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David Tepper’s 3 Top-Yielding Companies: REITs

January 23, 2013 | About:
After yesterday’s declaration on Bloomberg TV urging investors to join him in his bullish forecast for the economy this year, it seems that David Tepper has yet again re-awakened optimism in the financial world.

“The country is on the verge of an explosion of greatness,” he said. “The key is to be long equities this year.”

This overt confidence is one of Tepper’s likable traits. Those who follow his investment moves have been long assured to trust Tepper’s contrarian ideals.

After all, as the CEO and founder of Appaloosa Management, Tepper has made history producing some of the largest returns on Wall Street in his decades as an investor.

Let’s rewind all the way back to 2003 when Tepper, a distressed debt investor, purchased from the then-largest bankruptcies in corporate history: Enron, Worldcom and Conseco. He left Wall Street astounded when the three companies emerged from bankruptcy, returning 148 percent to Appaloosa.

Tepper’s reputation has also garnered him the rightful power to influence the markets. Take the widely dubbed “Tepper Rally” of 2010. When the quick-witted, wisecracking Guru from Pittsburgh appeared on CNBC’s Squawk Box giving his then bullish outlook of the market, it caused the market to rally at least 2 percent. During the program, he essentially said that either the economy’s going to improve and the economy is going to go up, or the Fed will closely monitor and take enough action to push economic improvement, which will in turn cause it go up.

When the Fed greeted the deteriorating economy by minimizing downside risks through quantitative easing (QE2), it was made clear that Tepper was right.

Not only that, he made billions for his investors and himself (returning 130 percent to be exact) by betting on bank stocks in the first quarter of 2009, amidst the financial crisis recovery.

Perhaps for Tepper, sniffing out value in ailing companies has always come as second nature. Prior to heading Appaloosa, the Guru worked his way to head trader for Goldman Sachs. As told to NY Magazine, Tepper managed to maintain Goldman’s high-yield trading desk by buying into bonds of financial institutions that suffered from the market crash of 1987.

Needless to say, Tepper has a knack for this. In 2012, Appaloosa was up 30 percent.

As of Sept. 30, Tepper had 52 stocks in his portfolio. Among them, some of his top holdings are Apple (AAPL), American International Group Inc. (AIG), United Continental Holdings (UAL), and Citigroup (C), which is up 10 percent since the previous quarter.

Below are Tepper’s stocks with the highest yield percentages, which also all happen to be real estate investment trusts.

Two Harbors Investment Corp. (TWO)

Maryland-based Two Harbor Investment Corp. is a real estate investment trust that focuses on residential mortgage-backed securities. It has a dividend yield of 13.8 percent, and a dividend payout ratio of 2.06.

The company’s presence in Tepper’s portfolio only spans back the first quarter of last year, after he bought 3 million stocks at an average price of $9.96.

Two Harbors, according to its website, seeks attractive risk-adjusted returns over the long term, primarily through dividends and secondarily through capital appreciation. On Dec. 31, the company paid a dividend of $0.55 per share.

In one year, Two Harbors has raked in 29.8 percent in market value. From Tepper’s average purchase price, the stock has elevated to $12.39 for this afternoon’s trading.

1358965269357.pngTWO data by GuruFocus.com

Two Harbors’ annual growth rate is 148.07 percent, according to 10-Year Financials.

Besides Tepper, Omega Advisors’ Leon Cooperman is the only other investor on GuruFocus who holds the stock. SAC Capital’s Steven Cohen and Renaissance Technologies’ Jim Simons both sold out of the stock in the third quarter of 2012.

Chimera Investment Corp. (CIM)

As another stock that Tepper purchased in the first quarter of 2012, Chimera Investment Corp.’s dividend yield percentage dwells at 12.9 percent, with a payout ratio of 1.04.

Also an REIT, Chimera is an investor in residential mortgage loans, real-estate related securities and various other asset classes. In November, the company announced a common stock cash dividend of $0.09 per share, payable to shareholders Jan. 25.

When purchased, Tepper acquired 4.4 million shares of Chimera at an average price of $2.93. After getting rid of 425,500 shares when Chimera’s market value slightly lowered, and then buying about 6.4 million shares by the end of third quarter, Tepper’s current shareholding totals almost 10.4 million shares to date.

From its declining price in 2012, Chimera has recovered almost back to Tepper’s purchase price, trading this afternoon at $2.94.

David Tepper owns the most shares of Chimera among the rest of the investors on GuruFocus. Gurus who have recently welcomed the stock to their portfolios include Elliot Management’s Paul Singer, Glenview Capital’s Larry Robbins and GMO’s Jeremy Grantham.

MFA Financial Inc. (MFA)

New York-based MFA Financial has a dividend yield of 9.7 percent and a payout ratio of 0.85.

It engages its business in investing, on a leveraged basis, in residential mortgage-backed securities.

Tepper welcomed the stock with open arms in the first quarter of 2012, buying over 1 million shares, priced on average, $7.27. Currently, he holds 969,783 shares.

On Dec. 31, MFA paid a preferred stock dividend of $0.53 per share, out of its 8.5% Series A Cumulative Redeemable Preferred Stock. Additionally, shareholders will also be paid $0.20 per share on Jan. 31 for the company’s quarterly dividend payout.

In the last year, MFA has gained about 29 percent in market value. Today, the stock trades at $8.86, down 0.52 percent this afternoon.

1358968117520.pngMFA data by GuruFocus.com

Its annual growth rate is 0.24 percent according to 10-Year Financials.

Besides Tepper, Gurus Donald Smith, Chuck Royce and Steven Cohen also hold the stock.

To view the rest of his high-yielding companies list, visit David Tepper’s Top-Yielding Stocks. His portfolio can be viewed on David Tepper’s Current Portfolio. Also view his undervalued predictable companies and top growth stocks.


About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

Visit Dianne Tordillo's Website


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