In this article, we discuss the 5 stocks to sell now according to billionaire David Tepper. To read the detailed analysis and hedge fund performance of his firm Appaloosa Management, along with Tepper’s investment philosophy, skip to 10 Stocks to Sell Now According to Billionaire David Tepper.
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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