Tracking David Tepper's Appaloosa Management Portfolio - Q4 2018 Update

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Includes: AABA, AAPL, AGN, ALL, AMLP, AY, BABA, BAC, BSX, BYD, CNC, COOP, CZR, DG, ET, FB, GOOG, GOOGL, HUN, KMT, LNG, LRCX, MU, NRG, OC, PCG, STT, SUM, SYK, TERP, TMO, TMUS, UNH, VNTR, VST, WFC, WMB, XPO
by: John Vincent
Summary

David Tepper’s 13F portfolio value decreased from $5.69B to $2.02B this quarter.

Micron Technology is the largest individual stock position at ~25% of the portfolio.

Appaloosa reduced or disposed the majority of the 13F stakes over the last two quarters.

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 02/14/2019. 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 2018.

This quarter, the pattern of reducing or eliminating positions continued as Tepper’s 13F portfolio value decreased roughly two-thirds from $5.69B to $2.02B. The number of holdings decreased from 37 to 23. The top five individual stock positions are Micron Technology (NASDAQ:MU), Facebook (NASDAQ:FB), Allergan (NYSE:AGN), PG&E (NYSE:PCG), and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL). Combined, they account for ~57% of the 13F holdings. To know more about Tepper's distress investing style, check out the book Distress Investing: Principles and Technique.

New Stakes:

Energy Transfer LP (ET), Alps Alerian MLP ETF (AMLP), Allstate Corp. (ALL), and Wells Fargo (WFC): Energy Transfer Partners merged with Energy Transfer Equity and the resulting entity was renamed Energy Transfer LP. The transaction closed last month and terms were 1.28 shares of ETE for each ETP. Tepper held shares in both and those got converted to ET shares. The 3% portfolio stake in AMLP was established at prices between $8.30 and $11 and it is currently at $9.91. ALL is a 2.48% portfolio position purchased at prices between $77 and $100 and it currently trades at $94.90. WFC is a very small 0.68% portfolio stake.

Note: AMLP and WFC are back in the portfolio after a quarter’s gap.

Stake Disposals:

State Street Corp. (STT), Williams Companies (WMB), and Apple Inc. (AAPL): These three positions established last quarter were disposed this quarter. The 1.75% STT stake was purchased at prices between $83 and $95 and eliminated this quarter at prices between $60 and $87. The stock currently trades at $72.47. 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 it received ~3.1M shares of WMB. That net position was reduced by roughly two-thirds last quarter when it traded between $26.50 and $32. The position was disposed this quarter at prices between $20.50 and $28. It is now at $27.35. AAPL was a minutely small 0.4% stake. Tepper has had several successful roundtrips with Apple over the years.

Alibaba Group Holding (BABA): BABA was 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. Q1 2018 saw a ~6% trimming and that was followed by another one-third reduction next quarter at prices between $168 and $211. The pattern continued last quarter: ~43% selling at prices between $166 and $198 and that was followed by the disposal this quarter at prices between $132 and $164. The stock currently trades at $183.

Lam Research (LRCX): LRCX was a medium-sized 2.72% of the portfolio stake established in Q1 2018 at prices between $162 and $229. Last quarter saw a ~15% reduction at prices between $149 and $191 and the elimination this quarter was at prices between $123 and $161. The stock is now at $180.

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. There was a ~23% selling in Q2 2018 at prices between $93.50 and $114. Last quarter saw another ~18% reduction at prices between $95.50 and $115. The disposal this quarter was at prices between $44.50 and $113. The stock currently trades at $51.17.

Centene Corp. (CNC): The 1.50% CNC position was increased by ~60% in Q1 2018 at prices between $99 and $112. Last two quarters had seen a ~52% selling at prices between $105 and $147. The remaining position was sold this quarter at prices between $54.50 and $73.50. It is now at ~$64.02.

Energy Transfer Partners LP and Energy Transfer Equity: The two ~1.3% portfolio stakes were eliminated in October as a result of the merger to form Energy Transfer LP.

Owens Corning (OC): The original OC stake was established in Q1 and Q2 2012 at prices between $29 and $37. The position has wavered. Recently, 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. Q2 2018 saw marginal trimming while last quarter saw a 24% selling at prices between $54 and $67. The stake was disposed this quarter at prices between $41 and $55. The stock currently trades at $49.50.

Boston Scientific (BSX), Boyd Gaming (BYD), Dollar General (DG), Huntsman Corporation (HUN), Kennametal (KMT), Stryker Corp. (SYK), Summit Materials (SUM), Thermo Fisher Scientific (TMO), and Venator Materials plc (VNTR): These small positions (less than ~1% of the portfolio each) were eliminated this quarter.

Stake Increases:

PG&E Corp.: PCG is now a large (top five) 7.59% portfolio position. It was first purchased in Q4 2017 at prices between $44.50 and $70.75. Last year saw a combined ~500% stake increase at prices between $23 and $49. The stock currently trades well below those ranges at $18.65.

Note: PG&E filed for Chapter 11 bankruptcy protection in January due to the exposure to wildfire liabilities.

Vistra Energy (VST): The ~3% VST position was established in Q2 2018 at prices between $19.50 and $24.50 and increased by ~30% this quarter at prices between $21 and $25.50. The stock currently trades just above those ranges at $26.56.

Stake Decreases:

Micron Technology: MU is the largest 13F position at ~25% 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 $42.74. Last quarter saw a ~11% trimming and that was followed by a ~55% selling this quarter at prices between $29 and $46.

Facebook Inc.: FB is a large (top three) ~9% 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 ~$165. Q1 2018 saw a ~12% increase while next quarter there was a ~18% reduction. There was another one-third reduction last quarter at prices between $160 and $218 and that was followed by a ~55% selling this quarter at prices between $123 and $169.

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 (top three) 7.60% 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 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 ~$136. Last quarter saw a ~40% selling at prices between $167 and $193 and that was followed by a similar reduction this quarter at prices between $130 and $194.

Alphabet Inc.: GOOG is a large (top five) 7.45% 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. Last quarter saw a ~40% selling at prices between $1103 and $1268 and that was followed by a ~25% reduction this quarter at prices between $976 and $1203. The stock currently trades at $1109.

Altaba Inc. (AABA) previously Yahoo: AABA is a large 6.72% 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 $74.03. Last year saw a combined ~75% reduction at prices between $55.50 and $81.50.

Caesars Entertainment (CZR): The 4.46% CZR stake was established in Q4 2017 and more than doubled next quarter at prices between $10.50 and $14.50. Q2 2018 also saw a ~25% increase at prices between $10.50 and $13.20. The stock is currently well below those ranges at $8.96. There was a combined ~15% selling over the last two quarters.

T-Mobile US (TMUS): TMUS is a 3.27% of the portfolio position purchased in Q4 2017 at prices between $55 and $64.50 and the stock is currently at $73.05. Last quarter saw a one-third selling at prices between $58 and $71 and that was followed by a ~60% reduction this quarter at prices between $60.80 and $70.50.

UnitedHealth (UNH): UNH is a ~3% portfolio position built during the four quarters through Q1 2018 at prices between $213 and $249. Last three quarters have seen a combined ~65% selling at prices between $217 and $287. The stock is currently at ~$265.

Atlantica Yield plc (AY): AY is a 2.90% portfolio position purchased in Q4 2015 at prices between $14.50 and $21. Last two quarters have seen minor trimming and the stock is now at $19.53.

Mr. Cooper (COOP) previously WMIH: COOP was a very small stake that was almost eliminated in Q2 2018. Last 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 $14.16. There was a ~20% selling this quarter at prices between $11.30 and $17.

Note: the prices quoted are adjusted for the 12-for-1 reverse stock split in October.

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 by a ~62% selling next quarter at prices between $30 and $35. It is now at $41.84. This quarter saw another ~80% reduction at prices between $35 and $43. The stake is now very small at 0.90%.

Bank of America (BAC): BAC is now a minutely small position. It was 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. The position was almost sold out over the last year at prices between $23 and $33. The stock currently trades at $29.27. BAC is a frequently traded stock in Tepper’s portfolio.

Caesars Entertainment Notes, Cheniere Energy (LNG), Kennametal, Platform Specialty Products (PAH), and TerraForm Power (TERP): These small positions (less than ~1% of the portfolio each) saw reductions this quarter.

Kept Steady:

None.

The spreadsheet below highlights changes to Tepper’s 13F stock holdings in Q4 2018:

David Tepper - Appaloosa - Q4 2018 13F Report Q/Q Comparison

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