Billionaire David Tepper Snapped Up These Stocks in Q4

New Jersey-based David Tepper‘s Appaloosa Management LP recently submitted its latest 13F filing with the SEC, revealing a 75% quarter-over-quarter rise in the value of its equity portfolio, to over $5 billion at the end of December. That increase was only partially due to the fund’s performance during the quarter. Appaloosa’s 29 long positions in stocks with market caps of more than $1 billion delivered weighted average returns of 4.08% during the fourth quarter, based on the size of those positions on September 30. That was the best quarterly performance of the year for Tepper according to that metric, and pushed his year-to-date losses down to 2.70%.

Founded by billionaire David Tepper and Jack Walton in 1993, Appaloosa Management LP is widely regarded as one of the pioneers of distressed debt investing on the Street. Although the fund continues to invest a large chunk of its assets under management (AUM) in distressed debt, over the last few years it has increased its exposure to equities; its latest 13F filing being a testament to that. According to the filing, 26 of the 52 equity holdings held by Appaloosa Management LP at the end of December were new purchases made during the fourth quarter. In this article we are going to focus on the top five of those 26 stocks.

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#5 Pfizer Inc. (NYSE:PFE)

– Shares Owned by Appaloosa Management LP (as of December 31): 2.41 million

– Value of Holding (as of December 31): $77.87 million

The 9.05% year-to-date decline in Pfizer Inc. (NYSE:PFE)’s stock might be causing some agony to existing investors, but it has also pushed the stock’s annual dividend yield above the 4% mark and made it attractive for fixed-income investors. The company has been constantly in the news since it announced last November that it will merge with Allergan PLC (NYSE:AGN) in a $160 billion deal. Regulators and lawmakers have criticized the merger, which incidentally is the biggest ‘tax inversion’ deal of all-time, on the grounds that it will pave the way for many more companies to migrate abroad for tax saving purposes. However, analysts feel the deal is hugely beneficial for Pfizer Inc. (NYSE:PFE). On February 9, Colin Bristow, released a note to its investors in which highlighted how this merger will add $4.00 per share to Pfizer’s net present value (NPV) and be 17% accretive in 2019. Bristow currently has a ‘Buy’ rating on the stock with a $39 price target on it on a stand-alone basis and a $43 price target on it as a merged entity. Billionaire Ken Fisher‘s Fisher Asset Management increased its stake in Pfizer by 1% to 32.33 million shares during the fourth quarter.

#4 TerraForm Power Inc (NASDAQ:TERP)

– Shares Owned by Appaloosa Management LP (as of December 31): 7.6 million

– Value of Holding (as of December 31): $95.6 million

There seems to be no respite for any company attached with SunEdison (NYSE:SUNE) in the last few months, including TerraForm Power Inc (NASDAQ:TERP). Shares of TerraForm Power Inc (NASDAQ:TERP) fell by 60% during the second-half of 2015 and are again trading down so far this year, by 37.5%, on the back of the financial difficulties faced by the company. After initiating his stake in the company in the fourth quarter, Mr. Tepper sent a letter to TerraForm Power’s board in December asking it to reveal all documents pertaining to SunEdison (NYSE:SUNE)’s $2.2 billion bid for Vivint Solar Inc (NYSE:VSLR). According to Mr. Tepper, SunEdison (NYSE:SUNE) cheated TerraForm Power’s shareholders by selling inferior assets to TerraForm Power for $922 million to raise capital for its Vivint Solar Inc (NYSE:VSLR) acquisition. On January 19, analysts at Bank of America downgraded TerraForm Power’s stock to ‘Neutral’ from ‘Buy’, while maintaining their price target on it at $11. Frank Brosens‘ Taconic Capital sold its entire stake of 1.8 million shares of TerraForm Power during the October-to-December period.

#3 Abengoa Yield PLC (NASDAQ:ABY)

– Shares Owned by Appaloosa Management LP (as of December 31): 6.3 million

– Value of Holding (as of December 31): $121.6 million

Spanish clean energy company Abengoa Yield PLC (NASDAQ:ABY), is another firm which has lost a significant amount of its market capitalization since the beginning of the second-half of last year, and in which Appaloosa Management LP initiated a stake during the fourth quarter. In November of last year, Abengoa Yield’s parent company Abengoa SA started looking for investors willing to take on at least part of its stake in the former to pay off the humongous amount of debt on its balance sheet. In order to save itself from becoming Spain’s largest bankruptcy, on January 25, Abengoa SA announced that its board had agreed to go forward with a debt restructuring and asset sale plan. On January 7, Abengoa Yield PLC (NASDAQ:ABY) announced that it changed its corporate brand to Atlantica Yield and that it named Francisco Martinez-Davis as its new CFO.

#2 Kinder Morgan Inc (NYSE:KMI)

– Shares Owned by Appaloosa Management LP (as of December 31): 9.44 million

– Value of Holding (as of December 31): $141 million

Moving on, the heavy decline in crude and natural gas prices last year resulted in Kinder Morgan Inc (NYSE:KMI) losing 65% of its market capitalization and forced it to reduce its quarterly dividend to $0.13 per share from $0.51 per share. However, it’s the only company in this list that is trading in the green, up by 0.2%, this year. During the company’s latest quarterly conference call, its founder and Chairman, Richard D. Kinder, laid out a new strategy for the company going forward. He revealed that Kinder Morgan Inc (NYSE:KMI) has significantly reduced its anticipated capital expansion expenditures for 2016 and by slashing its dividends it now has much better flexibility in how it uses its nearly $5 billion per year in free cash flow. Mr. Kinder highlighted that the company can now use that cash flow to delever its balance sheet and totally fund its growth capital needs. On January 19, analysts at RBC Capital reiterated their ‘Sector Perform’ rating on the stock, while boosting their price target on it to $17 from $15.

#1 Energy Transfer Partners LP (NYSE:ETP)

– Shares Owned by Appaloosa Management LP (as of December 31): 5.14 million

– Value of Holding (as of December 31): $173.48 million

Appaloosa Management’s largest new stake and its ninth-largest equity holding at the end of fourth quarter is another master limited partnership, Energy Transfer Partners LP (NYSE:ETP). Like Kinder Morgan Inc, Energy Transfer Partners LP (NYSE:ETP) also lost a major chunk of its market cap last year. However, unlike Kinder Morgan, the company has continued its downward march this year too, down by 30% year-to-date, and hasn’t made any notable change to its dividend payout. The $1.05 per share quarterly dividend that Energy Transfer Partners currently pays represents an astonishingly high annual dividend yield of almost 18% at its current market price. Several analysts who cover the MLP are not optimistic about its future, citing the high level of debt on its balance sheet, the tough macro environment it’s operating in, and its low coverage ratio. On February 8, analysts at Robert W. Baird downgraded the stock to ‘Neutral’ from ‘Outperform’ and also reduced their price target on it by more than half, to $25 from $51. Jim Simons‘ Renaissance Technologies made a greater than two-fold increase to its stake in Energy Transfer Partners during the fourth quarter, to 7.08 million shares.

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