Tracking David Tepper's Appaloosa Management Portfolio - Q4 2015 Update

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Includes: AAPL, ABY, AGN, ALL, AMLP, AR, AXLL, CBI, CEM, COG, CYH, DAL, EMN, EQT, ETP, EXP, FCX, FSL, GM, GOOG, GOOGL, GT, HCA, HDS, HPE, HUN, IR, JBLU, KBR, KMI, KYN, LUV, MYL, NKE, NXPI, OC, PCLN, PFE, PPG, RRC, RYL, SPY, TERP, TEX, TGI, TGP, TOO, TYG, UAL, URI, USG, WHR, WMIH, WPZ
by: John Vincent

Summary

David Tepper’s US long equity portfolio increased 75% from $2.86B to $5.01B this quarter.

General Motors is the largest individual stock position at 8.54% of the portfolio.

The call option on the S&P 500 ETF was increased significantly in the quarter.

This article is part of a series that provides an ongoing analysis of the changes made to David Tepper's US stock portfolio on a quarterly basis. It is based on Appaloosa Management's regulatory 13F Form filed on 02/12/2016. Please visit our Tracking David Tepper's Appaloosa Management Portfolio series to get an idea of his investment philosophy and our previous update for the fund's moves during Q3 2015.

This quarter, Tepper's US long equity portfolio increased 75% from $2.86B to $5.01B. Last quarter had seen a ~30% decrease from $4.04B to $2.86B. The number of holdings increased from 33 to 52. The top-five individual stock positions are General Motors, Alphabet Inc., Delta Air Lines, HCA Holdings, and Whirlpool Corporation. Combined, they account for ~35% of the 13F holdings.

To know more about Tepper's distress investing style, check out the book Distress Investing: Principles and Technique.

New Stakes:

ALPS Alerian MLP ETF (NYSEARCA:AMLP), Energy Transfer Partners LP (NYSE:ETP), Kinder Morgan Inc. (NYSE:KMI), TerraForm Power (NASDAQ:TERP), and Williams Partners LP (NYSE:WPZ): These energy sector stakes are new this quarter. Combined, the total position is at ~11% of the portfolio. Tepper is positioning in anticipation of a bottom in the sector. Interestingly, all of them trade very near or below the low-end of his purchase price ranges.

Abengoa Yield (NASDAQ:ABY), Allergan plc (NYSE:AGN), Community Health Systems (NYSE:CYH), Hewlett Packard Enterprise (NYSE:HPE), Pfizer Inc. (NYSE:PFE), PPG Industries (NYSE:PPG), and Range Resources (NYSE:RRC): AGN, CYH, HPE, and RRC are very small (less than ~1% of the portfolio each) positions. The 2.43% ABY position was established at prices between $14.15 and $21.10, and it is currently just below that range at $13.73. PFE is a 1.55% stake purchased at prices between $31.33 and $35.45, and the stock is now at $29.35. The 1.48% PPG position was established at prices between $88 and $107, and it currently trades at $91.78.

Stake Disposals:

JetBlue Airways (NASDAQ:JBLU): The 4.04% JBLU stake was established in Q1 2015 at prices between $14.38 and $19.58. It was disposed this quarter at prices between $22.56 and $26.86. The stock currently trades at $21.25.

Nike Inc. (NYSE:NKE) Puts: The 1.54% (nominal) bearish bet on NKE was established last quarter when the underlying share price varied between $50.50 and $62.50. This quarter, the position was eliminated. The share price was between $61 and $67 during the quarter. The stock is now at $56.41.

Axiall Corporation (NYSE:AXLL), KBR Inc. (NYSE:KBR), Ryland Group (NYSE:RYL), Terex Corporation (NYSE:TEX), and USG Corporation (NYSE:USG): These are very small positions (less than ~1% of the US long portfolio) that were eliminated this quarter.

Stake Increases:

Chicago Bridge & Iron (NYSE:CBI): CBI has been in the portfolio since Q2 2013. Around 1.5M shares were purchased for around $56 at that time. The position has wavered since and the current stake is at 1.39M shares (~1% of portfolio). Last three quarters have seen minor increases. The stock currently trades at $32.42.

Delta Air Lines (NYSE:DAL): DAL is the third-largest position at 7.40% of the portfolio. It was first purchased in 2012 at a cost basis in the high single digits. The position has wavered since. Last quarter saw a ~42% increase at prices between $40 and $48 and that was followed with a ~21% increase this quarter at prices between $44 and $52. The stock currently trades at $42.99. Tepper has huge long-term gains on this position.

Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG has been a significant presence in the portfolio since Q1 2012, and the original purchase was at prices between $290 and $325. The stake was increased by 87% in Q1 2014 at prices between $550 and $610. It was increased by 22% in Q2 2014 as well at prices between $510 and $579. Q4 2014 saw an about-turn as around 19% of the position was sold at prices between $495 and $577, and the following quarter saw a further ~8% reduction at prices between $493 and $575. Q2 2015 saw a large 56% further reduction at prices between $520 and $565 and that was followed with a ~47% reduction last quarter at prices between $517 and $673. This quarter saw an about-turn: ~190% increase at prices between $608 and $777. The stock currently trades at $682 and the stake is now the second-largest individual stock position at 8.11% of the portfolio.

HCA Holdings (NYSE:HCA): HCA became a significant position in the portfolio in Q4 2012 when over 4M shares were purchased in the low-$30s price range. The position has doubled and it currently trades at $66.01. It is the fourth-largest individual stock position at 6.12% of the US long portfolio. Q2 2015 saw a ~15% reduction at prices between $73.61 and $91.84 and that was followed with a similar reduction last quarter at prices between $74 and $95. This quarter, the pattern reversed: ~28% increase at prices between $64 and $79.

HD Supply Holdings (NASDAQ:HDS): HDS became a significant presence in the portfolio in Q1 2014 when around 1M shares were purchased for around $23 per share. The original stake was increased by ~118% in Q1 2015 at prices between $27.02 and $31.41. This quarter saw another ~41% increase at prices between $28 and $32. It currently trades at $23.31. The stake is now at 1.92% of the portfolio.

Mylan Inc. (NASDAQ:MYL): MYL is a very small 0.92% stake established in Q2 2015 at prices between $58 and $76. It was reduced by ~53% last quarter at prices between $39.80 and $71.49. This quarter, the pattern reversed: ~82% increase at prices between $39 and $55. The stock is now at $41.83.

Priceline Group Inc. (NASDAQ:PCLN): PCLN is a 2.80% of the US long portfolio position established in Q1 2014 at prices between $1,113 and $1,370. In Q2 2014, the stake was increased by over 70% at prices between $1,108 and $1,292. In Q1 2015, the pattern reversed with a ~25% reduction at prices between $1,108 and $1,268. Last quarter saw a further ~57% reduction at prices between $1,117 and $1,352. The stock currently trades at $1,058. There was a ~12% increase this quarter.

Southwest Airlines (NYSE:LUV): LUV is a 3.69% position purchased last quarter at prices between $32.36 and $40.45. This quarter saw a ~160% increase at prices between $38 and $50. The stock currently trades at $36.23.

SPDR S&P 500 Trust ETF (NYSEARCA:SPY) & Calls: SPY was the largest position at 22% of the US long portfolio in Q1 2014. The stake was drastically reduced in Q2 2014 from 22% to 3.84%. In Q4 2014, the remaining stake was almost eliminated. A similar pattern of trading played out over H1 2015: a huge stake increase to a 16.38% portfolio stake (nominal) using SPY Calls in Q1 2015 followed by liquidation the following quarter. This quarter saw another stake increase back to 12.29% of the portfolio primarily through SPY Calls. SPY traded between $192 and $211 during the quarter and it is currently at $187.

Triumph Group (NYSE:TGI): TGI is a very small 0.71% of the portfolio stake. The bulk of the position was purchased in Q1 2014 at prices between $62 and $79. Last two quarters have seen minor increases. The stock currently trades at $23.57.

United Continental Holdings (NYSE:UAL): UAL was a large 4.68% of the US long portfolio stake in Q4 2014. The bulk of the stake was established in Q1 2012 at prices between $18.21 and $25. Q1 2015 saw a ~19% reduction at prices between $63.83 and $73.62 and that was followed with a huge ~62% reduction in the following quarter at prices between $51.23 and $67.25. Last quarter saw another ~69% reduction at prices between $51.50 and $61.56. The pattern reversed this quarter: ~28% increase at prices between $50.78 and $61.49. The stock currently trades at $48.35 and the stake is at 0.69%.

Whirlpool Corporation (NYSE:WHR): WHR is a fairly large (top-five) ~4.73% of the US long portfolio position. Q1 2014 saw a 125% increase at prices between $127 and $159 and that was followed with a stake doubling in Q3 2014 at prices between $139 and $156. In Q4 2014, the pattern reversed: ~15% reduction at prices between $140 and $194. Q1 2015 saw another one-third reduction at prices between $187 and $215. This quarter saw a ~43% increase at prices between $142 and $167. The stock currently trades at $132.

Allstate Corporation (NYSE:ALL): The ALL stake was established last quarter at prices between $57 and $69 and increased by ~360% this quarter at prices between $58 and $65. The stock currently trades at $63.91. The position is now at 3.62% of the portfolio. The activity indicates a clear bullish bias.

Ingersoll-Rand (NYSE:IR): IR is a ~1% portfolio stake established last quarter at prices between $50.61 and $68.76 and increased by ~51% this quarter at prices between $50.69 and $60.21. The stock currently trades at $51.32.

Stake Decreases:

Apple Inc. (NASDAQ:AAPL): AAPL is a 2.65% of the US long portfolio stake established in Q2 2015 at prices between $120 and $133. Last quarter saw a ~48% reduction at prices between $103 and $132. The stock currently trades at $93.99. This quarter also saw minor selling.

Note: Tepper has traded Apple frequently over the last three years. It became a significant presence in Q1 2012, when around 3.5M shares (split-adjusted) were purchased at prices between $60 and $87. The stake represented around 10% of the US long portfolio at the time. In Q4 2012, another 2.8M shares were purchased at prices between $73 and $94. The stock was consistently sold from the next quarter onwards, and by Q4 2013, the position was at 1.5M shares. Most of the selling happened in Q1 2013 and Q2 2013 at prices between $56 and $75. Q1 2014 saw a 16% stake increase at prices between $71 and $80. In Q4 2014, the pattern reversed again: a 31% reduction at prices between $92.93 and $103. The remaining 1.72% position was eliminated in Q1 2015 at prices between $96.26 and $119.

Eagle Materials (NYSE:EXP): EXP was a 1.85% of the portfolio position purchased last quarter at prices between $67.42 and $84.42. It was almost eliminated this quarter at prices between $58.94 and $75.74. The stock currently trades at $53.08.

Eastman Chemical (NYSE:EMN): EMN is a small 0.94% of the US long portfolio position. It saw a huge ~92% increase in Q1 2015 at prices between $68.64 and $76.48. This quarter saw a ~10% trimming. The stock currently trades at $60.66.

General Motors (NYSE:GM): GM is Appaloosa's largest 13F individual stock position at 8.54% of the US long portfolio. The bulk of the original stake was purchased in Q1 2012 and Q2 2012 at prices between $21 and $27. Q1 2014 saw a ~60% increase at prices between $34 and $41, and the following quarter the position was increased by another two-thirds at prices between $32 and $37. Q1 2015 also saw a ~25% increase at prices between $32.62 and $38.87. The pattern reversed last quarter: roughly one-third reduction at prices between $27.28 and $33.33. The stock currently trades at $27.71. This quarter also saw a marginal further reduction.

Goodyear Tire & Rubber (NYSE:GT): GT is a very long-term 1.39% position that has been in the portfolio since before the financial crisis. In 2007, the stake stood at 2.7M shares (~5% of portfolio). The position size peaked at 22M shares in Q2 2013 when a large increase happened at prices between $12 and $15.50. The stake has been sold down since. Last quarter saw a ~41% reduction at prices between $27.83 and $32.66 and that was followed with another ~64% reduction this quarter at prices between $29 and $35. The stock currently trades at $29.69. Tepper is harvesting huge long-term gains from this position.

NXP Semiconductors (NASDAQ:NXPI): NXP was a top five stake at 6.98% of the US long portfolio as of last quarter. It was sold down by ~65% this quarter at prices between $73 and $98. The original stake is from Q3 2014 at prices between $60.50 and $73.01. Last quarter had seen a ~38% increase at prices between $79.26 and $99.28. The stock currently trades at $67.30 and the stake is at 1.34%.

Note: In March 2015, NXP agreed to acquire Freescale Semiconductor (NYSE:FSL) and the deal closed in December.

United Rentals (NYSE:URI): URI was first purchased in Q1 2015 at prices between $82.31 and $104 and increased by ~17% in the following quarter at prices between $87.24 and $105. Last quarter saw a further ~39% increase at prices between $59.48 and $87.62. It now trades at $45.45. The stake is now at 1.11% of the US long portfolio. This quarter saw an 8% trimming.

Kept Steady:

Huntsman Corporation (NYSE:HUN): HUN is a 1.82% of the US long portfolio position that has been in the portfolio since Q1 2012. Just over 5M shares were purchased at that time for around $13 per share. The stake is now at 8M shares and the stock trades at $8.80. Q1 2015 saw a one-third increase at prices between $21.26 and $24.40.

Owens Corning (NYSE:OC): The original OC stake was established in Q1 2012 and Q2 2012 at prices between $29 and $37. Q4 2014 saw a ~14% reduction at prices between $29 and $36.80, while in Q2 2015, there was a ~22% increase at prices between $38.31 and $43.40. The stake is now at 3.15%. The stock currently trades at $40.52.

WMIH Corp. (NASDAQ:WMIH): WMIH is a 0.87% stake established last quarter at prices between $2.26 and $2.87. The stock is now at $2.35.

Following are the other minutely small stakes in the portfolio: Antero Resources (NYSE:AR), Cabot Oil & Gas (NYSE:COG), ClearBridge Energy MLP (NYSE:CEM), EQT Corp. (NYSE:EQT), Freeport-McMoRan (NYSE:FCX), Kayne Anderson MLP (NYSE:KYN), NRG Yield (NYSE:NYLD), Teekay LNG (NYSE:TGP), Teekay Offshore (NYSE:TOO), and Tortoise Energy Infrastructure (NYSE:TYG). Appaloosa's 13F portfolio also has minutely small stakes in General Motors and Kinder Morgan warrants.

The spreadsheet below highlights changes to Tepper's US stock holdings in Q4 2015:

Click to enlarge

Disclosure: I am/we are long GM, KMI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.