David Tepper, a billionaire hedge fund manager, is the president and CEO of Appaloosa Management LP. In the third quarter, Tepper’s hedge fund generated a loss of -9.62% on its investments. In the last three years, the fund has an annualized average return of +13.41%.
In the most recent quarter, Tepper reduced his holdings in General Electric Company (NYSE:GE) by 31%. GE is an industrial goods leader and represents 13% of Tepper’s hedge fund. In the third quarter, GE sold a $3.7 billion UK home loan portfolio to Kensington Mortgage, entered a $2 billion agreement with Sinomach to build energy infrastructure in emerging markets, sold its healthcare lending business to Capital One for $9 billion, and deployed its new SeaTech-84 water desalination system to help alleviate the water shortage in Catalina Island off southern California.
Tepper’s bearish actions do not reflect the consensus of 6 analysts who have rated the company in the past 3 months. According to TipRanks statistics, 4 analysts rated GE as a Buy with 2 remaining on the sidelines. On August 25, 2015, the stock dipped to $27.28, its 52 week low. On Friday, January 15, the stock closed at $40.20.
Tepper also sold 48% of his Apple Inc. (NASDAQ:AAPL) shares in the third quarter, which now makes up 5% of his portfolio. In the third quarter, Apple released the iPhone 6S as well as revealed updates on Apple TV, the iPad, and Apple Watch, although investors were not so impressed with these updates because revenue generated from these product lines do not come close to that of the iPhone. Related, the company announced further delays in its subscription TV service. The third quarter also marked investor concern regarding competition from Pandora for Apple music and China’s economic slowdown. Furthermore, research firm Canalys reported that the company lost its smartphone market share leader status in China to Xiamoi.
Tepper’s sentiment on the company is the opposite from analysts, as 28 out of the 35 who have rated the company in the past 3 months are bullish, with 6 remaining on the sidelines and one bearish. According to these analysts, the average 12-month price target for the stock is $136.55, marking a 40% upside from where shares last closed.
In the airline sector, Tepper added shares of Delta Air Lines, Inc. (NYSE:DAL) to his portfolio, which now makes up 9% of his total portfolio. The hedge fund now owns over 6 million shares of the company, marking a 42% increase. In the third quarter, the company benefitted from falling oil prices, experienced strong August traffic, and entered into a deal to purchase a 3.55% stake in China Eastern Airlines for $450 million.
On July 1, 2015, Delta was trading at $40. On September 30, the last day of the quarter, the stock rose to about $44. Tepper’s sentiment echoes that of analysts, with 4 rating the company a Buy in the last 3 months. The average price target between these 4 analysts is $65.75, marking a 48% increase from where shares last closed.