Tracking David Tepper's Appaloosa Management Portfolio - Q3 2018 Update

|
Includes: AABA, AAPL, AGN, ALLY, AMLP, AY, BABA, BAC, BSX, BYD, CFG, CNC, COOP, CZR, EDU, ET, FB, GOOG, GOOGL, HUN, KEY, KMT, KNX, LNG, LRCX, MGM, MU, NRG, NXPI, OC, PAH, PCG, STT, SUM, SYK, SYMC, TERP, TMO, TMUS, UAL, UBS, UNH, VNTR, VST, WDC, WFC, WMB, XPO
by: John Vincent
Summary

David Tepper’s 13F portfolio value decreased from $8.78B to $5.69B this quarter.

Micron Technology is the largest individual stock position at ~29% of the portfolio.

Appaloosa reduced or disposed the majority of the positions this quarter.

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 11/14/2018. 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 Q2 2018.

This quarter, Tepper’s 13F portfolio value decreased ~35% from $8.78B to $5.69B as the majority of the positions were reduced or eliminated. The number of holdings decreased from 48 to 37. The top-five individual stock positions are Micron Technology, Facebook, Allergan, Alibaba, and Alphabet. 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:

State Street Corp (STT), Williams Companies (WMB), and Apple Inc. (AAPL): These are the new positions this quarter. The 1.75% STT stake was purchased at prices between $83 and $95 and the stock currently trades well below that range at $71.19. The very small 0.5% WMB position came about as Williams Companies completed a merger with Williams Partners LP in August. Terms called for an exchange ratio of 1.494 shares of Williams Companies for each share of Williams Partners LP. Appaloosa had a ~2.1M share stake in Williams Partners for which they received ~3.1M shares of WMB. That net position was reduced by roughly two-thirds during the quarter. The stock traded between $26.50 and $32 in the quarter and it is now just below that range at $24.65. AAPL is a minutely small 0.4% stake. Tepper has had several successful roundtrips with Apple over the years.

Stake Disposals:

Ally Financial (ALLY): Q3 2017 saw a ~525% stake increase in the ALLY position at prices between $20.50 and $24.50. Last quarter, there was a ~62% selling at prices between $30 and $35 and the disposal this quarter was at prices between $26 and $28. The stock currently trades at $24.25.

UBS Group AG (UBS): UBS was a 1.20% portfolio stake established in Q1 2018 at prices between $17 and $21. Last quarter saw a ~2% trimming and the position was eliminated this quarter at prices between $15 and $16.65. The stock is now at $13.30.

Wells Fargo (WFC): The ~2% WFC position was purchased in Q1 2018 at prices between $51 and $66. There was an ~11% increase last quarter and the disposal this quarter was at prices between $52 and $59. The stock currently trades at $52.54.

ALPS Alerian MLP ETF (AMLP), Citizens Financial Group (CFG), KeyCorp (KEY), Knight-Swift Transportation (KNX), MGM Resorts International (MGM), NXP Semiconductors (NXPI) & Calls, New Oriental Education (EDU), Symantec Corp. (SYMC), United Continental (UAL), and Western Digital (WDC): These small (less than ~1% of the portfolio each) stakes were disposed this quarter.

Stake Increases:

PG&E Corp. (PCG): PCG is now a 3.23% portfolio position. It was first purchased in Q4 2017 at prices between $44.50 and $70.75. YTD has seen a roughly 4x stake increase at prices between $38.50 and $46. The stock currently trades well below those ranges at $23.51.

NRG Energy (NRG): NRG stake saw a ~575% increase in Q3 2017 at prices between $16 and $26. Q1 2018 saw an about turn: ~30% reduction at prices between $24 and $31 and that was followed with a ~62% selling last quarter at prices between $30 and $35. It is now at $37.89. There was a marginal increase this quarter and the stake is at 1.72% of the portfolio.

Mr. Cooper (COOP) previously WMIH: COOP was a very small stake that was almost eliminated last quarter. This quarter saw the position built back up to a 1.53% portfolio stake at prices between $16 and $20 and the stock is now at $14.22.

Boyd Gaming (BYD), Summit Materials (SUM), and Vistra Energy (VST): These small positions (less than ~1% of the portfolio each) saw increases this quarter.

Stake Decreases:

Micron Technology (MU): MU is the largest 13F position at ~29% of the portfolio. The stake was built over the last seven quarters through Q2 2018 at prices between $16.50 and $65. The stock is now at $36.12. This quarter saw an ~11% trimming.

Facebook Inc. (FB): FB is a large (top three) ~10% 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 with a two-thirds increase the following quarter at prices between $168 and $183. The stock currently trades at ~$132. Q1 2018 saw a ~12% increase while last quarter there was a ~18% reduction. There was another one-third reduction this quarter at prices between $160 and $218.

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): AGN is a large (top three) 6.67% of the portfolio stake. It was built 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 with 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 ~$153. There was a ~7% increase in Q1 2018 while last quarter there was a similar reduction. This quarter saw another ~40% selling at prices between $167 and $193.

Alibaba Group Holding (BABA): BABA is a large (top five) 4.34% 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 $146. Q1 2018 saw a ~6% trimming and that was followed with another one-third reduction last quarter at prices between $168 and $211. The pattern continued this quarter: ~43% selling at prices between $166 and $198.

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 follow: 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 $1,077. In Q1 2018, there was a ~14% increase while last quarter saw a similar reduction. There was another ~40% selling this quarter at prices between $1,103 and $1,268. The stock currently trades at $1,026.

Altaba Inc. (AABA) previously Yahoo: AABA is a fairly large ~4% 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 with 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 $60.89. Last three quarters have seen a combined ~62% reduction at prices between $64 and $82.

T-Mobile US (TMUS): TMUS is a 3.32% of the portfolio position purchased in Q4 2017 at prices between $55 and $64.50 and the stock is currently at $66.57. There was an ~8% stake increase in Q1 2018 while last quarter saw a ~4% trimming. There was another one-third selling this quarter at prices between $58 and $71.

Lam Research (LRCX): LRCX is a medium-sized 2.72% of the portfolio stake established in Q1 2018 at prices between $162 and $229 and the stock currently trades at ~$144. There was a ~7% increase last quarter while this quarter saw a ~15% reduction.

XPO Logistics (XPO): XPO was a minutely small stake in Q3 2017. The position was built to a ~2% of the portfolio position in Q4 2017 at prices between $64.50 and $92. The stock is now at $71.23. There was a ~3% trimming in Q1 2018 and that was followed with a ~23% selling last quarter at prices between $93.50 and $114. This quarter saw another ~18% reduction at prices between $95.50 and $115.

Caesars Entertainment (CZR): The 2.62% CZR stake was established in Q4 2017 and more than doubled next quarter at prices between $10.50 and $14.50. Last quarter also saw a ~25% increase at prices between $10.50 and $13.20. The stock is currently well below those ranges at $7.84. There was a ~8% trimming this quarter.

Bank of America (BAC): BAC is a 1.75% 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. YTD has seen a combined ~80% reduction at prices between $27.75 and $33. The stock currently trades at $27.38. BAC is a frequently traded stock in Tepper’s portfolio.

UnitedHealth (UNH): UNH is a 1.63% portfolio position built during the four quarters through Q1 2018 at prices between $213 and $249. Last two quarters have seen a combined ~50% selling at prices between $217 and $270. The stock is currently at ~$262.

Centene Corp. (CNC): The 1.50% CNC position was increased by ~60% in Q1 2018 at prices between $99 and $112. Last two quarters have seen a ~52% selling at prices between $105 and $147. It is now at ~$130.

Energy Transfer Partners LP and Energy Transfer Equity: The ~1.3% portfolio stakes saw ~30% reductions each this quarter. Energy Transfer Partners merged with Energy Transfer Equity and the transaction closed last month. The resulting entity was renamed Energy Transfer LP (ET). Terms were 1.28 shares of ETE for each ETP.

Atlantica Yield plc (AY): AY is a ~1.21 % portfolio position purchased in Q4 2015 at prices between $14.50 and $21. 2016 saw an overall ~8% trimming and that was followed with a ~40% reduction last year. The stock is now at $19.49. There was an ~8% increase in Q1 2018 while last quarter saw a similar reduction. There was another ~3% trimming this quarter.

Owens Corning (OC): The original OC stake was established in Q1 & Q2 2012 at prices between $29 and $37. The position has wavered. Recent activity follow: the five quarters through Q4 2017 had seen a combined two-thirds selling at prices between $46.50 and $92. The pattern reversed next quarter: ~45% stake increase at prices between $77.50 and $96. Last quarter saw marginal trimming while this quarter saw a 24% selling at prices between $54 and $67. The position is now very small at ~1% of the portfolio. The stock currently trades at $49.43.

Boston Scientific (BSX), Cheniere Energy (LNG), Dollar General (NYSE:DG), Huntsman Corporation (HUN), Kennametal (KMT), Platform Specialty Products (PAH), Stryker Corp. (SYK), TerraForm Power (TERP), Thermo Fisher Scientific (TMO), and Venator Materials plc (VNTR): These small positions (less than ~1% of the portfolio each) saw reductions this quarter.

Kept Steady:

Caesars Entertainment Notes: The small 1.43% portfolio stake remained steady this quarter.

The spreadsheet below highlights changes to Tepper’s 13F stock holdings in Q3 2018:

David Tepper - Appaloosa Capital Management - Q3 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.