We recently published a list of Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against other Billionaire David Tepper’s top stock picks heading into 2025.
David Tepper is one investor who stands out in squeezing and generating optimum returns from distressed debt and undervalued equities. Born into a middle-class family, he has risen up the ranks to become one of the most successful investors on Wall Street. The billionaire investor started Appaloosa Management LP in 1993 after quitting his job at Goldman Sachs after being overlooked for promotion twice.
It is a decision the billionaire investor can never regret, as Appaloosa Management LP has grown to become one of the most followed hedge funds on Wall Street. It had one of its best performances in 2001 when it returned 61% on investing in distressed bonds after the dot com crash.
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Additionally, Appaloosa made $7 billion at the height of the great recession in 2009, when it opportunistically bought into distressed financial stocks and bonds. The focus on distressed situations has always defined Tepper. The investment strategy has allowed Tepper to accrue significant wealth, based on his net worth of about $21 billion. His hedge fund has made billions of dollars over the years, averaging 28% returns annually.
Tepper is already sensing a window of opportunity with Chinese equities trading at highly discounted valuations in response to deteriorating economic conditions. In the aftermath of the Chinese government initiating a series of stimulus packages to try and prop up the economy, Tepper believes it is time to take a closer look at Chinese equities.
“Everything,” Tepper said when asked what Chinese stocks to buy in an interview with CNBC. “Everything… ETFs, I would do futures, everything.” The investment thesis is based on the notion that it is wrong to fight the Fed, which in this case is the Chinese government and the central bank.
Tepper’s sentiment comes on China cutting key interest rates and announcing liquidity support for the stock market. China’s central bank has lowered bank reserve requirements and encouraged companies to buy back stocks. Appaloosa Management has already responded to China’s monetary policy changes by tweaking its portfolio. The hedge fund trimmed stakes in some of the big US tech companies whose valuations have exploded over the past year amid the artificial intelligence-driven rides. In return, it has ramped up stakes in Chinese internet giants.
“I don’t love the US markets on a value standpoint, but I sure as heck won’t be short, because I’d be nervous as heck of the setup with easing money everywhere, a relatively good economy, and China just doing massive stimulus coming in, so it would make me nervous not to be somewhat long the US,” Tepper said.
Amid the sentiments, technology stocks both in the US and China account for the most significant share of billionaire David Tepper’s top 10 stock picks. Additionally, the billionaire investor is heavily invested in the services sector and basic materials as part of his diversification strategy.
Our Methodology
To compile billionaire David Tepper’s top 10 stock picks heading into 2025, we scanned Appaloosa Management LP’s Q3 ’2024 portfolio. We identified the top ten stocks from the hedge fund’s portfolio. Then, we ranked these stocks in ascending order according to the size of the hedge fund’s investments in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
David Tepper
Amazon.com, Inc. (NASDAQ:AMZN)
Appaloosa Management LP’s Stake Value: $596.26 Million
Number of Hedge Fund Holders: 286
Amazon.com, Inc. (NASDAQ:AMZN) is a technology company that dominates e-commerce and cloud computing. Best known for offering a platform for selling and buying items, it’s also making a mark amid the digital revolution with the most significant cloud computing platform.
Amazon.com, Inc.’s (NASDAQ:AMZN) cloud computing division, Amazon Web Services (AWS), continues to be a key growth and profitability driver. The unit delivered a 19% increase in revenue in the third quarter. Even though the growth rate has leveled off, it is still higher than that of many rivals in the cloud services industry.
Amazon.com, Inc.’s (NASDAQ:AMZN) significant investments in AI infrastructure for AWS are anticipated to support future revenue growth. Amazon has raised its capital expenditure forecast for 2024 to about $75 billion, primarily to meet the demand for AI services on AWS.
In addition to growth in cloud computing, Amazon.com, Inc.’s (NASDAQ:AMZN) core e-commerce business is also doing well. Thanks to a robust supply and logistics network, the company is staring at another record-breaking holiday shopping season. Black Friday sales are already up by an average of 7%. Same-day and next-day delivery services are also up, growing at over 30% year-over-year.
AMZN has also moved to strengthen its grip on the e-commerce business with the launch of Amazon Haul. The launch seeks to improve the company’s push into the discount storefront business with products priced at less than $20. With the launch, it should take on Temu and TikTok shops, therefore expanding its market reach.
Polen Capital mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter. Here is what the fund said:
“The largest absolute detractors were Alphabet, Airbnb, and Amazon.com, Inc. (NASDAQ:AMZN). Amazon’s position as a notable detractor speaks more to the size of the position than the magnitude of the underperformance, as the company delivered a solid set of results during the quarter.
We trimmed our positions in Amazon, Alphabet, and Microsoft during the quarter. As we have previously, we trimmed Amazon slightly to bring the weight back to 15% for risk management purposes. We remain very optimistic about our investment thesis of strong revenue growth, even more substantial earnings, and free cash flow growth continuing over the next few years.”
Overall, AMZN ranks 3rd on our list of Billionaire David Tepper’s top stock picks heading into 2025. While we acknowledge the potential of AMZN, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.