BOSTON (TheStreet) -- Billionaire hedge fund manager David Tepper of Appaloosa Management has distinguished himself as one of the most successful investors in the world. His go-anywhere, deep-value strategy has yielded tremendous long-term returns.
Tepper's flagship fund more than doubled in 2009, as he made concentrated bets on troubled financial companies. This risk-adoring investor just disclosed his first-quarter holdings. Hedge funds that manage more than $100 million are required to disclose equity holdings, options and convertible debt on a Form 13F, filed to the SEC within 45 days of a quarter's end. Funds aren't required to report short positions.
David Tepper (Appaloosa Management)
Tepper is still rotating into large-cap value stocks. He amplified positions in several holdings, including
while reducing investments in others.
Tepper cut his financial holdings, downsizing stakes in
Bank of America
Fifth Third Bancorp
The hedge fund manager also reduced positions in
Tepper sold out of technology laggard
, whose stock he presumably acquired via IPO and held for a brief period, as well as
Johnson & Johnson
The fact that Tepper is dumping so many blue-chip holdings may unnerve investors who have retained a bullish stance on equities despite signs of slowing economic growth, impending fiscal restraint and ongoing sluggishness in the housing and employment markets.
However, Tepper did add 14 new stocks to his portfolio during the first quarter.
Here is a look at
and that undoubtedly will be mentioned as long ideas in coming weeks, given Tepper's outstanding track record.
is an oil-and-gas refining and marketing company, which Tepper owned previously. Valero's stock has ranked among the best-performing of the past six months, with a 40% gain. It is unclear whether Tepper still holds it. In recent weeks, the commodity sell-off has shaken many investors who booked gains on refining stocks. Valero's first-quarter adjusted profit, at 28 cents a share, missed analysts' consensus by roughly 37%.
Sales, however, beat expectations by 21%. Refiners are particularly susceptible to volatility in crude oil prices, which has been the trend, as of late. West Texas intermediate fell below $100 a barrel yesterday as recent data showed a tremendous inventory build, worldwide, again raising the question about the role of speculators in futures markets. Tepper's position in Valero is significant, equal to 2.6 million shares.
2. Tepper's next biggest buy of the first quarter was tech darling
, which has dropped by 4.1% in the past four trading sessions, although the company delivered a solid quarterly report.
Apple's adjusted fiscal second-quarter earnings surged 92% to $6.40 a share, exceeding consensus by 19%. Sales, up 83% to nearly $25 billion, beat by 5.3% as
sales came in strong. Apple has risen 31% in 12 months.
Tepper, who calls himself a deep-value investor, apparently sees a discount in Apple's current valuation. Apple's PEG ratio, calculated by dividing the trailing P/E by researchers' terminal earnings growth forecast, at 0.3, signals an estimated 70% growth discount. Apple is among the highest-rated U.S. stocks, with "buy" recommendations from 91% of analysts in coverage. Tepper held 200,000 Apple shares at quarter's end, equal to $70 million.
1. Tepper's third-biggest acquisition of the quarter was insurance company
, which specializes in life and health insurance.
MetLife's stock has declined marginally in 2011. It has dropped 10%, annualized, over a three-year span, but is remarkably cheap, even relative to other unloved insurance stocks. It sells for a forward earnings multiple of 7.7, a book value multiple of 1.0 and a sales multiple of 0.9, industry discounts of up to 40%.
Tepper added 1.5 million shares of MetLife to his portfolio during the first quarter, equal to $67 million, or 1.6% of the total portfolio. MetLife posted adjusted first-quarter earnings of $1.33, beating consensus by 5.4%. Sales increased 21% to nearly $16 billion, a modest beat. But, the shares corrected 3.3%.
MetLife receives "buy" ratings from 78% of researchers in coverage, demonstrating positive sentiment.
-- Written by Jake Lynch in Boston.
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