In this article, we discuss the 10 stocks to sell now according to billionaire David Tepper.
David Tepper is an American billionaire, philanthropist, and founder of Appaloosa Management. Tepper’s professional life started at a young age with odd jobs, but he entered the world of trading during his college years. His father, an accountant by profession, gave him money for his first two investments, both of which went bankrupt.
Tepper received his BA in Economics from the University of Pittsburgh and started working as a credit analyst at Equibank soon after. He quit his job to pursue his Master’s in Industrial Administration at Carnegie Mellon University’s business school, which is now named after him after his $67 million donation.
Investment Strategy
David Tepper follows the value investing strategy where he finds high-quality stocks and invests a large sum in just a limited number of stocks. Apart from stocks, he invests in preferred stocks and bonds and favors investing in distressed debt to convert it to equity ownership later.
David Tepper has shown bearish sentiment towards stocks due to the recent market conditions. In a recent interview, he said:
“I don’t think it’s a great investment right here,”
He further added:
“I just don’t know how interest rates are going to behave next year… I don’t think there’s any great asset classes right now… I don’t love stocks. I don’t love bonds. I don’t love junk bonds.”
Most Successful Trades
David Tepper is one of the world’s most successful hedge fund managers, and he has the outcomes of his trades to show for it.
Tepper’s first successful idea that bore fruit was shorting all of his stocks right before the market crash. He was the only trader at Goldman Sachs to do so and the only trader in the firm who didn’t lose money and made a lot instead. David Tepper said:
“Going into the crash I had set up my entire portfolio as just short – I had no long positions. I made a fortune during and after the crash. It was very cool.”
Another opportunity David Tepper capitalized on came after the 2008 housing market crash. Soon after the crash, the major financial institutions were trading at meagre prices, and Tepper predicted that they would recover and bought as many stocks as he could. The institutions eventually recovered, and his firm made $7 billion, out of which $4 billion was Tepper’s personal profit.
Appaloosa Management
David Tepper founded Appaloosa Management with $7 million of his money and $50 million in outside capital in 1993. The fund became an instant success. In 2003, the fund returned 149% to its investors. Since its inception, the fund has had average annualized returns of around 25%.
David describes the fund as follows:
“We’re value-oriented and performance-based like a lot of funds. But I think what differentiates us is that we’re not afraid of the downside of different situations when we’ve done the analysis. Some other people are very afraid of losing money, which keeps them from making money.”
David Tepper recently announced that he would soon be returning investor’s money and converting Appaloosa into a family office. This conversion is expected to take a few years. According to the second quarter of 2022 13F filings, the fund has $1.59 billion in managed 13F securities and the top 10 holdings represent a concentration of 76%.
PG&E Corporation (NYSE:PCG), Las Vegas Sands Corp. (NYSE:LVS), and Freeport-McMoRan Inc. (NYSE:FCX) are some of the notable stocks that David Tepper is selling.
Our Methodology
After a careful assessment of Appaloosa Management’s portfolio, we picked the ten stocks that the firm sold off completely during Q2 2022. The hedge fund sentiment around each stock has been taken from Insider Monkey’s database of 895 elite hedge funds at the end of Q2 2022.
Stocks to Sell Now According to Billionaire David Tepper
10. TCV Acquisition Corp. (NASDAQ:TCVA)
Number of Hedge Fund Holders: N/A
TCV Acquisition Corp. (NASDAQ:TCVA) is a California-based shell company. TCV Acquisition Corp. (NASDAQ:TCVA) was added to Appaloosa Management’s portfolio in Q2 2021 and later dumped in the second quarter of 2022.
At the end of Q2 2022, Ubs Oconnor Llc was TCV Acquisition Corp. (NASDAQ:TCVA)’s most significant stakeholder. The fund owned 263,246 shares worth $2.567 billion, covering 0.04% of its portfolio.
PG&E Corporation (NYSE:PCG), Las Vegas Sands Corp. (NYSE:LVS), and Freeport-McMoRan Inc. (NYSE:FCX) are some of the significant stocks that Appaloosa Management dumped, along with TCV Acquisition Corp. (NASDAQ:TCVA).
9. Altimeter Growth Corp. 2 (NYSE:AGCB)
Number of Hedge Fund Holders: N/A
Altimeter Growth Corp. 2 (NYSE:AGCB) is a SPAC focusing on the tech sector and it is owned by Altimeter Capital Management. In the June quarter, the company reported a net income of $326,059, compared to a $1.64 million net loss in Q2 2021.
Citadel Investment Group was the most prominent shareholder of Altimeter Growth Corp. 2 (NYSE:AGCB) in Q2 2022, with 1.94 million shares worth $19.138 million. The firm increased its activity by 405% during the quarter.
Appaloosa Management added Altimeter Growth Corp. 2 (NYSE:AGCB) stock to its portfolio in Q1 2021 and sold the entirety of it in Q2 2022.
8. Western Midstream Partners, LP (NYSE:WES)
Number of Hedge Fund Holders: 8
Western Midstream Partners, LP (NYSE:WES) is an American mid-stream oil and gas company. The company became a part of Appaloosa Management’s portfolio in the first quarter of 2020. In Q2 2022, the firm sold all of its stock, valued at $6 million in Q1 2022.
As of September 12, Western Midstream Partners, LP (NYSE:WES) has a dividend yield of 7.06%, compared to the 4.24% energy sector average. Its latest quarterly dividend of $0.50 was declared on July 21 and paid out on August 8 to the shareholders of record on August 1.
On August 1, Wolfe Research analyst Keith Stanley initiated coverage on Western Midstream Partners, LP (NYSE:WES) with a Peer Perform rating and no price target. Stanley told investors that the company trades at a discount value with a “top-tier” balance sheet. Nonetheless, “poor G&P transaction comps don’t support a higher valuation.”
Here is what Miller/Howard Investments has to say about Western Midstream Partners, LP in its Q1 2021 investor letter:
“We increased our weight in Western Midstream Partners (WES) again this quarter, as it should benefit from higher oil prices that might lead to more drilling activity in the Permian and DJ basins.”
7. Nordstrom, Inc. (NYSE:JWN)
Number of Hedge Fund Holders: 23
Nordstrom, Inc. (NYSE:JWN) is an American luxury fashion retailer headquartered in Washington. The company offers apparel, shoes, beauty, accessories, and home goods for women, men, and children.
On August 25, Barclays analyst Paul Kearney reaffirmed an Underweight rating on Nordstrom, Inc. (NYSE:JWN) and lowered the price target to $18 from $21. Kearny views the potential for company sales to remain challenging for the foreseeable future.
According to the Insider Monkey database, 31 hedge funds held bullish positions on Nordstrom, Inc. (NYSE:JWN) in the second quarter of 2022, compared to 29 in Q1 2022. Appaloosa Management started investing in the company in Q4 2021 and closed out all of the company stock in Q2 2022.
Here is what Mayar Capital said about Nordstrom, Inc. (NYSE:JWN) in its Q2 2022 investor letter:
“The second thought experiment comes from my own personal experience in the period around the financial crisis. In 2006 I made an investment in the shares of Nordstrom, Inc. (NYSE:JWN). Over the following three-and-a-half years, the stock was up by 36%, outperforming the S&P 500 by a very respectable 41.4%. A fund made up of a single holding in Nordstrom would have ranked in the top 1% of all funds in the Morningstar database.
However, Nordstrom stock declined by a very painful 80% during 2008. A single-stock fund would have almost certainly liquidated during that drawdown, taking investors out of the game and ending any hope of them ever realizing the return. But because my portfolio was diversified, it held its value a bit better (it declined by 25% while the market was down by 38%), allowing me to sell some holdings and redeploy money into investments like Nordstrom that had declined severely.”
6. Wynn Resorts, Limited (NASDAQ:WYNN)
Number of Hedge Fund Holders: 26
Wynn Resorts, Limited (NASDAQ:WYNN) is a luxury resort and casino operator. The company was added to Appaloosa Management’s portfolio in Q1 2022 and was dumped in the next quarter.
Wynn Resorts, Limited (NASDAQ:WYNN) is another casino operator affected by COVID lockdowns, as most of its revenue is generated from the casino business, which was down 40% YoY in Q2 2022. However, other segments of the company fared quite well, as food and beverage revenues grew by 54.1%, rooms revenue by 46.1%, and other revenues excluding casinos showed a 17.6% YoY growth. Nevertheless, overall operating losses increased to $52 million in Q2 2022, compared to $29.5 million a year ago.
On August 10, Deutsche Bank analyst Carlo Santarelli maintained a Buy rating on Wynn Resorts, Limited (NASDAQ:WYNN) and lowered the price target to $85 from $92. Santarelli told investors that the company’s Las Vegas and Encore Boston Harbor metrics were better than the estimates.
Wynn Resorts, Limited (NASDAQ:WYNN) is a notable stock that David Tepper sold out of, along with PG&E Corporation (NYSE:PCG), Las Vegas Sands Corp. (NYSE:LVS), and Freeport-McMoRan Inc. (NYSE:FCX)
Here is what Baron Funds had to say about Wynn Resorts, Limited in its Q3 2021 investor letter:
“In the most recent quarter, we exited the Fund’s holdings in Wynn due to: (i) ongoing COVID-19-related travel restrictions in China, Macau, and Singapore; and (ii) the Macau government’s announcement to tighten its casino regulatory oversight.”
5. The Goodyear Tire & Rubber Company (NASDAQ:GT)
Number of Hedge Fund Holders: 30
The Goodyear Tire & Rubber Company (NASDAQ:GT) is an Ohio-based tire company that manufactures tires for bicycles, cars, trucks, heavy machinery equipment, and airplanes. It is one of the top four tire manufacturers in the world.
The Goodyear Tire & Rubber Company (NASDAQ:GT)’s revenues declined from the year 2016 to 2019. During the pandemic, the company faced its first 3-year loss of $311 million, and later in 2020, the company posted a significant loss of $1.25 billion. However, the company recently rebounded with the acquisition of Cooper Tire in 2021. The combination of the two companies is expected to generate $17.5 billion in revenue, making it the world’s third largest tire company by revenue. Furthermore, the management expects its operating income to reach $1 billion and operating margins to 5.7% by the end of the year.
The Goodyear Tire & Rubber Company (NASDAQ:GT) is seeing a significant growth catalyst in the form of the growing EV market. The company has a total of 5 to 6 competitors in the market, and in 2021, The Goodyear Tire & Rubber Company (NASDAQ:GT) achieved a 60% win rate on EV tire deals. At the end of the year, Deutsche Bank analyst Emmanuel Rosner said:
“We view Goodyear as a very large beneficiary from the industry shift to EVs, with very favorable economics and strong early market share traction.”
The Goodyear Tire & Rubber Company (NASDAQ:GT) was added to Appaloosa Management’s portfolio in Q1 2020 and all of its shares were sold off by the firm in the June quarter.
4. APA Corporation (NASDAQ:APA)
Number of Hedge Fund Holders: 36
APA Corporation (NASDAQ:NASDAQ:APA) is the holding company for the hydrocarbon exploration firm Apache Corporation. Appaloosa Management added the company to its portfolio in Q1 2021 and dumped the entirety of the stock in the second quarter of 2022.
APA Corporation (NASDAQ:NASDAQ:APA) generated a free cash flow of $814 million in the June quarter, and like always, it was adamant about returning massive amounts to shareholders. On average, the company pays approximately $40 million in dividends per quarter. In Q2 2022, the firm repurchased $290 million worth of shares, most of which were bought back in July. Furthermore, the company reduced its debt in the quarter by $600 million.
On August 12, Citi analyst Scott Gruber upgraded APA Corporation (NASDAQ:NASDAQ:APA)’s shares to Buy from Neutral and raised the price target to $58 from $40. The analyst noted that the company offers an under-appreciated growth story. He added that the company’s FCF over the next three years at strip stands at 2%, while the sector on average declines by 20%.
Here is what Oakmark Funds had to say about APA Corporation (NASDAQ:APA) in its Q1 2022 investor letter:
“Our oil holding, APA Corporation (NASDAQ:APA) (+54%) was one of our top contributors in the quarter as oil prices rallied due to tight supplies, which were then exacerbated by the Russian invasion of Ukraine. Although their share prices have increased considerably, both companies still look quite undervalued even using longer term oil prices in the $65-70 dollar range. Meanwhile, if times are good over the next couple of years, we expect these companies to return significant percentages of their market caps to shareholders.”
3. Las Vegas Sands Corp. (NYSE:LVS)
Number of Hedge Fund Holders: 42
Las Vegas Sands Corp. (NYSE:LVS) is a Nevada-based casino and resort company. Apart from the United States, the company also operates in Singapore and China.
In the previous four quarters, Las Vegas Sands Corp. (NYSE:LVS) has only outperformed its estimates in a single quarter. The primary reason is COVID lockdowns, which put pressure on all resorts and casino businesses. For Las Vegas Sands Corp. (NYSE:LVS), it’s significantly worrisome as it sold some of its Las Vegas strip properties and relies majorly on its businesses in Macao, where the majority of the bettors originate from China. In early August, Macau’s gaming bureau reported a 95.3% decline on a YoY basis in gross revenues from the games of fortune.
According to the Insider Monkey database, 42 hedge funds had a stake in Las Vegas Sands Corp. (NYSE:LVS), compared to 39 in the previous quarter. Citadel Investment Group was the most prominent position holder in the second quarter, with over 3.6 million shares worth $121.79 million. Appaloosa Management dumped all of its stake in the company in Q2 2022 and was previously added to the portfolio in Q1 2022.
Here is what Baron Funds had to say about Las Vegas Sands Corp. (NYSE:LVS) in its Q1 2022 investor letter:
“Following a 50%-plus decline in the share price of Las Vegas Sands Corporation from its 2021 peak share price of $67 to $34, we began acquiring shares of this global leader in the development and operation of luxury casino resorts in the fourth quarter of 2021 and continued to acquire shares in the most recent quarter. We believe Las Vegas Sands’ market-leading resorts in Macau and Singapore position the company for strong growth when travel and tourism spending rebounds. Las Vegas Sands maintains a liquid and investment grade balance sheet and is currently valued at a significant discount to our assessment of replacement cost.”
2. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 51
PG&E Corporation (NYSE:PCG) supplies electricity in parts of the United States to over 5 million households. It is an investor-owned utility. Appaloosa Management began acquiring the shares in Q3 2020 and dumped the stock entirely in the quarter ending June 30.
PG&E Corporation (NYSE:PCG) faced a major setback due to the 2018 California wild-fires claims and had to file for bankruptcy to access liquidity. Prior to filing for bankruptcy, the company was booted out of the S&P 500. However, the restoration might now be possible, as CFO, Christopher Foster said in May:
“We recorded GAAP income of $475 million, including noncore items for the first quarter of 2022. This means we’ve recorded cumulative positive GAAP earnings of $253 million for the most recent 4 consecutive quarters, which means we have met the eligibility requirements for S&P 500 index inclusion.”
According to Insider Monkey database, 51 hedge funds had stakes in PG&E Corporation (NYSE:PCG) in Q2 2022, with a combined value of $2.67 billion. Dan Loeb’s Third Point held the most prominent position in the quarter, with 65.4 million shares worth $652.69 million.
Here is what GoodHaven Capital Management said about PG&E Corporation (NYSE:PCG) in its Q2 2022 investor letter:
“Other activity in the period included eliminating our holding in PG&E Corporation (NYSE:PCG) and adding a few new holdings – the luxury furniture and lifestyle company RH (formerly Restoration Hardware) and Goldman Sachs. A few important developments changed at PG&E including higher future capex plans and changes in long-term guidance, and so we changed our mind and sold. Purchases were made on a handful of occasions in 2020 and mid-2021 at an approximate average price of $9.20 and fully sold during February 2022 at an approximate average price of $11.42, earning approximately 24%.”
1. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 56
Freeport-McMoRan Inc. (NYSE:FCX) is an American mining company. It is the world’s largest producer of molybdenum and operates the world’s largest gold mine. Moreover, the company also has interests in copper.
Freeport-McMoRan Inc. (NYSE:FCX)’s profitability has been significantly affected by the declining prices. In the second quarter, the company revenue showed a 5.7% decline while the gross margins lagged by 3.6% on a YoY basis. Moreover, the net income of $840 million represented a 15.5% decline, and the net margins were around 22% below the Q2 2021 levels. However, Freeport-McMoRan Inc. (NYSE:FCX) expects a 4-year CAGR to be 2.12% while expecting a decline of 4.41% in net income over the same period.
Freeport-McMoRan Inc. (NYSE:FCX) was added to Appaloosa Management’s portfolio in Q4 2020 and was sold off completely in Q2 2022. In the quarter, hedge funds showed a bearish sentiment towards the company. At the end of Q2 2022, 56 hedge funds had a stake in the company, valued at around $2.5 billion, compared to 68 hedge funds in the previous quarter, with a combined stake value of $4.1 billion.
Here is what Carillon Tower Advisers had to say about Freeport-McMoRan Inc. (NYSE:FCX) in its Q1 2022 investor letter:
“Supply chains eased for some goods, but remained challenged for many commodities including energy, agriculture, and fertilizer due to war and general scarcity, and also in many consumer products as semiconductors remained in short supply. Copper and gold producer Freeport- McMoRan (NYSE:FCX) rose as copper prices remained strong due to supply shortages and growing use in renewable energy systems and electric vehicles.”
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Disclosure: None. 10 Stocks to Sell Now According to Billionaire David Tepper is originally published on Insider Monkey.
