It’s always interesting to peek into hedge fund managers’ trade book, getting a glimpse of the evolution of their positions quarter by quarter. In the case of Tepper and Appaloosa, one sees a very fluid portfolio, with high turnover as the size of its positive equity position oscillates dramatically.
Tepper is quite bullish on big-cap technology, which is evident in his Apple Inc. (NASDAQ:AAPL), QUALCOMM, Inc. (NASDAQ:QCOM), Google Inc (NASDAQ:GOOG), EMC Corporation (NYSE:EMC) and Microsoft Corporation (NASDAQ:MSFT) positions. Technology represents an important part of Tepper´s overall portfolio.
Apple: Tepper thinks you should buy!
Tepper holds 10.5% of his portfolio in Apple Inc. (NASDAQ:AAPL) at an average cost of $492 a share. Last quarter, he increased his position by 75%.
I think the market has been selling Apple because iPhone 5 sales have not arrived as expected. Apple faces rising competition from Android devices, and concerns about the ability of the company to hold together its management team in the post-Steve Jobs era. In addition, sales of mobile phones around the world fell last year for the first time since 2009. This fact was driven by tough economic conditions, shifting consumer preferences, and intense market competition that weakened the worldwide mobile phone market.
I think that Tepper invested in Apple Inc. (NASDAQ:AAPL) because he likes to bet big in one of the nation’s premier brands that trades at a mid single-digit P/E, net of cash, and has a fortress-like balance sheet with opportunities to unlock significant shareholder value. Apple has already made the transition to a “value play” (from a growth story). I also think that Apple innovation is not over. Tim Cook highlighted that in his latest appearance:
“We’re working on some incredible stuff, and the pipeline is chock full,” Cook said. “We feel great about what we have in store.”
Tepper seems not to have thrown in the towel on Apple Inc. (NASDAQ:AAPL) as many other hedge fund managers did (Daniel Loeb and Leon Cooperman, among others).
Apple could also increase its margins by launching an Apple-branded watch that could sell millions of the watches, and generate a margin of about 45 percent. In addition, Apple has not fully explored the field of TV and gaming, so the opportunities in both segments are still there.
In conclusion, although the playing field has gotten more competitive, Apple Inc. (NASDAQ:AAPL) is still performing well and has momentum. Apple still carries a lot of potential to perform well this year, and I remain confident in the company. I think Tepper made a good bet here.
EMC: a great tech leader
Appaloosa also increased the position in EMC Corporation (NYSE:EMC) by 47%. In addition to Tepper, top portfolio managers Lee Ainslie, Ray Dalio, Jeremy Grantham, Joel Greenblatt and Andreas Halvorsen initiated or increased their holding in this company during Q4. This is evidence that great fundamental investors think that EMC is a great opportunity at current levels.
