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Sydnee Gatewood
Sydnee Gatewood
Articles (642) 

David Tepper’s Top 5 Holdings

Guru’s top holding as of the 3rd quarter is semiconductor manufacturer Micron Technology

According to GuruFocus’ top 10 holdings data, Appaloosa Management leader David Tepper (Trades, Portfolio)’s five largest positions as of the third quarter are Micron Technology Inc. (NASDAQ:MU), Facebook Inc. (NASDAQ:FB), Allergan PLC (NYSE:AGN), Alibaba Group Holding Ltd. (NYSE:BABA) and Alphabet Inc. (NASDAQ:GOOG).

A distressed-debt specialist, filings show the guru’s New Jersey-based hedge fund focuses on “equities and debt of distressed companies, exchange warrants, options, futures notes and junk bonds.” Tepper's $5.61 billion equity portfolio, which is composed of 36 stocks, is heavily invested in the technology sector with a weight of 46.55%.

Micron Technology

Tepper’s largest stake is 36 million shares of Micron, representing 29.03% of the equity portfolio. GuruFocus estimates he has broke even on the investment since establishing the holding in the fourth quarter of 2016.

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The Boise, Idaho-based semiconductor manufacturer has a $45.4 billion market cap; its shares closed at $36.88 on Tuesday with a price-earnings ratio of 3.20, a price-book ratio of 1.33 and a price-sales ratio of 1.49.

The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.

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GuruFocus rated Micron’s financial strength 8 out of 10. Along with having sufficient interest coverage, the Altman Z-Score of 5.46 suggests the company is fiscally sound. The company’s profitability and growth scored a 9 out of 10 rating, boosted by an expanding operating margin, strong returns, a high Piotroski F-Score of 8 and a business predictability rank of 3.5 out of five stars. In addition to steady revenue and earnings growth, GuruFocus says companies with this rank typically see their stock prices gain an average of 9.3% per year.

Of the gurus invested in Micron, PRIMECAP Management (Trades, Portfolio) has the largest position with 5.12% of outstanding shares. Donald Smith (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), George Soros (Trades, Portfolio), Ray Dalio (Trades, Portfolio), the Signature Select Canadian Fund (Trades, Portfolio), Leon Cooperman (Trades, Portfolio) and several others are also shareholders.

Facebook

The guru’s second-largest holding is Facebook. He holds 3.3 million shares, which represent 9.68% of the equity portfolio. According to GuruFocus, he has gained an estimated 1% on the investment since the third quarter of 2016.

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Headquartered in California, the social media company has a market cap of $396.38 billion; its shares closed at $137.93 on Tuesday with a price-earnings ratio of 20.80, a price-book ratio of 4.93 and a price-sales ratio of 7.81.

According to the Peter Lynch chart, the stock is overvalued.

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Facebook’s financial strength and profitability and growth were both rated 9 out of 10 by GuruFocus. As a result of no long-term debt and comfortable interest coverage, the high Altman Z-Score of 22.62 indicates the company is in good financial standing. The social media giant also has an expanding operating margin, good returns and a moderate Piotroski F-Score of 6, which suggests business conditions are stable.

With 0.28% of outstanding shares, Frank Sands (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors include Spiros Segalas (Trades, Portfolio), Chris Davis (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Pioneer, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ruane Cunniff (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio).

Allergan

Tepper’s third-largest position is Allergan, of which he owns 1.9 million shares. The stake has a weight of 6.77% in the equity portfolio. GuruFocus data shows he has lost an estimated 7% on the investment since the fourth quarter of 2015.

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The Irish pharmaceutical company has a $51.94 billion market cap; its shares closed at $154 on Tuesday with a price-earnings ratio of 23.33, a price-book ratio of 0.74 and a price-sales ratio of 3.23.

Based on the Peter Lynch chart, the stock appears to be overvalued.

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GuruFocus rated Allergan’s financial strength 5 out of 10. In addition to having poor interest coverage, the Altman Z-Score of 1.17 suggests the company is at risk of going bankrupt. The company’s profitability and growth fared a bit better with a 7 out of 10 rating. Despite having margins and returns that underperform competitors, the company is supported by a moderate Piotroski F-Score of 6 and a one-star business predictability rank. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.

The Vanguard Health Care Fund (Trades, Portfolio) has the largest stake in the company with 4.09% of outstanding shares. Seth Klarman (Trades, Portfolio), Mason Hawkins (Trades, Portfolio)’ Southeastern Asset Management, Larry Robbins (Trades, Portfolio), John Paulson (Trades, Portfolio), Simons’ firm, Wallace Weitz (Trades, Portfolio), David Carlson (Trades, Portfolio), NWQ Managers (Trades, Portfolio) and several others also own the stock.

Alibaba

The investor holds 1.5 million shares of Alibaba, representing 4.41% of the equity portfolio. GuruFocus estimates he has gained 32% on the investment since the second quarter of 2017.

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The Chinese e-commerce company has a market cap of $407.24 billion; its shares closed at $158.34 on Tuesday with a price-earnings ratio of 45.63, a price-book ratio of 6.77 and a price-sales ratio of 8.77.

The Peter Lynch chart suggests the stock is overvalued.

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Alibaba’s financial strength was rated 7 out of 10 by GuruFocus. In addition to having adequate interest coverage, the Altman Z-Score of 6.33 indicates the company is in good fiscal health. The company’s profitability and growth scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms a majority of industry peers. The company is also strengthened by good returns and a moderate Piotroski F-Score of 4. As a result of consistent earnings and revenue growth, it also has a 3.5-star business predictability rank.

With 0.6% of outstanding shares, Sands is the company’s largest guru shareholder. Other gurus invested in the stock include Primecap, Ken Fisher (Trades, Portfolio), Mandel, Andreas Halvorsen (Trades, Portfolio), Coleman, Segalas, Daniel Loeb (Trades, Portfolio), Davis and Pioneer.

Alphabet

Tepper holds 200,000 Class C shares of Alphabet, which represent 4.26% of the equity portfolio. According to GuruFocus, he has gained an estimated 28% on the investment since the fourth quarter of 2013.

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Google’s parent company, which is headquartered in California, has a $772.92 billion market cap; its shares closed at $1,050.82 on Tuesday with a price-earnings ratio of 40.02, a price-book ratio of 4.35 and a price-sales ratio of 5.84.

According to the Peter Lynch chart, the stock is overvalued.

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Alphabet’s financials strength and profitability and growth were both rated 9 out of 10 by GuruFocus. Supported by adequate interest coverage, the Altman Z-Score of 11.39 suggests the company is good financial health. Although the operating margin is in decline, it still outperforms industry peers. The company is also supported by good returns, a stable Piotroski F-Score of 6 and a three-star business predictability rank. In addition to having predictable earnings and revenue growth, GuruFocus says companies with this rank typically see their stock prices gain an average of 8.2% per year.

Of the gurus invested in Alphabet, Dodge & Cox has the largest holding with 0.45% of outstanding shares. Primecap, Davis, Pioneer, Mandel, Ruane Cunnif, Segalas, Bill Nygren (Trades, Portfolio), Hawkins, First Pacific and several other gurus also have positions in the stock.

Other top holdings

Tepper’s other top holdings as of the third quarter are Altaba Inc. (NASDAQ:AABA), T-Mobil US Inc. (NASDAQ:TMUS), PG&E Corp. (NYSE:PCG), Lam Research Corp. (NASDAQ:LRCX) and XPO Logistics Inc. (NYSE:XPO).

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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