Billionaire David Tepper’s 10 Long-Term Stock Picks

5. Energy Transfer LP (NYSE:ET)

Value of Appaloosa Management’s 13F Position (9/30/2024): $110 million

Number of Hedge Fund Shareholders (9/30/2024): 29

Energy Transfer LP (NYSE:ET) is Appaloosa’s top long-term energy stock to make the list, having a place in the fund’s 13F portfolio since the second quarter of 2017. Appaloosa cut its stake in the company by 12% during the latest quarter, to 6.83 million shares. Energy Transfer has lost hedge fund support in five of the past seven quarters, with an overall dip in smart money ownership of 26% during that time.

Energy Transfer LP (NYSE:ET) shares are near 52-week highs, which hasn’t frightened David Tepper away from the midstream giant. Part of that ongoing conviction could be due to the stock’s attractive dividend yield of 6.7%, with the company having paid out dividends for 18 straight years.

ET shares are slightly more expensive than peers at 14.3x earnings, but analysts expect the company’s earnings growth to be solid, with projections for between $1.39 and $1.56 in earnings next year and between $1.52 and $1.69 in earnings in 2026. Energy Transfer is a top 25 U.S. stock pick for 2025 by UBS, one of just three energy stocks to make the list.

Samantha McLemore’s Patient Capital Management continues to like the long-term outlook for Energy Transfer LP (NYSE:ET), as the fund revealed in its Q3 2024 investor letter:

“Energy names disappointed in the quarter following commodity prices lower throughout the period. We took the opportunity to add to our highest conviction ideas. We look to names that have idiosyncratic opportunities and are attractive in a variety of different commodity price environments. Many see risk to energy prices over the next year as supply is expected to outstrip demand by 1.3mb/d even before assuming any incremental OPEC supply comes onto the market. With commodities, consensus is rarely right. We assess companies on through cycle returns and normalized prices. From this perspective, we see a handful of attractive opportunities, including Energy Transfer LP (NYSE:ET), Seadrill (SDRL) and Kosmos (KOS).

Our ownership of Energy Transfer began in 2019 with the belief that the limited supply of new pipelines would provide attractive pricing opportunities over the long-term. At the same time, the company was paying us an attractive dividend (10% yield over the period). So far this investment thesis has largely played out, but we continue to see an attractive long-term setup for the name given our belief that natural gas will be a key ingredient to bridge us to a net carbon neutral world.”