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XPO Logistics Inc (XPO), Applied Materials Inc. (AMAT): Billionaire David Tepper’s New Stock Picks

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Billionaire David Tepper is one of the most respected and most followed investors on Wall Street. The co-founder and CEO of Appaloosa, who was one of 2016’s top earning hedge fund managers is known for his investments in distressed debt and out-of-favor companies. In its latest 13F filing, Appaloosa disclosed an equity portfolio worth $7.12 billion as of the end of September, up from $6.74 billion a quarter earlier. During the third quarter, Appaloosa trimmed its equity portfolio, as it reduced its exposure to 28 companies and closed 14 positions. At the same time, the investor raised its stakes in 15 companies and added four new positions.

David Tepper is bullish on the stock market, as he said during an interview on CNBC in August, when he said that, despite some opinions to the contrary, the market is not overvalued and there are plenty of opportunities to invest in. “Look at where multiples and rates were in 1999. I’m not saying stocks are screaming cheap, but you’re nowhere near an overheated market,” Tepper said. He added that global economic growth will increase companies’ earnings and “stocks are relatively cheap to interest rates.” The investor also said that even though higher interest rates could affect the market, the increase would have to be much higher before it does any damage.

One particular sector that Tepper is fond of is technology. According to Appaloosa’s 13F, over 45% of its equity portfolio is allocated towards the tech sector. In the same interview, Tepper explained his fondness for tech stocks, saying that the sector looks cheaper than others and shows low multiples, despite the recent growth. One particular tech stock that Tepper likes is Micron Technology, Inc. (NASDAQ:MU), which represents Appaloosa’s largest position, amassing 9.42% of its total portfolio value.

Appaloosa Management Lp

Tepper added Micron Technology, Inc. (NASDAQ:MU) to Appaloosa’s 13F portfolio during the fourth quarter of 2016 and has been raising the stake every quarter this year. During the first three months of 2017 the position was more than doubled, in the second quarter it was raised by over 90%, and between July and September, the stake was increased by another 32% to 17.05 million shares worth $670.73 million.

The investor’s bullish sentiment towards Micron Technology, Inc. (NASDAQ:MU) is not limited to Appaloosa’s substantial position. Tepper also pitched Micron at the Robin Hood Conference in October, saying that the stock is trading at a forward P/E of 3.8, which is below industry average. At the same time, the company enjoys strong market dynamics as the memory market sees high capital intensity, with $600 million required to increase supply volume by just 1%. At the same time, demand for DRAM is expected to grow at a CAGR of 34% by 2026. The demand for DRAM in the automotive industry is expected to grow at a rate of 64%, while demand from server and cloud segments is projected at 49% CAGR.

While Appaloosa had invested in a number of distressed, or at least troubled, companies during the second quarter, three of the four positions added between July and September were in companies that have advanced since the beginning of the year, while the other position represents ‘Call’ options underlying shares of an ETF. For example, during the second quarter, Appaloosa initiated a stake in Wells Fargo & Co (NYSE:WFC), as the company had been struggling with a scandal regarding unauthorized account openings. In addition, Tepper’s fund initiated stakes in several distressed energy companies, such as Chesapeake Energy Corporation (NYSE:CHK) and Southwestern Energy Company (NYSE:SWN).

Having said that, let’s take a look at David Tepper’s new stock picks.

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