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Citigroup Inc. (C), The Goodyear Tire & Rubber Company (GT) Among Billionaire David Tepper’s Long Term Stock Picks

Quarterly 13F filings from hedge funds and other major investors disclose many of these investment managers’ long equity positions as of the end of the previous quarter. This is a bounty of information, but it is fairly old by the time it is released, so many retail investors are not sure how to make use of it. We have researched investment strategies based on 13Fs, including our finding that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy. Since its inception 11 months ago, our portfolio following this strategy has beaten both the S&P 500 and small-cap indices by a substantial amount.

Our database of funds’ historical filings also allows us to see what their long-term picks are: stocks which they also had a large position in two years ago. Read on for our quick take on the five largest holdings in billionaire David Tepper’s Appaloosa Management which it owned at least $100 million of at the end of June 2011, see the fund’s most recent filing on the SEC’s website, or research Appaloosa’s filings over time.

The largest single-stock position in David Tepper’s portfolio at the end of this part June was Citigroup Inc. (NYSE:C), at a position of 9.6 million shares. Wall Street analysts believe that the bank is a good value at current prices as its earnings continue to recover: Citigroup Inc. (NYSE:C)’s profits grew by over 40% last quarter compared to the second quarter of 2012 as they rebounded from poor conditions. Expectations for the next few years result in a forward P/E of only 9 and a five-year PEG ratio of 0.7. Investors can also make a value case for Citigroup Inc. (NYSE:C) in book terms, as its P/B ratio is 0.8.

Billionaire David Tepper’s Long Term Stock Picks

Another stock which Appaloosa has liked for the past couple years is The Goodyear Tire & Rubber Company (NASDAQ:GT). Between dependence on demand for autos, high conventional leverage, and concerns over its pensions The Goodyear Tire & Rubber Company (NASDAQ:GT) ends up being tightly tied to the broader markets with a beta of 2.4. Analysts are also optimistic about The Goodyear Tire & Rubber Company (NASDAQ:GT)’s upside potential, even after a 60% gain in the last year, and so the stock is valued at only 7 times forward earnings estimates. Net income has been up recently but this has been entirely due to lower costs rather than growth in the business.

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