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James Li
James Li
Articles (1246)  | Author's Website |

David Tepper’s Top 5 Buys in the 4th Quarter

Appaloosa fund manager’s top buys include new holding in a telecom company

David Tepper (Trades, Portfolio), founder of Appaloosa Management, disclosed last week that his fund’s top five buys during the fourth quarter of 2019 included a new holding in Intelsat SA (I) and position boosts in four companies: Alibaba Group Holding Ltd. (NYSE:BABA), Micron Technology (NASDAQ:MU), Energy Transfer LP (NYSE:ET) and Amazon.com Inc. (NASDAQ:AMZN).

A distressed debt specialist, Tepper became interested in the stock market as a young boy watching his father trade stocks in his hometown of Pittsburgh. The Appaloosa fund manger has since earned international reputation for producing some of the highest returns among fund managers on Wall Street.

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According to CNBC sources, Tepper announced in May 2019 that he plans to convert Appaloosa into a family office so that he can concentrate on managing the Carolina Panthers NFL football franchise, which he purchased for over $2.27 billion in 2018. As of December 2019, the $3.94 billion equity portfolio contains 22 stocks, with turnover of 13%. The top three sectors in terms of portfolio weight are communication services, consumer cyclical and technology, with weights of 31.53%, 30.05% and 17.39%.

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New buy: Intelsat

Appaloosa purchased 2,885,019 shares of Intelsat, giving the stake 0.51% weight in the equity portfolio. Shares averaged $15.33 during the quarter.

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The Luxembourg-based telecom company provides diversified communication services to media companies, fixed and wireless telecom operators and data networking service providers. According to GuruFocus, Intelsat’s interest coverage and debt ratios underperform over 90% of global competitors, suggesting low financial strength.

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Lee Ainslie (Trades, Portfolio)’s Maverick Capital also purchased shares in Intelsat during the quarter.

Alibaba

Having purchased 1.3 million shares of Alibaba in the previous quarter, the fund added 1.1 million more shares, increasing the holding 84.62% and the equity portfolio 5.92%. Shares of the Chinese retail giant averaged $188.59 during the fourth quarter.

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The Hangzhou, China-based company said last week that revenues for the quarter were 161.456 billion yuan ($23.192 billion), up 38% year over year on double-digit increases in annual active consumers and mobile monthly active users. Alibaba CEO Daniel Zhang said that the Nov. 11 Singles Day Global Shopping Festival achieved a new record for merchants and partners, generating over 268.4 billion yuan in gross merchandise value through Alipay, up 26% year over year.

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Alibaba’s three-year revenue growth rate of 52.80% outperforms over 96% of global competitors, contributing to a GuruFocus profitability rank of 9. Additionally, operating margins are outperforming over 94% of global retail companies despite contracting over the past five years.

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Steven Romick (Trades, Portfolio), Charles Brandes (Trades, Portfolio)’ Brandes Investment, Ken Heebner (Trades, Portfolio) and Howard Marks (Trades, Portfolio)’ Oaktree also purchased shares in Alibaba during the quarter.

Micron Technology

Appaloosa added 2.1 million shares of Micron Technology, increasing the position 35% and the equity portfolio 2.86%. Shares averaged $47.96 during the quarter.

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The Boise, Idaho-based company provides dynamic random-access memory chips for servers and personal computers. GuruFocus ranks Micron’s profitability 9 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank, a three-year revenue growth rate that outperforms 80.55% of global competitors and an operating margin that has increased in the double-digits on average over the past five years.

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Energy Transfer

The fund added 5,374,026 shares of Energy Transfer, increasing the position 91.75% and the equity portfolio 1.75%. Shares averaged $12.32 during the quarter.

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The Dallas-based company operates a large platform of crude oil, natural gas and liquid assets throughout Texas and the U.S. midcontinent region. GuruFocus ranks Energy Transfer’s profitability 7 out of 10: operating margins are expanding and outperforming over 68% of global competitors despite a three-year revenue growth rate outperforming just over half of midstream energy companies.

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Amazon

The fund added 26,500 shares of Amazon, increasing the holding 10% and the equity portfolio 1.24%. Shares of the Seattle-based retail giant averaged $1,771.74 during the quarter.

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GuruFocus ranks Amazon’s profitability 8 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank and a three-year revenue growth rate that outperforms over 91% of global competitors.

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Despite high profitability, Amazon’s valuation ranks 1 out of 10 on several signs of overvaluation, including a share price close to a 10-year high and several price valuations that underperform over 90% of global competitors.

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Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) owns 537,300 shares of Amazon as of quarter-end.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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