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Appaloosa Management, L.P. is a Short Hills, NJ-based hedge fund management firm founded by David A. Tepper. The firm manages over $4 bn in equities and has beaten the S&P 500 consistently returning 25.86%, 8.88%, -26.72%, 132.72% and 22% in 2006, 2007, 2008, 2009 and 2010 respectively.

The following is a list of Appaloosa's top holdings with good dividend yields:

Stock

Symbol

Shares Held - 09/30/2011

Yield

Valero Energy Corp.

VLO

5558808

2.50%

BP Plc.

BP

157227

3.80%

Microsoft Corporation

MSFT

1711926

2.70%

KLA-Tencor Corporation

KLAC

1034534

2.70%

Applied Materials Inc.

AMAT

4144385

2.70%

Calumet Specialty Products Partners LP

CLMT

1333893

9.20%

International Paper Co.

IP

3316483

3.40%

Source: 13F filing

I believe Valero, Microsoft and BP provide attractive risk reward profile at current levels.

Valero Energy Corp. is the largest independent petroleum refiner in the United States. The company owns and operates 13 refineries in the U.S., Canada and Aruba, and has total throughput capacity of 2.6 million barrels per day. Valero also operates around 1,400 retail sites under the Valero, Diamond Shamrock and Ultramar brands. Valero offers the most diversified refinery base out of all the other independent refiners, with a footprint in all major regions of the U.S.

A key factor which differentiates Valero and with other refiners is the high complexity of Valero's refining facilities. High complexity allows Valero to refine cheaper and heavy crude oil, which is available at a discount to WTI. Around 50% of VLO's feedstock consists of heavier crude. This helps company's margins and as economy slowly recovers and crude price remains high, complex refiners like Valero will make substantially higher margins as compared to others. I believe, in the medium to long term, complex refiners like Valero should get a higher multiple than others, which is not the case currently.

Valero management tripled dividend payment and share repurchases last year. This shows managements willingness to share the positives of company's growth with investors. VLO is also investing in some high-EBITDA generative hydrofrackers' facilities that will come on-stream in 2H2012/early 2013. Though these investments will likely dent earnings in 2012, it will be a big tailwind for 2014-15. I believe market is significantly underestimating company's normalized earning power (2014e) and would recommend buying the stock from a medium term perspective.

Microsoft is trading at a forward P/E of 8.5x. I believe Microsoft is a good medium-term investment in these uncertain times. Its cash cushion limits the downside as well as enables it to make opportunistic acquisitions if the valuations of target companies reach attractive levels. In addition, Microsoft is also taking a lot of new initiatives, which can drive meaningful growth over the next few years. Some of the major catalysts for the stocks are the Windows 8 launch, Office 365 gaining traction and a successful adoption of Nokia-WP7 phones. I think Microsoft offers an attractive risk/reward for investors who can hold the stock for one year.

I also like BP Plc primarily due to the money-printing binge of U.S. government which is fueling inflation across the globe and commodities are expected to benefit from it. I am bullish about prospects of oil in particular. Since oil and gas stocks directionally trade in line with the crude oil price, I see a good upside in them. BP, in particular, is trading at very attractive levels at less than 7x forward PE and I see a good potential upside in its stock price.

Source: David Tepper's Top Dividend Stocks: 3 Attractive Buying Opportunities