Hedge Fund Guru David Tepper's Latest Moves

by: Arsene Lupin

Recently released 13F-HR filings give a perspective on famed hedge fund manager David Tepper's micro moves as well as his macro views. David has been 'batting a 1000' in baseball lingo since he his famous balls to the wall call on a market bottom almost 18 months ago.

Overall, Tepper has gotten much more 'cash'ious (cautious and holding more cash) at the end of December 2011 than in the previous quarter. In general his Appaloosa Management Hedge fund holds a fairly large number of positions (typically 50-100) so a position by position analysis is futile. However, below are some macro or sector bets that reveal patterns, organized from bearish to bullish.

Ultra Bearish. Tepper bet big on semiconductor materials since the tech meltdown in the summer of 2011. In the past he has been particularly good at timing his buys on Applied Materials (NASDAQ:AMAT). However, he recently liquidated all his holdings including in AMAT as well as significant positions in KLA-Tencor (NASDAQ:KLAC) and LAM Research (NASDAQ:LRCX) - all of which previously constituted almost 10% of his portfolio. Seems like he is unimpressed by the feeding frenzy on NASDAQ, and is betting on it being over-optimistic.

Company Size of position (old) % of portfolio (old) Position Now
Applied Materials 4.15 M shares 3.04% 0
KLA-Tencor 1.04M shares 2.81% 0
LAM Research 900K shares 3.14% 0

Bearish. Tepper has also been (repeatedly) successful in the past on oil related stocks, and made some big bets on refiners (notably Valero). But now he is betting against refiners such as Holly Frontier (NYSE:HFC), and Tesoro (NYSE:TSO). He is also betting against a number of airlines - Delta (NYSE:DAL), United Airlines (NYSE:UAL) and US Airways Group (LCC). This would suggest that he sees higher prices on gas in the near future, driven by challenges in getting oil to US refineries, as also perhaps supply issues due to global conflicts.

Company Size of position (old) % of portfolio (old) Position Now
Holly Frontier 1.6M shares 2.97% 0
Tesoro 1.1M shares 1.52% 0
United Airlines 4M shares 5.51% down 70%
US Air 9.3M shares 3.62% down 65%
Delta 880K shares 1.52% 0

Muddled. Tepper seems neither bearish not bullish on Financials, completely liquidating positions in Citibank (NYSE:C) and E-Trade Financial (NASDAQ:ETFC) while taking a major new position in money center banks via the Financial Select SPDR ETF (NYSEARCA:XLF). This suggests that he sees financials as a stock picker's market, and no longer an all-out sector bet.

Company Size of position (old) % of portfolio (old) Position Now
Citibank 2.52 M shares 4.58% 0
E-Trade 1.18M shares 0.76% 0
Financial Select SPDR ETF 0 0 4.42% of portfolio

Bullish. There's not a lot that Tepper is truly bullish about, it would seem. However, on a stock specific basis, he seems to think the sell-off on Oracle (NASDAQ:ORCL) and Boston Scientific (NYSE:BSX) are overdone. Oracle called a slowdown and had taken a 20% haircut late last year, and BSX has recently taken an even more drastic 30% haircut. Tepper's 1.2 M share stake in ORCL (4.94% of portfolio) and 7.8M share stake in BSX (6.6% of portfolio) suggests that he knows enough to make a big 'conviction' bet here.

Disclosure: I am long ORCL.