Appaloosa Management is an equity and fixed-income hedge fund headquartered in Chatham, New Jersey. Its fund manager, David Tepper is an alumnus of the University of Pittsburg, with a BA in Economics. Like many successful business leaders before him, he continued his education to eventually earn a Master of Science in Industrial Administration (MBA-equivalent) degree from Carnegie Mellon. His academic successes propelled him forward in his career, landing him positions in prominent firms such as Keystone Mutual Funds and Goldman Sachs. At Goldman Sach’s, Tepper’s career trajectory was unbounded as he landed the head trader position on its high yield desk in the short time span of six months. However, frustrated with what he perceived as an overly hierarchical firm in his eight year tenure with Goldman Sachs, he established his own Appaloosa Management in 1993.
Fast forward to modern day, perhaps as an iconic symbolization of his many successes now and to come, Carnegie Mellon renamed its business school, the David A. Tepper School of Business. Originating from his tenure at Keystone and Goldman, Tepper developed his primarily niche in distressed companies. Initially pursuing junk bonds and debt securities exclusively, Tepper expanded Appaloosa’s operations into equities and sovereign debt as he felt numerous opportunities exist. He specifically focused on financials in the last quarter of 2010, because as “…markets adapt, people adapt…”, and with his underlying belief that the government served as a backstop to complete loss in financials, he increased his holdings dramatically in this sector.
However, his recent outlook on the market is “cautious, but optimistic”, as he stated, “When things go up too high, they will go down,". Tepper, who earlier last year, was bullish, (Tepper-Rally) now believes that while numerous opportunities remain, unforeseen underlying risk still exists. Nonetheless, his record has earned him to be voted as the investment guru of 2010 by Gurufocus, and ranked in the top 1% of hedge fund managers in 2009. Appaloosa earned $7 billion in 2009, translating into a 120% return, with $4 billion in profits going to David Tepper. In terms of comparison against the benchmark, on a 10 yr cumulative basis, Appaloosa Management returned 1335% vs. the S&P 16.4% return.
In GuruFocus’s latest study of the performances of Gurus from 2008 to 2010, David Tepper is ranked number one among all Gurus.
Appaloosa’s most recent portfolio composition broken into sector can be seen in the following charts. Two notable rebalancing changes to Appaloosa’s portfolio would be the 6.80% increase in technological equities, with a counter-balancing 6.20% decrease in health care equities.
Appaloosa’s current portfolio is valued at $4.915 billion with 40.54% of their portfolio concentrated in the following five stocks. One key element to note is the 29.64% concentration in three of the “Big Four Banks” in the United States. Appaloosa increased their holdings in these banks by $423 million from Q3 to Q4.
Wells Fargo (WFC, Financial)
Wells Fargo is a diversified financial services company offering a variety of services to both personal and business consumers. Wells Fargo market capitalization is $165.45 billion, and their shares trade around $31.44. Wells Fargo, in totality of both common and preferred equity, compromises of 11.53% of Appaloosa’s portfolio and is one of the “Big Four Banks” in the United States. Wells Fargo is at the moment, the biggest component of Appaloosa’s portfolio, since their holdings of Wells Fargo increased approximately $272 million from Q3 to Q4. Appaloosa’s holding of Wells Fargo is split into two categories, WFC.PL (preferred stock), and the common stock, WFC. $335 million of their holdings is in preferred, with the remaining $231 million in common stock.
Wells Fargo has a P/E ratio of 14.78, a P/B ratio of 1.4, and a P/S ratio of 1.8. For their fiscal year ending in 12/10, they reported revenues of $93 billion, and a net income of $12 billion, yielding a profit margin of 12.9%. Their EPS was $2.21 with a dividend yield of .61%. Historically, over a 10 year period, Wells Fargo grew its revenue by 10.6% and earnings by 4%. A cash dividend of $18.75 was declared per each preferred share of Wells Fargo.
Goldman Sachs recently upgraded Wells Fargo to a conviction buy in anticipation of a future dividend hike. Wells Fargo also recently settled in a discrimination lawsuit for $32 million with a group of their financial advisors.
Gurufocus rated Wells Fargo with a business predictability rank of 1 star.
Citigroup (C, Financial)
Citigroup is a financial services company catering to both that of personal and business needs. Citigroup’s market capitalization is $136.28 billion, and their shares trade around $4.69. Citigroup compromise of 11.31% of Appaloosa’s portfolio, and is one of the “Big Four Banks” in the United States. Citigroup is the second largest holding of Appaloosa’s portfolio, as they increased their holdings of Citigroup by $356 million from Q3 to Q4.
Citigroup has a P/E ratio of 13.4, P/B ratio of .8, and a P/S ratio of 1.6. For their fiscal year ending in 12/10, they reported revenues at $111 billion with net income at $10 million, yielding a profit margin at 9 %. Their earnings per share for the fiscal year were $.35.
According to Citigroup’s president of consumer banking, Citigroup “will restructure its North American retail bank and credit card units to improve its sales and services.” Furthermore, they have acknowledged that they “must align ourselves to the segments, strengthen our product and service offerings... enhance the customer experience... and maintain oversight and control of our underlying risks. Achieving this will improve our market position and generate sustained, long-term growth and profitability.”
Gurufocus rated Citigroup with a business predictability rank of 1 star.
Bank of America (BAC, Financial)
Bank of America is a financial services company, providing services to personal and business clients. Bank of America’s market capitalization is $140.89 billion, and their shares trade around $13.97. Bank of America compromises of 6.80% of Appaloosa’s portfolio and is one of the “Big Four Banks” in the United States. Appaloosa increased their holdings of Bank of America by $39 million from Q3 to Q4, placing it as their third largest holding.
Bank of America reported earnings of $134 billion for their most recent fiscal year, and a loss of $2.2 billion. Historically, over a 10 year period, Bank of America grew its revenue by 1.4%. Their current dividend yield stands at .28%.
Recent developments with Bank of America are as followed: In order to boost revenues, Bank of America currently plans on introducing fees upon their checking accounts. On the popular CNBC show Mad Money, Jim Cramer called the stock a “steal” at its current price. Finally, a class action complaint and lawsuit was recently filed against Bank of America due their operational practices by Murray, Frank & Sailer LLP.
Gurufocus rated Bank of America with a business predictability rank of 1 star.
Pfizer (PFE, Financial)
Pfizer is the number one pharmaceutical company ranked by sales in the United States. Two of their signature drugs are Lipitor and Celebrex. Pfizer’s market capitalization is $151.39 Billion, and their shares trade around $18.90. Pfizer increased its holding of Pfizer by 5.6 million, and is now 5.9% of Appaloosa’s composite portfolio.
Pfizer has a P/E ratio of 8.5, a P/S ratio of 2.2, and a P/B ratio of 1.7. Their growth has been fairly stable, with 10 year growths of revenue and earnings at 4.2% and 5.4% respectively. Pfizer posted revenues at $67.8 billion, with the bottom line at 8.2 billion, yielding a profit margin of 12.1%. Their EPS for the year was $1.02, with a dividend yield of 4.25%.
Pfizer recently collaborated with an Israeli based pharmaceutical firm to produce a drug designed to treat Gaucher’s disease. However, their drug taliglucerase alfa is currently stalled by a request for further trials by the FDA. Pfizer recently made strides towards reentering the insulin market, by tapping into an India-based firm, Biocon Ltd, to supply them with Pfizer with four generic insulin products.
Gurufocus rated Pfizer with a business predictability rank of 1 star.
Hewlett-Packard (HPQ, Financial)
Hewlett-Packard is a conglomerate information technological and personal computing hardware provider. They offer a slew of technological equipment aimed at both personal and business clients, in all aspects of the computational experience. Hewlett –Packard’s market capitalization is $91.70 Billion, with shares trading around $42.17. Hewlett-Packard comprises of 5% of Appaloosa’s portfolio, with an aggregate increase in value of $89 million quarter to quarter.
Hewlett-Packard has a P/E ratio of 9.3, a P/B ratio of 2.4, and a P/S ratio of .7. Their revenue growth for the last 5 years has been at 13.1%, with earnings at 28.8%. Hewlett-Packard earnings for the year were at $126 billion, with a net income of $8.2 billion, yielding a margin of 6.5%. Their current dividend yield stands at .75%.
For its 2011 outlook, Hewlett-Packard estimates earnings at $130-131.5, a growth rate of 3.2%. This was well below expectations, and as such, the stock’s price dropped accordingly. One potential cause for its weak outlook lies in its weak operating division in Asia. Recent developments caused HP’s Asian market to perceive Hewlett-Packard as discriminatory in its practice of offering abridged warranties only in Asia. Furthermore, due to the release and recall of faulty notebooks in Asia, sales are expected to remain stagnant if not decline.
Gurufocus rated Hewlett-Packard with a business predictability rank of 1 star.
For a more intricate look at David Tepper, and Appaloosa Management’s current portfolio and stock picks, please go to: http://www.gurufocus.com/ListGuru.php?GuruName=David+Tepper
Fast forward to modern day, perhaps as an iconic symbolization of his many successes now and to come, Carnegie Mellon renamed its business school, the David A. Tepper School of Business. Originating from his tenure at Keystone and Goldman, Tepper developed his primarily niche in distressed companies. Initially pursuing junk bonds and debt securities exclusively, Tepper expanded Appaloosa’s operations into equities and sovereign debt as he felt numerous opportunities exist. He specifically focused on financials in the last quarter of 2010, because as “…markets adapt, people adapt…”, and with his underlying belief that the government served as a backstop to complete loss in financials, he increased his holdings dramatically in this sector.
However, his recent outlook on the market is “cautious, but optimistic”, as he stated, “When things go up too high, they will go down,". Tepper, who earlier last year, was bullish, (Tepper-Rally) now believes that while numerous opportunities remain, unforeseen underlying risk still exists. Nonetheless, his record has earned him to be voted as the investment guru of 2010 by Gurufocus, and ranked in the top 1% of hedge fund managers in 2009. Appaloosa earned $7 billion in 2009, translating into a 120% return, with $4 billion in profits going to David Tepper. In terms of comparison against the benchmark, on a 10 yr cumulative basis, Appaloosa Management returned 1335% vs. the S&P 16.4% return.
In GuruFocus’s latest study of the performances of Gurus from 2008 to 2010, David Tepper is ranked number one among all Gurus.
Appaloosa’s most recent portfolio composition broken into sector can be seen in the following charts. Two notable rebalancing changes to Appaloosa’s portfolio would be the 6.80% increase in technological equities, with a counter-balancing 6.20% decrease in health care equities.
Overall Portfolio Composition | Q4 | Q3 | % Change |
|---|---|---|---|
Technology | 21.90% | 15.10% | 6.80% |
Financials | 31.60% | 31.50% | 0.10% |
Consumer Services | 4.60% | 7.30% | -2.70% |
Health Care | 10.10% | 16.30% | -6.20% |
Consumer Goods | 6.00% | 1.70% | 4.30% |
Industrials | 2.30% | 1.10% | 1.20% |
Basic Materials | 4.80% | 3.10% | 1.70% |
Oil and Gas | 2.70% | 2.80% | -0.10% |
Appaloosa’s current portfolio is valued at $4.915 billion with 40.54% of their portfolio concentrated in the following five stocks. One key element to note is the 29.64% concentration in three of the “Big Four Banks” in the United States. Appaloosa increased their holdings in these banks by $423 million from Q3 to Q4.
Top five holdings for Q4 | Symbol | Composition% | Shares | Value |
|---|---|---|---|---|
Wells Fargo (Cs / Pfd) | WFC / WFC.PL | 11.53% | 7,795,582 | 566,855,000 |
Citigroup | C | 11.31% | 117,501,357 | 555,781,000 |
Bank of America | BAC | 6.80% | 25,067,544 | 334,401,000 |
Pfizer | PFE | 5.90% | 16,562,202 | 290,004,000 |
Hewlett-Packard | HPQ | 5.00% | 5,843,144 | 245,996,000 |
Total Value of Portfolio | 4,915,604,000 |
Top five holdings for Q3 | Symbol | Composition% | Shares | Value |
|---|---|---|---|---|
Wells Fargo (Cs/Pfd) | WFC / WFC.PL | 13.57% | 6,702,719 | 454,872,000 |
Bank of America | BAC | 8.79% | 22,473,699 | 294,630,000 |
Pfizer | PFE | 8.48% | 16,562,202 | 284,373,000 |
Citigroup | C | 5.96% | 51,250,000 | 199,875,000 |
Hewlett-Packard | HPQ | 4.67% | 3,723,144 | 156,633,000 |
Total Value of Portfolio | 3,352,881,000 |
Wells Fargo (WFC, Financial)
Wells Fargo is a diversified financial services company offering a variety of services to both personal and business consumers. Wells Fargo market capitalization is $165.45 billion, and their shares trade around $31.44. Wells Fargo, in totality of both common and preferred equity, compromises of 11.53% of Appaloosa’s portfolio and is one of the “Big Four Banks” in the United States. Wells Fargo is at the moment, the biggest component of Appaloosa’s portfolio, since their holdings of Wells Fargo increased approximately $272 million from Q3 to Q4. Appaloosa’s holding of Wells Fargo is split into two categories, WFC.PL (preferred stock), and the common stock, WFC. $335 million of their holdings is in preferred, with the remaining $231 million in common stock.
Wells Fargo has a P/E ratio of 14.78, a P/B ratio of 1.4, and a P/S ratio of 1.8. For their fiscal year ending in 12/10, they reported revenues of $93 billion, and a net income of $12 billion, yielding a profit margin of 12.9%. Their EPS was $2.21 with a dividend yield of .61%. Historically, over a 10 year period, Wells Fargo grew its revenue by 10.6% and earnings by 4%. A cash dividend of $18.75 was declared per each preferred share of Wells Fargo.
Goldman Sachs recently upgraded Wells Fargo to a conviction buy in anticipation of a future dividend hike. Wells Fargo also recently settled in a discrimination lawsuit for $32 million with a group of their financial advisors.
Gurufocus rated Wells Fargo with a business predictability rank of 1 star.
Citigroup (C, Financial)
Citigroup is a financial services company catering to both that of personal and business needs. Citigroup’s market capitalization is $136.28 billion, and their shares trade around $4.69. Citigroup compromise of 11.31% of Appaloosa’s portfolio, and is one of the “Big Four Banks” in the United States. Citigroup is the second largest holding of Appaloosa’s portfolio, as they increased their holdings of Citigroup by $356 million from Q3 to Q4.
Citigroup has a P/E ratio of 13.4, P/B ratio of .8, and a P/S ratio of 1.6. For their fiscal year ending in 12/10, they reported revenues at $111 billion with net income at $10 million, yielding a profit margin at 9 %. Their earnings per share for the fiscal year were $.35.
According to Citigroup’s president of consumer banking, Citigroup “will restructure its North American retail bank and credit card units to improve its sales and services.” Furthermore, they have acknowledged that they “must align ourselves to the segments, strengthen our product and service offerings... enhance the customer experience... and maintain oversight and control of our underlying risks. Achieving this will improve our market position and generate sustained, long-term growth and profitability.”
Gurufocus rated Citigroup with a business predictability rank of 1 star.
Bank of America (BAC, Financial)
Bank of America is a financial services company, providing services to personal and business clients. Bank of America’s market capitalization is $140.89 billion, and their shares trade around $13.97. Bank of America compromises of 6.80% of Appaloosa’s portfolio and is one of the “Big Four Banks” in the United States. Appaloosa increased their holdings of Bank of America by $39 million from Q3 to Q4, placing it as their third largest holding.
Bank of America reported earnings of $134 billion for their most recent fiscal year, and a loss of $2.2 billion. Historically, over a 10 year period, Bank of America grew its revenue by 1.4%. Their current dividend yield stands at .28%.
Recent developments with Bank of America are as followed: In order to boost revenues, Bank of America currently plans on introducing fees upon their checking accounts. On the popular CNBC show Mad Money, Jim Cramer called the stock a “steal” at its current price. Finally, a class action complaint and lawsuit was recently filed against Bank of America due their operational practices by Murray, Frank & Sailer LLP.
Gurufocus rated Bank of America with a business predictability rank of 1 star.
Pfizer (PFE, Financial)
Pfizer is the number one pharmaceutical company ranked by sales in the United States. Two of their signature drugs are Lipitor and Celebrex. Pfizer’s market capitalization is $151.39 Billion, and their shares trade around $18.90. Pfizer increased its holding of Pfizer by 5.6 million, and is now 5.9% of Appaloosa’s composite portfolio.
Pfizer has a P/E ratio of 8.5, a P/S ratio of 2.2, and a P/B ratio of 1.7. Their growth has been fairly stable, with 10 year growths of revenue and earnings at 4.2% and 5.4% respectively. Pfizer posted revenues at $67.8 billion, with the bottom line at 8.2 billion, yielding a profit margin of 12.1%. Their EPS for the year was $1.02, with a dividend yield of 4.25%.
Pfizer recently collaborated with an Israeli based pharmaceutical firm to produce a drug designed to treat Gaucher’s disease. However, their drug taliglucerase alfa is currently stalled by a request for further trials by the FDA. Pfizer recently made strides towards reentering the insulin market, by tapping into an India-based firm, Biocon Ltd, to supply them with Pfizer with four generic insulin products.
Gurufocus rated Pfizer with a business predictability rank of 1 star.
Hewlett-Packard (HPQ, Financial)
Hewlett-Packard is a conglomerate information technological and personal computing hardware provider. They offer a slew of technological equipment aimed at both personal and business clients, in all aspects of the computational experience. Hewlett –Packard’s market capitalization is $91.70 Billion, with shares trading around $42.17. Hewlett-Packard comprises of 5% of Appaloosa’s portfolio, with an aggregate increase in value of $89 million quarter to quarter.
Hewlett-Packard has a P/E ratio of 9.3, a P/B ratio of 2.4, and a P/S ratio of .7. Their revenue growth for the last 5 years has been at 13.1%, with earnings at 28.8%. Hewlett-Packard earnings for the year were at $126 billion, with a net income of $8.2 billion, yielding a margin of 6.5%. Their current dividend yield stands at .75%.
For its 2011 outlook, Hewlett-Packard estimates earnings at $130-131.5, a growth rate of 3.2%. This was well below expectations, and as such, the stock’s price dropped accordingly. One potential cause for its weak outlook lies in its weak operating division in Asia. Recent developments caused HP’s Asian market to perceive Hewlett-Packard as discriminatory in its practice of offering abridged warranties only in Asia. Furthermore, due to the release and recall of faulty notebooks in Asia, sales are expected to remain stagnant if not decline.
Gurufocus rated Hewlett-Packard with a business predictability rank of 1 star.
For a more intricate look at David Tepper, and Appaloosa Management’s current portfolio and stock picks, please go to: http://www.gurufocus.com/ListGuru.php?GuruName=David+Tepper
