David Tepper (Trades, Portfolio) runs Appaloosa Management LP, a $2.9 billion hedge fund. It's important to analyze key holdings from prominent hedge funds because they have more analytical resources to analyze stocks than the majority of individual investors. Here is a look at Appaloosa's most interesting stock selections:
Largest position: General Motors Co.
Nearly one-seventh of Appaloosa Management's portfolio (13.51%) is in General Motors (GM, Financial). Here is a snapshot of General Motors' recent quarterly performance.
As we can see in the table, GM reported EPS growth of 55% year over year and revenue decline of 1% year over year in the third quarter. In the previous two quarters, the company had reported EPS growth of 122% and 197% while revenues declined by 4% and 5%. It is essential to look for companies with solid growth in both EPS and sales because that is what ultimately drives the shares.
Another important aspect to take a look at is the level of annual EPS growth.
General Motors' EPS declined 4% in FY2014. Analysts expect 58% growth in 2015 and 13% in 2016.
Earnings surprises
One important aspect in analyzing stocks is evaluating the level of surprises in the past and most importantly in the last reported quarter. In the last quarter, GM reported EPS of $1.50 compared to consensus expectations of $1.18 per share. This is a 32-cent difference in earnings surprise and is a good element to see in the stock. In the past three quarters, GM surprised analyst consensus estimates by 19.44%, -11.34% and 43.37%.
Second position: HCA Holdings Inc.
HCA Holdings (HCA, Financial) accounts for 9.6% of Appaloosa Management's portfolio. Here is a snapshot of HCA Holdings' recent quarterly performance.
In the third quarter, HCA reported EPS growth of -1% year over year and revenue growth of 7% year over year. In the previous two quarters the company had reported EPS growth of 0% and 61% while revenues grew at 7% and 7%. It is essential to look for companies with solid growth in both EPS and sales because that is what ultimately drives the shares.
Another important aspect to review is the level of annual EPS growth.
HCA Holdings generated 38% growth in EPS in FY2014, and analysts expect +11% growth in 2015 and +11% in 2016.
Earnings surprises
One important aspect in analyzing stocks is evaluating the level of surprises in the past and most importantly in the last reported quarter. In the last quarter HCA reported EPS of $1.17 compared to consensus expectations of $1.20 per share. This is a -0.03 difference earnings surprise and is a good element to see in the stock. In the past three quarters HCA surprised analyst consensus estimates by -2.50%, 2.24% and 12.50%.
Third position: Delta Air Lines Inc.
Nearly one-tenth (9.52%) of Appaloosa Management's portfolio is in Delta Air Lines (DAL, Financial). Here is a snapshot of Delta Air Lines' recent quarterly performance.
As we can see in the table, in the quarter ended in September, Delta reported EPS growth of +45% year over year and revenue growth of -1% year over year. In the previous two quarters the company had reported EPS growth of +22% and +36% respectively while revenues grew at +1% and +5%. It is essential to look for companies with solid growth in both EPS and sales because that is what ultimately drives the shares.
Another important aspect to take a look at is the level of annual EPS growth
Delta Air Lines generated +6% growth in EPS in FY2014; analysts expect +38% growth in 2015 and +25% in 2016.
Earnings surprises
One important aspect in analyzing stocks is evaluating the level of surprises in the past and most importantly in the last reported quarter. In the last quarter Delta reported EPS of $1.74 compared to consensus expectations of $1.72 per share. This is a +0.02 difference earnings surprise and is a good element to see in the stock. In the past three quarters Delta surprised analyst consensus estimates by 1.16%, 4.96% and 2.27%.
