In this article, we will list Billionaire David Tepper’s 5 small and midcap stock picks with huge upside potential. Please visit Billionaire David Tepper’s 10 Small and Midcap Stock Picks with Huge Upside Potential if you would like to see the extended list and the methodology behind it.
5. Mohawk Industries, Inc. (NYSE:MHK)
Appaloosa Management LP’s Stake: $74 Million
David Tepper of Appaloosa Management LP has had a long term bet on Mohawk Industries, Inc. (NYSE:MHK) stock. The firm first appeared in 13F filings for the fund in the second quarter of 2014. Back then, this position comprised just over 500,000 shares. The fund increased this to around 760,000 shares by the second quarter of 2016. Thereafter, this stake was trimmed and sold off completely by early 2018. A new position in the company was opened in the second quarter of 2025. This stake comprised just 65,000 shares. In the third quarter of 2025, this was increased by 148% to 161,000 shares. Filings for the fourth quarter of 2025 show that the fund owns 675,000 shares in the company, up 317% compared to the previous quarter.
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Hedge funds like Mohawk Industries, Inc. (NYSE:MHK) stock for a number of reasons. One of these is that the firm is trading well below its intrinsic value. In recent years, the stock has traded at a significant discount to its book value (Price-to-Book around 0.72x). Hedge funds often view a P/B ratio under 1 for a market leader as a strong margin of safety. Institutional investors are also betting on Mohawk’s aggressive internal restructuring. The company has implemented strategic initiatives expected to yield an additional $100 million in EBITDA by 2026. Despite declining volumes in the broader flooring industry, Mohawk has managed to increase its adjusted EBIT margins through better price/mix strategies and productivity improvements.
4. Baidu, Inc. (NASDAQ:BIDU)
Appaloosa Management LP’s Stake: $75 Million
Baidu, Inc. (NASDAQ:BIDU) first appeared in the 13F portfolio of Appaloosa Management LP back in the fourth quarter of 2013. This stake comprised 205,000 shares. The fund maintained this position for a couple of quarters before selling it off completely. A new position in the firm was then opened in the second quarter of 2023. This comprised nearly 1.3 million shares. The fund increased this to 1.8 million shares by the first quarter of 2024. A trimming period followed, with this stake going down to 625,000 shares by the second quarter of 2025. Filings for the fourth quarter of 2025 show that the fund owned 575,000 shares in the firm, down 50% compared to filings for the previous quarter.
Interest in Baidu, Inc. (NASDAQ:BIDU) stock has jumped following the company’s decision to spin off its in-house semiconductor unit, Kunlunxin. Hedge funds are betting that listing the AI chip unit on the Hong Kong Exchange will highlight its $3 billion+ valuation, which many believe was previously buried within Baidu’s massive corporate umbrella. Funds are also shifting their thesis from Baidu as the Google of China to Baidu as an AI Cloud & LLM leader. With over 200 million monthly active users, Baidu’s Ernie Bot is now a core part of its enterprise toolset. Recent data shows Baidu’s AI cloud infrastructure revenue growing at over 30% year-over-year, significantly outpacing its legacy search advertising business.
3. American Airlines Group Inc. (NASDAQ:AAL)
Appaloosa Management LP’s Stake: $217 Million
American Airlines Group Inc. (NASDAQ:AAL) has had a stop-start relationship with Appaloosa Management LP. The fund first disclosed a stake in the company back in the fourth quarter of 2013. This position comprised nearly 7 million shares and was increased to more than 11.6 million shares by the second quarter of 2014. In the following quarters, this holding was trimmed and sold off completely by early 2015. A new position was opened in the firm in the third quarter of 2025. This holding comprised 9.2 million shares. In the fourth quarter of 2025, the fund increased this by more than 52% to 14.1 million shares.
The most significant driver for institutional interest in American Airlines Group Inc. (NASDAQ:AAL) stock is the aggressive focus on fixing the balance sheet. The company has committed to reducing its total debt by approximately $15 billion from its peak levels. As of April 2026, it has already cleared a significant portion of this goal. As debt decreases, the equity value of the company typically increases, leading to significant stock price appreciation. Institutional investors are also optimistic about American’s shift toward higher-margin revenue streams. The airline is increasing its premium seating capacity by 20%, aiming to capture higher-paying business and luxury travelers who are less price-sensitive. Management has projected roughly $1 billion in steady-state cost savings, excluding fuel, through operational excellence and better fleet utilization.
2. NRG Energy, Inc. (NYSE:NRG)
Appaloosa Management LP’s Stake: $261 Million
NRG Energy, Inc. (NYSE:NRG) first appeared in the 13F portfolio of Appaloosa Management LP back in the second quarter of 2017. This stake comprised 1.2 million shares. By the fourth quarter of 2017, the fund had increased this position to nearly 10 million shares. Thereafter, the holding was trimmed and sold off completely by early 2019. A new position was then opened in the stock in the third quarter of 2023. This comprised nearly a million shares. In the following quarter, this position was almost doubled. Filings for the fourth quarter of 2025 show that the fund owned 1.6 million shares in the company, down more than 12% compared to filings for the third quarter of 2025.
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NRG Energy, Inc. (NYSE:NRG) is on the radar of elite hedge funds as it is a massive beneficiary of the growing electricity demand from AI and data centers. NRG has significantly expanded its data center power agreements, reaching approximately 445 megawatts of contracted capacity across key markets like ERCOT (Texas) and PJM (Mid-Atlantic). Hedge funds are tracking the company’s pipeline of potential data center projects, which has grown to over 5.4 gigawatts. A key driver of smart money interest in early 2026 was the completion of the LS Power portfolio acquisition. This deal effectively doubled NRG’s generation fleet to approximately 25 gigawatts, adding 18 natural gas-fired facilities and a commercial virtual power plant platform. Following the deal, NRG raised its 2026 financial guidance, projecting Adjusted EBITDA of $5.325 billion to $5.825 billion.
1. Whirlpool Corporation (NYSE:WHR)
Appaloosa Management LP’s Stake: $282 Million
David Tepper of Appaloosa Management LP has had a long-term bullish view on Whirlpool Corporation (NYSE:WHR) stock. The firm first appeared in the 13F portfolio of the fund back in the third quarter of 2012. This position comprised just under 650,000 shares. By early 2014, this holding had grown to over a million shares. A trimming period followed and the position was sold off completely by the fourth quarter of 2017. A new position in the firm was opened by the fund in the second quarter of 2025. This comprised 266,000 shares. In the third quarter of 2025, the stake was grown to 5.5 million shares. Filings for the fourth quarter of 2025 show that the fund owned 3.9 million shares in the firm, down 28% compared to the previous quarter.
Whirlpool Corporation (NYSE:WHR) is a value play for hedge funds. The stock has recently traded at levels that institutional investors find mathematically compelling for a market leader. With a forward P/E often dipping into the single digits and a dividend yield that has reached over 7%, hedge funds view the stock as a coiled spring. A key 2026 catalyst identified by analysts is Whirlpool’s domestic manufacturing advantage. Approximately 80% of products Whirlpool sells in the US are manufactured in the US. As tariffs increase costs for Asian competitors who preloaded the market in 2025, hedge funds expect Whirlpool to regain pricing power and market share as that excess inventory clears in 2026.
While we acknowledge the potential of WHR to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than WHR and that has 100x upside potential, check out our report about the cheapest AI stock.
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