In this article, we discuss the 10 stocks to sell now according to billionaire David Tepper. To skip the detailed analysis and performance of his firm Appaloosa Management, along with Tepper’s investment philosophy, go directly to 5 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.”
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Disclosure: None. 10 Stocks to Sell Now According to Billionaire David Tepper is originally published on Insider Monkey.