Hedge fund billionaire David Tepper of Appaloosa Management LP has made some tweaks to his $7.12 billion portfolio as per the latest disclosure with SEC. The manager of Florida-based Appaloosa Management upped his stake in Micron Technology, Inc. (NASDAQ: MU) and Facebook Inc. (NASDAQ: FB) while offloading positions in Alibaba Group (NYSE: BABA).
David Tepper, best known for kicking off the “Tepper Rally” in September 2010, co-founded Appaloosa Management in 1993. Since it started, the flagship fund has focused on stocks and bonds of out-of-favor companies and has been steadily returning money to client investors. The fund has given 17.12% average annualized returns in the past 3 years and the portfolio has made a whopping 75.1% gain since June 2013.
Tepper earned his Bachelor of Arts in Economics from the University of Pittsburgh and then went on to earn a Masters in Industrial Administration from Carnegie Mellon University in 1982. After beginning his career with Equibank as a credit analyst in the Treasury Department, he went on to work at Keystone Mutual Funds, Boston. He then joined the prestigious Goldman Sachs and had a meteoric rise there. After 8 years, in 1992, he quit Goldman Sachs, disillusioned with his failure to make partner three times.
Tepper is one of the top 5 Highest-Earning Hedge Fund Managers as per Forbes. He is not only a popular name in investment circles in the United States, but also a well-known philanthropist and part-owner of Pittsburgh Steelers of the NFL.
Let’s take a look at the fund’s key moves for the last quarter:
Buys Micron Technology, Inc. (NASDAQ: MU)
Tepper increased his holding in Micron Technology by 32.2%. The memory and semiconductor technology company is now the fund’s no 1 position with shares valued at $670.73 million. Indeed MU now accounts for almost 10% of Appaloosa’s total holdings. Since the last filing, MU has made an impressive 17.37% gain.
After an extended lull, the technology sector is now having a spectacular recovery. MU, trading near its 52-week high price, is making significant headway against its rivals like Samsung Electronics and SK Hynix. The company hauled in $925 million from its mobile DRAM business in the second quarter, an all-time high record for MU.
JP Morgan analyst Harlan Sur had recently raised his price target for Micron Technology to $55, thanks to the near-term increases in spot and contract pricing in DRAM and NAND. Sur expects the supply of memory components to remain tight/balanced at least into 1H2018, giving an edge for Micron. In addition, the strong financials and a competitive fire are expected to cause yet another surge in the stock prices of MU.
According to TipRanks, 22 of the 24 analysts who weighed in on Micron in the last 3 months are bullish on the stock while 2 remain on the sidelines. The average 12-month price target between the 24 analysts is $51.27, marking an 11.07% potential upside from current levels. You can click on the screenshot for more insights into MU stock.
Buys Facebook Inc. (NASDAQ: FB)
David Tepper increased his holdings in the social media giant by 40.5%, boosting his bets to 7.92% of the overall portfolio. This makes FB the fund’s third biggest holding with a value of $564 million.
Facebook recently reported a blowout third-quarter earnings report. The company posted $1.59 in earnings, crushing the $1.28 estimate and revenues grew by 47% YoY, exceeding the 42% consensus forecast. Recently, investors had got jittery and had a brief sell-off of the stock due to the news of increased security spend adversely affecting the profitability of FB in the future.
But financial experts say that this move will help FB immensely in the digital advertising world. The benefits are two-fold – it helps in evading any government crackdown or billion-dollar fines, and will also attract more advertisers to the platform. Moreover, FB’s ultimate fundamental catalyst is the two billion monthly active users (MAUs), the increased revenue from Instagram, and advertising revenue generation through sports live-streaming. All this is expected to steer FB to higher levels.
Based on TipRanks data, FB is one of the most widely-covered stocks, with 31 analysts offering recommendations for in the last 3 months. While 29 analysts have rated FB as Buy, 1 has a Hold rating while 1 has recommended to Sell the stock. The average price target for Facebook’s stock is $208.24, an upside of 16.34% from current levels.
Sells Alibaba Group (NYSE: BABA)
Refuting the bull case on the Chinese e-commerce giant, David Tepper has trimmed his holdings on BABA. But despite the 3.56% decrease in the stake, Alibaba still remains one of the top stock in Appaloosa portfolio. BABA makes up 8.64% of the overall portfolio, translating to $615.28 million in value.
The immense profits from Single’s day and from cloud computing arm ‘Alibaba Cloud’ has made investors clamor for BABA stocks, boosting its prices. Yet, there are also ongoing credibility concerns like the allegations of fake products and counterfeiting. Another stigma for Alibaba is that its financials may not be on the up-and-up. Legendary hedge-fund manager Jim Chanos had questioned the accounting practices of BABA while the Securities and Exchange Commission has made “inquiries” about the fundamentals that drive the BABA stock price. However, nothing has been proven yet.
The popular belief remains that the technical momentum will steer the stock higher in the near future. As per TipRanks data, all the 18 analysts who have rated the company in the past 3 months have given a unanimous Buy verdict on the stock. The analysts have an average 12-month price target of $209.5 for Alibaba, marking a 13.16% upside from where shares last closed.