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Whirlpool Corp. (WHR), Huntsman Corporation (HUN) Among Billionaire David Tepper’s Top Mid-Cap Stock Picks

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Appaloosa Management LP is a New Jersey-based employee-owned hedge fund co-founded by billionaire David Tepper in 1993. The hedge fund’s main operation is to manage separate client-focused fixed income and balanced portfolios, which together were worth $5.70 billion as of March 31. Tepper’s fund has generated annual compounded returns of 30% since its inception and Tepper himself attracted a lot of attention in 2009 when he became the highest-paid hedge fund manager of that year after providing his investors a 120% return after fees. The latest 13F filing for the fund indicates that it maintains a diversified portfolio, having 26.4o% exposure to the consumer cyclical sector, 16.48% to the technology sector, and 11.99% to the transportation sector. In this article we will cover the following four mid-cap stocks that Appaloosa Management held at the end of the latest reporting quarter, which are Goodyear Tire & Rubber Company (NADAQ:GT), Whirlpool Corp. (NYSE:WHR), Huntsman Corporation (NYSE:HUN) and Masco Corporation (NYSE:MAS).

David Tepper

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

Tepper reported selling 2.45% of his equity position in Goodyear Tire & Rubber Company (NADAQ:GT) during the first quarter, ending the quarter with 9.99 million shares valued at $270.46 million. The tire manufacturer’s stock has been on a strong uptrend throughout the last few months, increasing by nearly 12% in 2015, as analysts have been positively raising the company’s earnings estimates for the year. In spite of this, the stock still looks quite affordable and attractive as Goodyear Tire & Rubber Company has a forward price-earnings ratio of 10.36, while the industry forward P/E is estimated at 13.54. Alexander Roepers’ Atlantic Investment Management and John W. Moon’s Moon Capital both made large additions to their equity stakes in Goodyear Tire & Rubber Company (NADAQ:GT) during the first quarter.

Appaloosa Management also sold off 33% of its position in Whirlpool Corp. (NYSE:WHR), remaining with 1.13 million shares valued at $228.79 million. Tepper’s sell-off might have been triggered by the disappointing performance of the stock at the beginning of the year. The global manufacturer of home appliances missed earnings estimates for the first quarter due to the strong U.S. dollar and falling demand, generating adjusted earnings per share of $2.14 as opposed to the Zacks Consensus Estimate of $2.49 per share. However, despite the fact that Whirlpool’s shares are down by nearly 3% during the current year, the stock has been on an uptrend lately, which might represent a good buying opportunity for investors seeking to enter at a down moment. Ken Heebner’s Capital Growth Management and Edgar Wachenheim’s Greenhaven Associates are among the funds that increased their equity holdings in Whirlpool Corp. (NYSE:WHR) during the first quarter.

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