In this article, we discuss the top 10 stock picks of billionaire David Tepper.
David Tepper, the billionaire chief of Florida-based Appaloosa Management LP, manages more than $4.8 billion in 13F securities at his hedge fund. The top holdings of the hedge fund are concentrated in the technology, services, and basic materials sectors. The top ten holdings comprise over 57% of the entire portfolio. Tepper has a personal net worth of close to $16 billion and ranks 142nd on a list of the richest men in the world maintained by news publication Forbes. The billionaire founded the hedge fund in 1993.
According to the latest 13F filings, the portfolio value of the fund has dropped from $6.9 billion at the end of March this year to $4.8 billion at the end of June. The fund made new purchases in 4 stocks during this period, sold out of 12 stocks, made additional purchases in 2 stocks, and reduced holdings in 41 stocks. Tepper is a former employee of investment bank Goldman Sachs and was the third highest-earning hedge fund manager in 2018. He also owns Carolina Panthers, a National Football League team.
Some of the top stocks in the investment portfolio of Appaloosa Management LP at the end of the second quarter of 2021 included Micron Technology (NASDAQ:MU), Amazon.com, Inc. (NASDAQ:AMZN), and Facebook, Inc. (NASDAQ:FB), among others discussed in detail below. Tepper has expertise in bankruptcies and junk bonds. He has continued on this impressive growth trajectory, cementing a place of honor in the wider finance world that has struggled to keep up.
Our Methodology
With this context in mind, here is our list of the top 10 stock picks of billionaire David Tepper. These were picked from the investment portfolio of Appaloosa Management LP at the end of the second quarter of 2021. The list is compiled according to the value of each holding in the portfolio.
The analyst ratings of the firms are also discussed to provide readers with some more context about their investment decisions.
The hedge fund sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.
Why should we pay attention to Tepper’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Billionaire David Tepper’s Top Stock Picks
10. D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 45
D.R. Horton, Inc. (NYSE:DHI) is placed tenth on our list of top 10 stock picks of billionaire David Tepper. The firm operates as a homebuilding firm. It is headquartered in Texas. 13F filings reveal that Appaloosa Management LP owned 1.1 million shares in the company at the end of the second quarter of 2021 worth $103 million, representing 2.14% of the portfolio.
On September 27, investment advisory Citi reiterated a Buy rating on D.R. Horton, Inc. stock but lowered the price target to $104 from $106, noting that major homebuilders had cut fiscal year guidance but pushed margin outlooks higher.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Egerton Capital Limited is a leading shareholder in D.R. Horton, Inc. with 8.3 million shares worth more than $752 million.
Just like Micron Technology, Amazon.com, Inc., and Facebook, Inc., D.R. Horton, Inc. is one of the stocks that is attracting the attention of institutional investors.
9. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Holders: 29
Energy Transfer LP (NYSE:ET) is ranked ninth on our list of top 10 stock picks of billionaire David Tepper. The company markets energy-related services and is headquartered in Texas. Government filings show that Appaloosa Management LP owned 10.6 million shares in the company at the end of June 2021 worth $112 million, representing 2.33% of the portfolio.
On September 14, investment advisory Citi maintained a Buy rating on Energy Transfer LP stock and raised the price target to $15 from $14. Timm Schneider, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, Washington-based firm Appaloosa Management LP is a leading shareholder in Energy Transfer LP with 10.6 million shares worth more than $112 million.
In its Q1 2021 investor letter, Miller/Howard Investments highlighted a few stocks and Energy Transfer LP (NYSE:ET) was one of them. Here is what the fund said:
“Another upweight was Energy Transfer (ET), which was selling at a discount on EV/ EBITDA compared with the portfolio and had an attractive +20% FCF yield. Further, ET’s ample FCF should exceed the current distribution even if the Dakota Access Pipeline were to be shut down.”
8. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 146
Alibaba Group Holding Limited (NYSE:BABA) is a China-based diversified technology company. It is placed eighth on our list of top 10 stock picks of billionaire David Tepper. Latest data shows that Appaloosa Management LP owned 585,000 shares in the company at the end of the second quarter of 2021 worth $132 million, representing 2.74% of the portfolio.
On October 1, investment advisory KeyBanc maintained an Overweight rating on Alibaba Group Holding Limited stock but lowered the price target to $200 from $250. Hans Chung, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited with 14 million shares worth more than $3.2 billion.
In its Q1 2021 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
7. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 64
PG&E Corporation is a California-based company that engages in the sale and delivery of electricity and natural gas to consumers. It is ranked seventh on our list of top 10 stock picks of billionaire David Tepper. According to securities filings, Appaloosa Management LP owned 16 million shares in the company at the end of June 2021 worth $165 million, representing 3.43% of the portfolio.
On August 16, investment advisory RBC Capital upgraded PG&E Corporation stock to Outperform from Sector Perform with a price target of $14. Shelby Tucker, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Third Point is a leading shareholder in PG&E Corporation with 81 million shares worth more than $833 million.
Micron Technology, Amazon.com, Inc., and Facebook, Inc. are some of the top stocks to buy now, just like PG&E Corporation.
In its Q4 2020 investor letter, GoodHaven Capital Management, an asset management firm, highlighted a few stocks and PG&E Corporation (NYSE:PCG) was one of them. Here is what the fund said:
“During the period we purchased a new holding – PG&E Corporation – the California based utility (PCG). We expect that contrarian special situations will continue to (opportunistically) be an important part of the portfolio. After all, we bought PCG – which has filed Ch. 11 twice related to prior exposure to wildfire liabilities and staggering mismanagement – right in the middle of California’s recent heavy wildfire season. Our thinking here is that the reorganized utility has new regulatory protections that significantly reduces wildfire liability exposure, an above average rate growth profile and potentially much better management – they were searching for a new CEO when we made our investment. We purchased the stock at a high single digit forward earnings multiple, a discount to its peers that trade in the mid to high teens. Shortly after our purchases PG&E hired the well regarded Patti Poppe as their new CEO – we like this decision.”
6. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 57
Occidental Petroleum Corporation (NYSE:OXY) is placed sixth on our list of top 10 stock picks of billionaire David Tepper. The firm operates as an integrated oil and gas firm. It is headquartered in Texas. According to the latest filings, Appaloosa Management LP owned 5.7 million shares in the company at the end of the second quarter of 2021 worth $178 million, representing 3.69% of the portfolio.
On September 29, investment advisory Evercore ISI upgraded Occidental Petroleum Corporation stock to Outperform from In Line and raised the price target to $40 from $35, noting that domestic upstream for the firm had good momentum heading into 2022.
At the end of the second quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $3.6 billion in Occidental Petroleum Corporation, up from 52 the preceding quarter worth $3.4 billion.
5. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 100
T-Mobile US, Inc. (NASDAQ:TMUS) is ranked fifth on our list of top 10 stock picks of billionaire David Tepper. The firm provides communication services and is headquartered in Washington. According to the latest filings, Appaloosa Management LP owned 2.5 million shares in the company at the end of the second quarter of 2021 worth $364 million, representing 7.55% of the portfolio.
On September 20, investment advisory Loop Capital initiated coverage of T-Mobile US, Inc. stock with a Buy rating and a price target of $160. Stephan Bisson, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, Greenwich-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. with 7.5 million shares worth more than $1 billion.
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ:GOOG) is a California-based diversified technology company. It is placed fourth on our list of top 10 stock picks of billionaire David Tepper. According to securities filings, Appaloosa Management LP owned 146,000 shares in the company at the end of June 2021 worth $365 million, representing 7.57% of the portfolio.
On September 17, investment advisory Jefferies reiterated a Buy rating on Alphabet Inc. stock and raised the price target to $3,325 from $3,150, noting the improved margin profile of the firm and the growth of the YouTube platform.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. with 2.9 million shares worth more than $7.3 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
3. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 266
Facebook, Inc. is a California-based technology company that owns and runs several social platforms. It is ranked third on our list of top 10 stock picks of billionaire David Tepper. Latest data shows that Appaloosa Management LP owned 1.2 million shares in the company at the end of the second quarter of 2021 worth $418 million, representing 8.67% of the portfolio.
On September 30, investment advisory Oppenheimer maintained an Outperform rating on Facebook, Inc. stock with a price target of $405, underlining that the firm remained a staple for performance marketing campaigns.
At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc., up from 257 in the preceding quarter worth $40 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ:FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. is placed second on our list of top 10 stock picks of billionaire David Tepper. The company operates as a technology firm with core interests in the ecommerce business. It is headquartered in Washington. Government filings show that Appaloosa Management LP owned 125,000 shares in the company at the end of June 2021 worth $430 million, representing 8.89% of the portfolio.
On September 30, investment advisory RBC Capital initiated coverage of Amazon.com, Inc. stock with an Outperform rating and a price target of $4,150, noting the firm had a “proprietary channel work on the advertising industry”.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. with 3.8 million shares worth more than $13 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
1. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 87
Micron Technology is ranked first on our list of top 10 stocks pick of billionaire David Tepper. The firm markets memory and storage products. It is headquartered in Idaho. 13F filings reveal that Appaloosa Management LP owned 5.6 million shares in the company at the end of the second quarter of 2021 worth $480 million, representing 9.94% of the portfolio.
On September 29, investment advisory Citi maintained a Buy rating on Micron Technology stock with a price target of $120. Christopher Danely, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Micron Technology, down from 100 in the preceding quarter worth $7.6 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
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This article is originally published at Insider Monkey.
