David Tepper, the founder of Appaloosa Management, has delivered extremely high annualized returns of 27.4% over the past 15 years, beating the S&P 500’s annualized return of just 6.8%. He currently has 69 stocks in his portfolio with a total market value of more than $4.7 billion.
As of March 2013, his top two positions were Citigroup Inc (NYSE:C) and United Continental Holdings Inc (NYSE:UAL). Citigroup Inc (NYSE:C), with more than 8.5 million shares, was his biggest position, accounting for 8% of his total portfolio. United Continental Holdings Inc (NYSE:UAL) ranked second, representing around 5.8% of his total portfolio.
An impressive first quarter
In the first quarter of 2013, Citigroup Inc (NYSE:C) witnessed a decent year-over-year revenue growth of 6% to nearly $20.5 billion. Although net interest revenue declined 1% to $11.88 billion, its non-interest revenue jumped 15%, from $7.46 billion in the first quarter last year to more than $8.6 billion. Net income came in at more than $3.73 billion, or $1.23 per share, 30% higher than net income of $2.88 billion, or $0.95 per share, reported last year.
Its deposits increased by 3%, from $906 billion to more than $933.7 billion, while the book value per common share reached $62.51. The net interest margin in the first quarter of 2013 stayed at around 2.95% while the return on average common stockholders’ equity was 8.21%. The market values Citigroup Inc (NYSE:C) at only 9.7 times forward earnings and at only 82% of its book value.
Bank of America Corp (NYSE:BAC) offers a decent total yield and is cheaply valued
Both Bank of America Corp (NYSE:BAC) and Citigroup’s capital plan was approved by the Fed in March 2013. While Bank of America planned to buy back $5 billion in common stock and redeem $5.5 billion in preferred stock, Citigroup Inc (NYSE:C) intended to repurchase around $1.2 billion worth of shares. At the current trading price, Bank of America Corp (NYSE:BAC) offers shareholders a dividend yield of 0.3%. With a $5 billion share repurchase plan, investors could get an additional yield of 3.4%. Thus, the total yield of Bank America could reach 3.7%. Citigroup, with a $1.2 billion share repurchase, offers shareholders only around 1% as total yield.
Recently, Bank of America settled MBIA Inc. (NYSE:MBI) claims. It would pay MBIA Inc. (NYSE:MBI) around $1.6 billion in cash and remit all of its 5.7% Senior Notes due 2034. Moreover, all of its outstanding CDS protection agreements would be terminated. Because of this settlement, Bank of America would have to record $1.6 billion in charges for the first quarter of 2013, reducing its first-quarter earnings by $1.1 billion, or $0.10 per share. Bank of America, at $13.50 per share, is worth $145.6 billion on the market. It is valued at only 67% of its book value, a bit cheaper than Citigroup.