David Tepper of Appaloosa Management expressed confidence in the market at the beginning of this year, telling CNBC that the market looked almost as cheap at the beginning of this year as it did at the beginning of last year, buoyed by corporate tax cuts. That confidence was reflected in the fourth-quarter growth spurt that Appaloosa undertook, as the billionaire investor poured money into the market, hiking the value of his hedge fund’s 13F portfolio by 50% to $10.7 billion according to the 13F that Appaloosa filed with the SEC last week.
Among the major stocks that Tepper poured money into during the previous quarter were Facebook Inc (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), T-Mobile US Inc (NYSE:TMUS), Comcast Corp. (NASDAQ:CMCSA), and MGM Resorts International (NYSE:MGM). However, of more interest to us are the moves that Tepper made in less heralded stocks, including XPO Logistics Inc (NYSE:XPO), which Tepper continued to buy heavily in the fourth-quarter after opening a small position in the stock in the third-quarter.
In this article, we’ll take a look at three of Tepper’s Q4 moves that didn’t attract much attention, but which may offer even more compelling investment opportunities than his big moves that grabbed all of the headlines.
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Summit Materials Inc (NYSE:SUM)
How Many Summit Materials Shares Tepper Owns: 2.51 million (+519,326 shares in Q4)
How Much Money Tepper Has Invested in the Stock: $78.93 million
About Summit Materials Inc (NYSE:SUM): Summit Materials is a $3.72 billion supplier of building materials for various industries. The company is lead by its Products Division, which includes the sales of Asphalt and Ready-Mix products. That division pulled in $854.5 million in revenue last year, a 20.7% year-over-year increase. Summit’s Aggregates Business overtook its Cement Business in revenue in 2017, climbing by 18.4% to $313.4 million.
Hurricane Harvey Hammers Summit Materials Inc (NYSE:SUM): Despite strong overall growth in its Products Business, organic sales volumes of the company’s ready-mix concrete declined by 2.3% in 2017, a development which was primarily blamed on Harvey as well as soft spending in Kansas. The division’s gross profit margin also declined by two percentage points last year.
Summit Materials Inc (NYSE:SUM) Buying Up Companies: Summit has already completed three acquisitions this year, spending $120 million to acquire assets in Texas, Utah, and Missouri. Summit management expressed that the company is currently conducting diligence on several other transactions, which it expects will close in the near term. Summit made 14 materials-based acquisitions in 2017.
On the next page we’ll look at two other stocks that were on the radar of the billionaire investor during the final quarter of 2017.
NRG Energy Inc (NYSE:NRG)
How Many NRG Energy Shares Tepper Owns: 9.76 million (+1.32 million shares in Q4)
How Much Money Tepper Has Invested in the Stock: $277.96 million
Too Much is Never Enough: Tepper bought 7.19 million shares of NRG Energy in the third-quarter, which wasn’t enough to quench his appetite for the stock, as he added another 1.32 million shares to his portfolio in Q4. Despite the increase, energy stocks fell to just 4.4% of Tepper’s 13F portfolio as of December 31, less than half of what they constituted a quarter earlier and their lowest level in over two years. With his exposure to energy stocks down at the moment, it shows his conviction in this particular company that he’s invested so heavily in it.
NRG Energy Inc (NYSE:NRG) Unloads Billions in Assets: Earlier this month, NRG Energy announced multiple asset sales that resulted in total cash proceeds of $2.8 billion and the removal of $7 billion in debt from the company’s books. Among the assets being divested were the company’s ownership in NRG Yield and the NRG Renewables Platform, in addition to its South Central business, which boasts 3,555 MW of power generation capacity.
Basking in the Hawaiian Sun: Earlier this year, NRG Energy broke ground on a large grid-scale solar project in Hawaii, the largest of its kind in the state. The three solar farms, which are being built on Oahu, the state’s most populated island, are expected to be completed next year and will provide over 100 MW of renewable energy to the island’s residents.
XPO Logistics Inc (NYSE:XPO)
How Many XPO Logistics Shares Tepper Owns: 2.20 million (+2.14 million in Q4)
How Much Money Tepper Has Invested in the Stock: $201.85 million
Tepper Wasn’t Done With XPO Logistics Inc (NYSE:XPO) Just Yet: XPO was one of Tepper’s new positions opened during the third-quarter of last year. However, the position was small (just 64,311 shares), which obscured how much Tepper really liked the stock. Now the picture is clearer, with Tepper having filled out the position with another 2.14 million shares in Q4, making it his 12th-largest stock position.
Timing is Everything: Tepper’s big Q4 purchase paid immediate dividends towards the end of December, when XPO Logistics soared on the news that Home Depot Inc. (NYSE:HD) was considering a purchase of XPO, partly due to fears that Amazon.com, Inc. (NASDAQ:AMZN) might buy the company first. XPO shares are still 16% higher than before that revelation came to light, though some analysts have questioned whether such a deal makes sense for Home Depot. It’s expected that XPO Logistics will greatly benefit from Amazon’s plans for a stronger push into large furniture items.
Hedge Fund Ownership of XPO Logistics Inc (NYSE:XPO): XPO was one of the most popular stocks among the hedge funds in our database in terms of overall share ownership as of September 30, 2017, as over 30% of the company’s shares were held by them (and that’s before Tepper’s big Q4 purchase). Billionaire Ken Griffin of Citadel Investment also hiked his sizable position in the stock by another 40% during Q4, lifting his stake to 2.49 million shares, while Doug Silverman and Alexander Klabin’s Senator Investment Group opened a 1 million-share position in XPO.