Here's What This Hugely Successful Investor Has Been Buying
Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Appaloosa Management, founded by investing giant David Tepper and known for investing in the debt of companies in distress. Tepper's investing history includes debt and stock in companies such as Enron and Worldcom. He made billions on bank stocks in 2009 after they had imploded and before they recovered. More recently, he invested in many housing-related companies.
Why should you look at Appaloosa Management's moves? Well, according to the folks at GuruFocus.com, Appaloosa gained a whopping 1,335% in the first decade of this century, compared with just 16% for the S&P 500.
Appaloosa's stock portfolio totaled $4 billion in value as of March 31, 2012. Its top three holdings, representing 47% of the portfolio's total value, were PowerShares QQQ (a Nasdaq-focused ETF), Apple, and Citigroup.
So what does Appaloosa's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Chimera Investment (NYS: CIM) and Fusion-io (NYS: FIO) . Chimera is a residential mortgage REIT that uses leverage to invest in loans. It uses less leverage than many of its peers, though, and invests in riskier, higher-yielding loans. Many associate it with huge dividend yields, and though it has cut its dividend several times over the past few years, its yield was still more than 15% recently! The fact that interest rates are expected to remain low for the near future should help Chimera.
Called "a disruptive tech stock poised for greatness," Fusion-io is an innovator in the data-storage realm, combining solid-state memory technology with its proprietary software to help companies manage their growing storage needs. To many investors, the only problem with the company is its stock's steep valuation. Others worry about shrinking margins and competition, such as from deep-pocketed EMC.
Among holdings in which Appaloosa increased its stake was Valero Energy (NYS: VLO) , North America's biggest oil refiner and marketer. The stock has been volatile, falling 15% over the past year as fuel sales sagged. Its recent quarterly earnings report showed revenue up sharply, but costs also rose, delivering net losses instead of gains. The company has lower capacity utilization than its peers, and is addressing that by suspending operations at its Aruba refinery.
Appaloosa reduced its stake in a handful of companies, including International Paper (NYS: IP) , which is not in the fastest-growing industry. The company has high hopes for its acquisition of Temple-Inland, expecting synergies of some $400 million over the first two years, but acquisitions can also be bumpy and not meet expectations. Some see it as undervalued, with solid growth prospects, given its international presence.
Finally, Appaloosa unloaded all of its shares of medical-device company Boston Scientific (NYS: BSX) . The stock has been a value-shrinker over the past decade, recently plagued by slipping sales of heart-rhythm devices such as pacemakers and defibrillators. Its first-quarter results were promising, though, with earnings more than doubling over year-ago levels and sales rising slightly due to problems with competitor St. Jude, whose image has been tarnished by concerns over some of its products.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
At the time this article was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, ownsowns shares of Apple, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of and creating a bull call spread position on Apple, as well as creating a ratio put spread position in PowerShares QQQ. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.