David Tepper’s Key Moves from Q4: Microsoft Corporation (MSFT), SanDisk Corporation (SNDK)

Page 1 of 2

In the hedge fund universe, 13F filing season is in full bloom, and while these positions are reported to the SEC with a 45-day delay, this actually improves investors’ ability to beat the market because, on average, fund managers are early into their investments. Our research has shown that hedge funds’ consensus stock picks beat the market handily, and ($BHFI quote)the MarketWatch Insider Monkey Billionaire Hedge Fund Index is a perfect example of this phenomenon. In 2012, this index returned 24.3%, beating the S&P 500 ETF by 8 percentage points (see the details of our market-beating strategy).

David Tepper, the manager of Appaloosa Management, is one of the most prophetic hedgies out there; he oversees close to $16 billion in assets and returned 25% last year after fees (YTD through Dec. 17th). The fact that Carnegie Mellon’s business school was named after Tepper by the age of 55 only adds to the hedge fund manager’s allure. Late last year, he said equity markets have “a lot” of upside in 2013 (see the full prediction), so let’s see how he’s playing them.

Confidence in Delphi, Microsoft

In the fourth quarter, Tepper upped his stake in Microsoft Corporation (NASDAQ:MSFT) and Delphi Automotive PLC (NYSE:DLPH) by 179.1% and 301.6% respectively. These moves accounted for the two largest increases in Appaloosa’s equity portfolio over this period, from the previous quarter. Mr. Market has been far kinder to Delphi than it has Microsoft since the start of Q4, but both are up around 4%-5% in 2013 thus far. Though they operate in vastly different sectors, both companies beat Wall Street’s earnings estimates last quarter, and each trades below 9 times forward earnings.

In comparison to industry averages, MSFT shares are far cheaper than Delphi, and analysts’ average price target on theAPPALOOSA MANAGEMENT LP tech giant represents an upside of about 18%—twice what’s expected of the auto parts maker. Microsoft Corporation (NASDAQ:MSFT) is also one of only eight S&P 500-listed large-caps operating in the tech sector to pay a dividend yield of at least 3%, while Delphi doesn’t offer a payout for income-seekers. Still, Tepper’s vote of confidence in both stocks should not be taken lightly.

Computer storage

Two companies with heavy involvement in the computer storage space, EMC Corporation (NYSE:EMC) and SanDisk Corporation (NASDAQ:SNDK), were big bets for Tepper and Appaloosa last quarter. The hedge fund upped its stake in each stock by more than 45% from Q3 levels, though SanDisk has been a far better investment year-to-date, returning 15% versus EMC’s loss of 5%. Both companies issued fourth quarter earnings beats, though SanDisk—the smaller company by market cap—offers better growth prospects moving forward.

What does the sell-side predict?

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!