Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Billionaire David Tepper’s ETF Killer Stock Picks

Page 1 of 2

According to a prominent financial newspaper, about eight in 10 hedge funds have underperformed so far this year. While this may turn some people off on the prospect of considering hedge funds as a viable investment vehicle, outstanding performances by certain funds should be considered, as these select funds manage to vastly outperform stock indices. The 30 mid-cap stocks that these overperfoming hedge funds had selected went on to generate a return of 18% in the 12 months ending November 21, surpassing the S&P 500 Index’s 7.6% return in the same period. And out of 659 hedge funds tracked by Insider Monkey, 627 funds containing at least five long positions in companies valued at $1 billion or more have gained 8.3% in returns on average from their long picks, a full 5.0 percentage above S&P 500 ETF returns.

Billionaire David Tepper’s Appaloosa Management LP is one of those high-performing hedge funds. The employee-owned hedge fund, which moved from New Jersey to the warmer climate (and more lax tax rules) of Florida earlier this year, had an equity portfolio worth $4.40 billion at the end of the third quarter, up from $3.80 billion in the previous quarter. Tepper started Appaloosa in 1993 and became known for investing in distressed companies and generating high returns from them, as well as becoming the highest-paid hedge fund manager in the middle of the financial crisis in 2009. Based on Insider Monkey’s comprehensive back-test, Appaloosa also returned 0.96% per month between 1999 and 2012 from its positions in companies with market cap above $20 billion, compared with S&P 500’s 0.34% a month in the same period, thus beating the index by 0.62 percentage point per month, or 7.44% on an annualized basis. In this article, we are going to take a closer look at some of David Tepper’s best-performing stock picks, which show that imitating his moves can help a retail investor outperform the market and to be better off than investing in an industry- or index-tracking ETF.

Appaloosa Management Lp

Let’s start with Alphabet Inc (NASDAQ:GOOG), the parent company of search engine giant Google, in which Appaloosa Management has 472,000 class C shares worth $366.88 million as of the end of the third quarter, after having sold 158,000 shares between July and September. Alphabet’s stock hit its all-time high of $813.11 per share on October 24; three days later, the Internet giant revealed third-quarter EPS of $9.06 and revenue at $22.45 billion, both figures easily beating consensus estimates of $8.62 and $13.17 billion. While the core business remains strong, Alphabet’s “moonshot” projects are undergoing changes amid certain challenges. The tech giant recently has turned its self-driving car project into a stand-alone company called Waymo LLC. Alphabet’s stock has grown by more than 4% since the beginning of the year. Among hedge funds tracked by Insider Monkey, 134 held positions in Alphabet Inc. (NASDAQ:GOOG)’s Class C stock at the end of the third quarter, up by six funds over the quarter.

During the third quarter, Appaloosa Management maintained its holding in Williams Partners LP (NYSE:WPZ) at 9.27 million shares, valued at $344.64 million. In November, the natural gas transmission company completed the execution of an agreement with the US affiliates of Total SA (NYSE:TOT) for gas gathering activities in the Barnett Shale that will run through 2029. A month later, Barclays reinstated coverage of the company, assigning an “Equal Weight” rating and a $37 price target. Year-to-date, Williams Partners’ stock has advanced by more than 25%. Among hedge funds tracked by Insider Monkey, 11 funds were long Williams Partners LP (NYSE:WPZ) at the end of September, down from 13 funds a quarter earlier.

Page 1 of 2