Tracking David Tepper's Appaloosa Management Portfolio - Q2 2019 Update

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Includes: AABA, ABBV, ADBE, AGN, AMLP, AMZN, BABA, CNC, COOP, CRM, CWEN, CZR, ERI, ET, FB, GOOG, GOOGL, HUM, I, LNG, MU, PCG, QCOM, QQQ, SPY, TMUS, UNH, VST, XLE, XOP
by: John Vincent
Summary

David Tepper’s 13F portfolio value increased from $3.49B to $9.26B this quarter.

Tepper added two large leveraged positions in SPDR SP& 500 and Invesco QQQ index ETFs through Calls.

Appaloosa decreased Micron and dropped Alibaba during the 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 08/14/2019. 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 Q1 2019.

This quarter, Tepper’s 13F portfolio value increased from $3.49B to $9.26B. The increase was primarily due to huge nominal long positions through Calls initiated during the quarter in SPDR S&P 500 and Invesco QQQ Index ETFs. The number of holdings increased from 22 to 26. The top-five individual stock positions are PG&E (PCG), Facebook (FB), Amazon (AMZN), Alphabet (GOOG, GOOGL), and Allergan plc (AGN). To know more about Tepper's distress investing style, check out the book Distress Investing: Principles and Technique.

Note: It was reported in May that Appaloosa is returning outside money and converting to a family office structure.

New Stakes

SPDR S&P 500 ETF (SPY) Calls and Invesco QQQ ETF (QQQ) Calls: These two leveraged long positions through Calls were established during the quarter. The huge ~58% of the portfolio SPY Calls stake was purchased as the underlying traded between $275 and $296. It currently trades at $292. The ~17% QQQ Calls position was established as the underlying traded between $170 and $191. It is now at $188.

Humana Inc. (HUM), Intelsat S.A. (I), Centene Corp. (CNC), and Qualcomm (QCOM) Calls: These are minutely small (less than 0.30% of the portfolio each) stakes purchased during the quarter.

Stake Disposals

Alibaba Group Holdings (BABA): The 5.23% BABA stake was established last quarter at prices between $131 and $187, and disposed this quarter at prices between $149 and $195. The stock currently trades at ~$172.

Note: Alibaba is a frequently traded stock in Tepper’s portfolio.

Select SPDR Energy (XLE): The minutely small 0.19% XLE position purchased last quarter was eliminated this quarter.

Stake Increases

Amazon.com: AMZN is a top-five 3.78% of the portfolio position purchased last quarter at prices between $1500 and $1820. This quarter saw a ~12% stake increase at prices between $1693 and $1963. The stock currently trades at ~$1806.

Alphabet Inc.: GOOG is a 2.51% 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. In recent activity, Q3 2018 saw a ~40% selling at prices between $1103 and $1268, and that was followed with a ~25% reduction next quarter at prices between $976 and $1203. The stock currently trades at ~$1190. This quarter saw a ~50% stake increase at prices between $1036 and $1288.

UnitedHealth (UNH): UNH is a 0.88% portfolio position built during the four quarters through Q1 2018 at prices between $213 and $249. The last three quarters of 2018 had seen a combined ~65% selling at prices between $217 and $287. The stock is currently at ~$233. There was a one-third increase this quarter at prices between $217 and $252.

Salesforce.com (CRM), Adobe Inc. (ADBE), and SPDR Oil & Gas (XOP): These are very small (less than ~1% of the portfolio each) stakes established last quarter and increased this quarter.

Stake Decreases

PG&E Corp.: PCG is now the largest individual stock position at 4.16% of the portfolio. 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 $11.68. There was a ~260% stake increase last quarter at prices between $6.25 and $24.50. This quarter saw a ~28% selling at prices between $17 and $24.

Note: PG&E filed for Chapter 11 bankruptcy protection in January, and a few hedge funds stepped in to purchase shares as the stock price crashed.

Facebook Inc.: FB is a top-three 3.86% 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. H2 2017 saw a stake doubling at prices between $148 and $183. The position has since wavered. There was a one-third reduction in Q3 2018 at prices between $160 and $218, and that was followed with a ~55% selling next quarter at prices between $123 and $169. Last quarter saw a ~40% stake increase at prices between $131 and $173. That was followed with an ~8% trimming this quarter. The stock is currently at $182.

Note: FB has had several previous round-trips in the portfolio: The latest was a 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 top-five 2.34% 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: a ~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: an ~85% increase at prices between $164 and $211. Q3 2018 saw a ~40% selling at prices between $167 and $193, and that was followed with a similar reduction next quarter at prices between $130 and $194. There was a ~175% stake increase last quarter at prices between $132 and $161. That was followed with a ~60% selling this quarter at prices between $116 and $168. The stock currently trades at $161.

Note: AbbVie (ABBV) is buying Allergan in a cash-and-stock deal ($120.30 cash and 0.866 shares of ABBV for each share of AGN held) announced in June.

Caesars Entertainment (CZR): The 1.43% 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 at $11.57. There was a combined ~15% selling in H2 2018, and that was followed with a minor increase last quarter. This quarter saw a ~20% trimming.

Note: Eldorado Resorts (ERI) is buying Caesars in a cash-and-stock deal announced in June ($8.40 cash and 0.0899 ERI shares for each share of CZR held).

Energy Transfer LP (ET): Energy Transfer Partners merged with Energy Transfer Equity, and the resulting entity was renamed Energy Transfer LP. The transaction closed in January, and terms were 1.28 shares of ETE for each ETP. Tepper held shares in both, and those got converted to ET shares. The last two quarters have seen a combined ~24% selling.

Altaba Inc. (AABA) (previously Yahoo): AABA is a 0.79% 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 $69.53. Last year saw a combined ~75% reduction at prices between $55.50 and $81.50. There was a marginal increase last quarter, and that was followed with a ~55% selling this quarter at prices between $59 and $79.

ALPS Alerian MLP ETF (AMLP): The ~0.70% portfolio stake in AMLP was established in Q4 2018 at prices between $8.30 and $11, and it is currently at $9.07. There was a ~6% stake increase last quarter, while this quarter saw a ~13% trimming.

T-Mobile US (TMUS): TMUS is a 0.56% of the portfolio position purchased in Q4 2017 at prices between $55 and $64.50, and the stock is currently at $77.79. Q3 2018 saw a one-third selling at prices between $58 and $71, and that was followed with a ~60% reduction next quarter at prices between $60.80 and $70.50. The last two quarters have seen another one-third selling at prices between $65 and $78.

Vistra Energy (VST): The 0.42% VST position was established in Q2 2018 at prices between $19.50 and $24.50, and increased by ~30% in Q4 2018 at prices between $21 and $25.50. The stock currently trades at $24.14. The last two quarters have seen a one-third selling at prices between $22 and $27.

Micron Technology (MU): MU was the largest position as of last quarter. The stake was built over the seven quarters through Q2 2018 at prices between $16.50 and $65. Q3 2018 saw an ~11% trimming, and that was followed with a ~55% selling next quarter at prices between $29 and $46. There was an about-turn last quarter: a ~20% stake increase at prices between $29 and $44. This quarter saw the position reduced to a minutely small 0.38% stake at prices between $31 and $44. The stock is now at $44.78.

Clearway Energy (CWEN), Mr. Cooper Group Inc. (COOP) (previously WMIH), Caesars Entertainment Notes, and Cheniere Energy (LNG): These small positions (less than ~1% of the portfolio each) were reduced during the quarter.

Kept Steady

None.

The spreadsheet below highlights changes to Tepper’s 13F stock holdings in Q2 2019:

David Tepper - Appaloosa Capital Management

Disclosure: I am/we are long ABBV, BABA. 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.