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

In Financial Select Sector SPDR Fund (NYSEARCA:XLF), Appaloosa acquired a stake containing ‘Call’ options underlying 8.10 million shares worth $209.57 million. Aside from XLF, the fund’s only other position in an ETF is in PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ). Financial Select Sector SPDR Fund (NYSEARCA:XLF) has gained 13% since the beginning of the year, as financial stocks appreciated on the back of potential deregulation and higher interest rates.

So far this year, the Federal Reserve has twice increased the key interest rate, with one more hike anticipated in December. In 2018, the Fed will have new leadership and is projected to increase interest rates four times, in addition to reducing its stockpile of over $4 trillion in US Treasury and mortgage-related bonds. In this way, as the momentum is strong, financial stocks are poised to grow, so Financial Select Sector SPDR Fund (NYSEARCA:XLF), which offers exposure to big banks and other financial companies in the U.S, looks like an attractive bet.

Appaloosa has held shares of Peabody Energy Corporation (NYSE:BTU) since the company emerged from bankruptcy in April, but during the third quarter, the fund also added 301,316 shares of 8.5% preferred convertible class A stock, worth $18.64 million. At the same time, Tepper cut his stake in Peabody Energy Corporation (NYSE:BTU)’s common stock by 78% to 216,536 shares valued at $6.28 million. Aside from Appaloosa, other big investors bullish on Peabody Energy Corporation (NYSE:BTU), include Paul Singer’s Elliott Management and Jon Bauer’s Contrarian Capital Management, which own 21.19 million shares and 4.81 million shares, respectively, as of the end of September.

As stated earlier, Peabody Energy Corporation (NYSE:BTU) emerged from bankruptcy in April and its stock has inched up by 4% since then. The company has improved its balance sheet and has the potential to grow as the coal market stabilizes. Coal companies have seen a decline in the last couple of years, with 26 companies going bankrupt. However, after years of decline, the coal industry around the world seems to be stabilizing. The EIA projects that coal’s market share will be around 29-30% by 2030 as power generation prices grow and emerging markets, such as India, rely more and more on coal for steel production. Peabody Energy Corporation (NYSE:BTU) stands to benefit from these trends in the coal market as it plans to further reduce its debt and focus on high-return investments.

On the next page, we will discuss Appaloosa’s two other new stock picks.