David Tepper Is Back On the Facebook (FB) and Apple (AAPL) Bandwagons

David Tepper is one of the most successful hedge fund managers of all time. His hedge fund generated an average annual return of 30% since its inception in 1993 and this success made him a double digit billionaire.

There is another reason why we like David Tepper. We analyzed the performance of David Tepper’s 13F stock picks covering the period from 1999 to 2012. Our goal was to find out whether outside investors can beat the market by imitating Tepper’s stock picks despite the fact that they are reported with a 45 day delay. In fact our methodology assumed that we bought his picks two months after the end of each quarter. The results were impressive. Investors imitating Tepper’s top 5 stock picks with a two-month delay would have returned 2.16% per month between 1999 and 2012. Investors investing in S&P 500 Index ETFs would have achieved a monthly return of only 0.32% during the same period.

We also tested the performance of his top 5 large-cap stock picks. Tepper’s top 5 large-cap stock picks managed to outperform the market by 64 basis points per month (0.96% per month vs. 0.32% per month). The best thing about this strategy is that you didn’t have to pay Tepper 2 and 20 for this performance. In this article we are going to take a look at David Tepper’s new positions in large-cap stocks almost all of which are from the technology space.

David Tepper reinvested in Facebook Inc. (NASDAQ:FB) buying 1.48 million shares of this social media stock during the third quarter. Earlier Tepper had sold off his complete position in Facebook Inc. (NASDAQ:FB) during the second quarter. He also took a new position in Apple Inc.(NASDAQ:AAPL) in the last quarter buying 800,000 shares of this stock. Apple Inc. (NASDAQ:AAPL) now comprises of 2.1% of his 13F portfolio with a total value $90 million at the end of the third quarter. Besides these 2 stocks, David Tepper also bought substantial new positions in Yahoo! Inc. (NASDAQ:YHOO), Bank of America Corp (NYSE:BAC) and QUALCOMM, Inc.(NASDAQ:QCOM).

The smart money sentiment is an important metric that can be used to assess the long-term profitability of a stock. While there are thousands of stocks trading daily on the market, taking a look at what hedge funds think about certain companies can narrow down the search significantly. At Insider Monkey, we track more than 700 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details here).

Appaloosa Management held $190 million of Facebook Inc. (NASDAQ:FB) at the end of the September quarter which made up 4.3% of the 13F portfolio. The company is the most valuable social media company on the planet, with a market value of more than $325 billion. Besides its extremely popular social media website, the company also owns important IT assets such as Instagram, Messenger, WhatsApp and Oculus. The Oculus virtual reality technology and content platform allows people to play games, consume content and connect with others. The stock has returned more than 12% over the last one year and is trading just 10% shy of its 52 week high price. Facebook Inc (NASDAQ:FB) did extremely well last quarter showing revenues of more than $7 billion, with net income coming at $2.38 billion. It reported cash and cash equivalents of more than $26 billion last quarter with zero debt liabilities. 149 funds tracked by our system held shares worth $16.27 billion in this stock, constituting 4.7% of the company’s float as of September 30th.

David Tepper bought a new position in Apple Inc. (NASDAQ:AAPL) in the third quarter. The firm bought 800,000 shares valued at $90.44 million. The company has the highest market capitalization in the world for a publicly listed company, with a value of $556 billion. Despite seeing a contraction in its valuation multiples over the last couple of years, the company still produces a huge amount of operating cash flows every quarter. The company reported $65 billion in operating cash flows last year, showing an increase of ~30% over 2014. The stock is currently trading near the middle of its 52 week price range and has shown a decline of ~4% over the last one year. The mean estimate for the current year earnings is $9 per share, up from $8.27 per share earned in 2015. There are fears that USA technology companies may suffer from the new administration’s restrictive trade polices as most of these companys’ revenues come from outside USA.  As per our database, the value of hedge fund holding in this stock increased to $16.22 billion during the third quarter from $10.67 billion in the quarter earlier. The number of hedge funds having Apple Inc. (NASDAQ:AAPL) in their portfolios also increased to 145 from 116 quarter over quarter.

 

Yahoo! Inc. (NASDAQ:YHOO) forms 1.76% of the Appaloosa Management’s total holdings with a value of $77.5 million at the end of the third quarter. David Tepper took a new position in this stock buying 1.8 million shares in the third quarter. The company is the owner of one of the most popular digital properties in the Internet industry. Besides its extremely popular online portal, the company also runs an online search business (Yahoo search) and email services (Yahoo Mail). It is also present in the social media space through Tumblr. Yahoo! Inc. (NASDAQ:YHOO) has been facing pressure on its financials over the last few years due to heightened competition from other strong technology players. However, its past year stock performance has been quite good, returning 25% to its stockholders. The stock price is currently trading at the ~$40 levels, which is near the top of its 52 week trading range. The company recently got some bad press after it was reported that it’s user accounts were hacked. The number of funds owning Yahoo! Inc. (NASDAQ:YHOO) increased by 9 to 90 by the end of the third quarter, as per our records.

 

Bank of America Corp (NYSE:BAC), one of the largest financial institutions in the world saw 4.1 million shares worth $65 million being held by Appaloosa Management at the end of the third quarter. The company has done extremely well after the win of Donald Trump like other financial stocks. The market thinks that financial companies will do well as Trump has said that he will lower the regulations stopping the growth of financial companies. This has made the stock price jump up by 20% over the last 7 days as investors have been aggressively buying up financial stocks. The share is now trading at its 52 week high price of $20 per share. The company has a market value of $215 billion and a dividend yield of 1.49%. Most of the 30 analysts covering the stock have rated it as a buy while no analyst amongst the 30 thinks that the stock is a sell. As per our system, 112 funds held shares worth $7.24 billion in this stock during the third quarter, when compared to 102 hedge funds holding shares worth $5.28 billion during the second quarter.

 

Qualcomm, Inc. (NASDAQ:QCOM) was another technology stock in which David Tepper took a new position. His fund bought 900,000 shares valued at $61.6 million at the end of the third quarter. This large semiconductor company, dominant in making processors for mobile phones and tablets saw the value of its hedge fund investment increase by 16.67% to $4.64 billion at the end of the third quarter. The company is a pioneer in inventing technologies for mobile phone communication and its patents earn billions of dollars every year. It’s QTL (Qualcomm Technology Licensing) segment makes massive amount of profits by licensing intellectual property to all smartphone and tablet making companies throughout the world. It made revenues of $6.1 billion and net profits of $1.6 billion during its third quarter. The company has a market value of $97 billion and the stock has shown a flat performance over the last one year.

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