NYSE:MGA). MGA is currently trading around $35 with a market cap of $8.43 billion and a price to earnings ratio of 9.69. MGA pays a dividend which yields 2.7% versus DAN which does not pay a dividend.

Appaloosa Management currently owns 46,173 shares of DAN. Appaloosa Management purchased all 46,173 shares of DAN in the third quarter of 2011. DAN produces modules, axles, chassis, suspension and drive-shafts for automobile manufacturers. The company has done a terrific job of increasing earnings, and in the third quarter, it increased year-over-year revenues by 17% and net income by 139%. In 2010, the company increased net income by $441 million from $-431 million in 2009 to $10 million in 2010. Despite the company’s earnings increases, the stock price is down by 21.3% over the last 52 weeks. The stock price is up by 1,380% over the last three years, so a price correction was not a surprise. The stocks current valuations (price to earnings ratio 19.5/price to book ratio 1.86) are not high for a fast growing company. In my opinion, the fundamentals for this company are strong and the stock price will improve. I agree with David Tepper and rate this stock as a buy because automotive sales should continue to rebound, albeit slowly.

Source: David Tepper's 5 Newest Buy Ideas From Q3