Tracking David Tepper's Appaloosa Management Portfolio - Q2 2018 Update

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Includes: AABA, AGN, ALL, ALLY, AMAT, AMLP, AY, BABA, BAC, BSX, BYD, CFG, CNC, COOP, CZR, EDU, ETE, ETP, FB, GOOG, GOOGL, HCA, HUN, KEY, KMT, KNX, LNG, LRCX, MGM, MU, NRG, NVDA, NXPI, OC, PAH, PCG, QQQ, SMH, SUM, SYK, SYMC, TERP, TMO, TMUS, UAL, UBS, UNH, URI, VNTR, VST, WDC, WFC, WMB, WPZ, XLE, XLF, XOP, XPO
by: John Vincent

Summary

David Tepper’s 13F portfolio value decreased from $9.72B to $8.78B this quarter.

Micron Technology is the largest individual stock position at ~24% of the portfolio.

Appaloosa increased Micron Technology while reducing Facebook, Alibaba, and Altaba.

This article is part of a series that provides an ongoing analysis of the changes made to David Tepper’s 13F portfolio on a quarterly basis. It is based on Appaloosa Management’s regulatory 13F Form filed on 08/14/2018. 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 Q1 2018.

This quarter, Tepper’s 13F portfolio value decreased ~10% from $9.72B to $8.78B. The number of holdings decreased from 53 to 48. The top-five individual stock positions are Micron Technology (NASDAQ:MU), Facebook (NASDAQ:FB), Allergan (NYSE:AGN), Alibaba (NYSE:BABA), and Altaba (NASDAQ:AABA). Combined, they account for ~53% of the 13F holdings.

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

New Stakes:

KeyCorp (KEY), Symantec Corp. (SYMC), NXP Semiconductors (NXPI) & Calls, Citizens Financial Group (CFG), Vistra Energy (VST), and New Oriental Education (EDU): These are small (less than ~1% of the portfolio each) new stakes established this quarter.

Stake Disposals:

Invesco QQQ ETF (QQQ): QQQ was a large (top three) 8.42% of the portfolio position purchased in Q2 2017 at prices between $130 and $144. The following quarter saw a ~20% selling at prices between $136 and $146 while Q4 2017 saw a ~300% stake increase at prices between $145 and $159. The zigzag trading continued last quarter: ~87% selling at prices between $154 and $174. The remaining ~1% position was eliminated this quarter at prices between $155 and $178. QQQ currently trades at ~$187.

Financial Select Sector SPDR (XLF) Calls, Energy Select Sector SPDR ETF (XLE) Calls, and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) Calls: A ~3% position in XLF Calls was established in Q3 2017 when XLF traded between $24 and $26. Q4 2017 saw a ~40% increase as XLF traded between $26 and $28. It currently goes for $28.33. The position was almost sold out last quarter as the underlying traded between $27 and $30 and the remnant stake was disposed this quarter. XLE and XOP Calls were very small stakes that saw ~75% reductions last quarter and elimination this quarter.

United Rentals (URI): URI was a 1.22% position as of Q4 2017. The original stake was built over the three quarters through Q2 2017 at prices between $72 and $129. There was a ~20% reduction in Q3 2017 at prices between $107 and $139 and that was followed by a similar selling in Q4 2017 at prices between $139 and $173. The position was almost sold out last quarter at prices between $162 and $189 and the remnant stake was disposed this quarter. The stock is now at $156.

Applied Materials (AMAT) and VanEck Vectors Semiconductor ETF (SMH): AMAT and SMH are very small (less than 1% of the portfolio each) stakes purchased last quarter but disposed this quarter.

Allstate Corporation (ALL), HCA Holdings (HCA), Nvidia Corp. (NVDA), and Peabody Energy pfd Cnvrts: These minutely small positions (less than ~0.5% of the portfolio each) were disposed this quarter.

Stake Increases:

Micron Technology: MU is the largest 13F position at 24% of the portfolio. The stake was built over the last seven quarters at prices between $16.50 and $65. The stock is now at $52.52.

Lam Research (LRCX) and Wells Fargo (WFC): LRCX is a medium-sized 2.72% of the portfolio stake established last quarter at prices between $162 and $229 and the stock currently trades at ~$173. There was a ~7% increase this quarter. The ~2% WFC position was purchased at prices between $51 and $66 and it is now at $58.48. There was a ~11% increase this quarter.

Caesars Entertainment (CZR): The CZR stake was established in Q4 2017 and more than doubled last quarter at prices between $10.50 and $14.50. This quarter also saw a ~25% increase at prices between $10.50 and $13.20. The stock is currently below those ranges at $10.20.

Western Digital (WDC): WDC is a small ~1% of the portfolio stake that was more than doubled this quarter at prices between $77 and $93. The stock currently trades well below that range at $63.24.

Cheniere Energy (LNG), Kennametal (KMT), Knight-Swift Transportation (KNX), Platform Specialty Products (PAH), PG&E Corp. (PCG), and Summit Materials (SUM): These small positions (less than ~1% of the portfolio each) saw increases this quarter.

Stake Decreases:

Facebook Inc.: FB is a large (top three) ~11% of the portfolio stake established in Q3 2016 at prices between $114 and $131 and increased by ~50% the following quarter at prices between $115 and $133. Q3 2017 saw a ~40% increase at prices between $148 and $174 and that was followed by a two-thirds increase the following quarter at prices between $168 and $183. The stock currently trades at $176. Last quarter saw a ~12% increase while this quarter there was a ~18% reduction.

Note: FB has had several previous roundtrips in the portfolio: The latest was a fairly large 3.28% of the portfolio position established in Q1 2016 at prices between $94 and $116, and sold the following quarter at prices between $109 and $121.

Allergan plc: AGN is a large 6.43% of the portfolio stake. It was built up over the five quarters through Q4 2016 at prices between $188 and $323. The pattern reversed in Q1 2017: ~30% selling at prices between $210 and $250 and that was followed by another ~15% reduction the following quarter at prices between $219 and $249. There was another ~25% selling in Q3 2017 at prices between $203 and $256. The pattern reversed again in Q4 2017: ~85% increase at prices between $164 and $211. The stock is now at $192. There was a ~7% increase last quarter while this quarter there was a similar reduction. For investors attempting to follow Appaloosa, AGN is a good option to consider for further research.

Note: AGN is an activist stake. Tepper is opposed to the company’s plan to spin off its women’s health and antibiotic divisions.

Alibaba Group Holdings: BABA is a large (top five) 5.38% of the portfolio stake established in Q1 2017 at prices between $107 and $144. There was a ~20% increase in Q4 2017 at prices between $170 and $191 and the stock currently trades at $175. Last quarter saw a ~6% trimming and that was followed by another one-third reduction this quarter at prices between $168 and $211.

Altaba Inc., previously Yahoo: AABA is a large 5.34% of the portfolio position. It was first purchased in Q3 2016 at prices between $37.50 and $44. Q1 2017 saw a ~60% increase at prices between $38.50 and $47 and that was followed by a ~130% increase in the following quarter at prices between $46 and $56. There was a ~90% increase in Q4 2017 at prices between $65 and $73. The stock is now at $69.55. Last two quarters have seen a combined ~28% reduction at prices between $67 and $82.

Alphabet Inc. (GOOG) (GOOGL): GOOG is a 4.20% of the portfolio position. It has been a significant presence in the portfolio since Q1 2012 and the original purchase was at prices between $290 and $325. The stake has wavered. Recent activity is as follows: Q3 2016 saw a 25% selling at prices between $692 and $787 while Q2 2017 saw a ~23% increase at prices between $824 and $984. Q4 2017 saw a ~37% reduction at prices between $952 and $1077. Last quarter there was a ~14% increase while this quarter saw a similar reduction. The stock currently trades at $1218.

T-Mobile US (TMUS): TMUS is a 2.72% of the portfolio position purchased in Q4 2017 at prices between $55 and $64.50 and the stock is currently at $66.04. There was a ~8% stake increase last quarter while this quarter saw a ~4% trimming.

Bank of America (BAC): BAC is a 2.32% position established in Q1 2017 at prices between $22 and $25.50 and reduced by ~30% in Q3 2017 at prices between $22.89 and $25.50. There was a ~170% stake increase in Q4 2017 at prices between $25 and $30 and that was followed by a ~36% reduction last quarter at prices between $29 and $33. There was another one-third selling this quarter at prices between $28 and $31. The stock currently trades at $30.93. BAC is a frequently traded stock in Tepper’s portfolio.

XPO Logistics (XPO): XPO was a minutely small stake in Q3 2017. The position was built up to a ~2% of the portfolio position in Q4 2017 at prices between $64.50 and $92. The stock is now at ~$107. There was a ~3% trimming last quarter and that was followed by a ~23% selling this quarter at prices between $93.50 and $114.

UnitedHealth (UNH): UNH is a 1.48% portfolio position built during the first three quarters of 2017 at prices between $158 and $200. Last quarter saw a ~19% increase while this quarter there was a ~25% reduction at prices between $215 and $256. The stock is currently at ~$269.

Centene Corp. (CNC): The 1.44% CNC position was increased by ~60% last quarter at prices between $99 and $112 and it is now at ~$147. This quarter saw a ~16% trimming.

NRG Energy (NRG) and Ally Financial (ALLY): These two positions had seen large stake increases in Q3 2017. NRG stake saw a ~575% increase at prices between $16 and $26 while ALLY position saw a ~525% increase at prices between $20.50 and $24.50. The NRG position was reduced by ~30% last quarter at prices between $24 and $31 and that was followed by a ~62% selling this quarter at prices between $30 and $35. It is now at $35.39. The ALLY position saw marginal trimming last quarter and a ~40% reduction this quarter at prices between $25.50 and $28. The NRG position is now at 0.90% while the ALLY stake is at 1.44%.

Energy Transfer Partners L.P. (ETP): ETP is a 1.20% of the portfolio position. The original stake is from Q4 2015 at prices between $28 and $47. The following quarter saw a ~200% increase at prices between $20 and $35. The pattern reversed in Q2 2016: ~30% selling at prices between $30 and $41. Q2 2017 saw another reversal: ~24% increase at prices between $18.50 and $24.50. Last four quarters saw a ~63% reduction at prices between $16 and $21. The stock is now at $22.55.

Note: Energy Transfer Partners is merging with Energy Transfer Equity (ETE). Terms are 1.28 shares of ETE for each ETP. Tepper has similarly sized ~1.2% portfolio stakes in ETE and ETP.

UBS Group AG (UBS): UBS is a 1.20% portfolio stake established last quarter at prices between $17 and $21 and it currently trades below that range at $15.66. There was a ~2% trimming this quarter.

Owens Corning (OC): The original OC stake was established in Q1 & Q2 2012 at prices between $29 and $37. The five quarters through Q4 2017 had seen a combined two-thirds selling at prices between $46.50 and $92. The pattern reversed last quarter: ~45% stake increase at prices between $77.50 and $96. The stock currently trades at $56.62. The position is now at ~1% of the portfolio. This quarter saw marginal trimming.

Williams Partners L.P. (WPZ): WPZ is now a small ~1% portfolio position. It was first purchased in Q4 2015 at prices between $23 and $35. There was a ~77% selling over the last four quarters at prices between $33 and $44.

Note: Last month, Williams Companies (WMB) completed a merger with Williams Partners LP. Terms called for an exchange ratio of 1.494 shares of Williams Companies for each share of Williams Partners LP.

Atlantica Yield plc (AY): AY is a ~0.80% portfolio position purchased in Q4 2015 at prices between $14.50 and $21. 2016 saw an overall ~8% trimming and that was followed by a ~40% reduction last year. The stock is now at $20.64. There was an ~8% increase last quarter while this quarter saw a similar reduction.

Alerian MLP Alps ETF (AMLP), Boston Scientific (BSX), Dollar General (DG, Energy Transfer Equity, Huntsman Corporation (HUN), MGM Resorts International (MGM), Stryker Corp. (SYK), TerraForm Power (TERP), Thermo Fisher Scientific (TMO), Venator Materials plc (VNTR), and WMIH Corp. (WMIH): These small positions (less than ~1% of the portfolio each) saw reductions this quarter.

Kept Steady:

Boyd Gaming (BYD), United Continental (UAL), and Caesars Entertainment Notes:

These are small positions (less than ~1% of the portfolio each) kept steady this quarter.

The spreadsheet below highlights changes to Tepper’s US stock holdings in Q2 2018:


David Tepper - Appaloosa - Q2 2018 13F Report

Disclosure: I am/we are long BABA, BAC, LNG, NXPI.

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.