Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.
Today, let’s look at Appaloosa Management, which was founded by investing giant David Tepper and known for investing in the debt of companies in distress. Tepper’s investing history includes debt and stock in companies such as Enron and Worldcom. He made billions on bank stocks in 2009 after they had imploded and before they recovered. More recently, he invested in many housing-related companies.
Why should you look at Appaloosa Management’s moves? Well, according to the folks at GuruFocus.com, Appaloosa gained a whopping 1,335% in the first decade of this century, compared with just 16% for the S&P 500.
The company’s reportable stock portfolio totaled $4.7 billion in value as of March 31, 2013.
So what does Appaloosa Management’s latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Comcast Corporation (NASDAQ:CMCSA) and Prudential Financial Inc (NYSE:PRU). Other new holdings of interest include Silver Bay Realty Trust Corp (NYSE:SBY), a hybrid mortgage REIT (real estate investment trust). Spun off by Two Harbors Investment Corp (NYSE:TWO), Silver Bay will focus on single-family homes, profiting from foreclosures. The company is worth watching, especially with a housing recovery under way, even though some question the recovery. In its last quarter, Silver Bay Realty Trust Corp (NYSE:SBY) acquired 1,200 single-family properties, bringing its portfolio to 4,600. Its overall occupancy rate is 53%, but 92% among its stabilized properties.
Credit: Comcast Corporation (NASDAQ:CMCSA)
Among holdings in which Appaloosa Management increased its stake was Fusion-IO, Inc. (NYSE:FIO), an enterprise storage company focused on technologies such as flash memory and solid-state drives. The company posted strong earnings in its last quarter, and an upbeat outlook, sending its shares up by double digits – but then they plunged by double digits a few weeks later, when the CEO and CMO, both co-founders of the company, abruptly departed. Bulls like its purchase of NexGen Storage, but bears worry about competitors looming and don’t like that much of its revenue has come from just a few key clients.
Appaloosa Management reduced its stake in companies such as Chimera Investment Corporation (NYSE:CIM) and Valero Energy Corporation (NYSE:VLO). Mortgage REIT Chimera Investment recently yielded 10.9%, but it may become less attractive if Congress cancels favorable tax treatment for REITs. Chimera Investment Corporation (NYSE:CIM) has taken on more risk than many of its brethren, and has had some trouble filing reports on time. Some still like its prospects, though, while others question its hefty management fees.