In this article, we discuss billionaire David Tepper’s top 10 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.
David Tepper
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).
Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025
10. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Appaloosa Management LP’s Stake Value: $186.23 Million
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor giant and the second-largest producer of graphics processing units (GPU). It offers GPUs that can be used in data centers, gaming, and embedded segments. While the stock is up by about 0.01% for the year, at the time of writing, its growth metrics and long-term prospects are improving.
Advanced Micro Devices, Inc. (NASDAQ:AMD) became a semiconductor giant developing chips for the gaming industry. It has since shifted its focus to chips that support the artificial intelligence revolution. According to CEO Lisa Su, there is a tremendous opportunity for growth by focusing on AI chips for powering data centers and other embedded businesses.
Focusing on AI chips for data centers allows the company to attract big customers like Meta Platforms, Microsoft, and Google, which house cloud computing servers. Advanced Micro Devices, Inc. (NASDAQ:AMD) is already recording strong demand for its data center chips. Meta Platforms acquired 1.5 million units of its EPYC computer processor, contributing to a 122% increase in data center segment revenue in the third quarter. The unit now accounts for about half of the company’s total revenues.
Likewise, Advanced Micro Devices, Inc. (NASDAQ:AMD) is doubling on acquisitions to exploit the demand for AI. It is in the process of acquiring server builder ZT Systems for $4.9 billion as it looks to challenge Nvidia’s AI dominance.
Here is what Columbia Threadneedle Global Technology Growth Strategy said about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock’s strong performance. Despite the stock’s underperformance during the quarter, the company’s AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company’s new AI product launch.”
9. Lyft, Inc. (NASDAQ:LYFT)
Appaloosa Management LP’s Stake Value: $200.81 Million
Number of Hedge Fund Holders: 51
Lyft, Inc. (NASDAQ:LYFT) is a rideshare company that offers access to various transportation options. It provides a platform that connects drivers with riders. It also offers a car rental program, a network of shared bikes and scooters. The stock is up by about 15.51% for the year, an outperformance bolstered by strong financial results.
Lyft, Inc. (NASDAQ:LYFT) continues to deliver steady growth backed by investments across all businesses. The company generated its first quarterly profits of $5 million in August. The momentum continued in the third quarter as gross bookings rose 16%, resulting in a 32% revenue increase of $1.52 billion. Its adjusted earnings increased to $107.3 million from $92 million as reported on November 6, 2024.
The issuance of better-than-expected guidance for the fourth quarter and 2025 is the latest catalyst that’s strengthening Lyft’s sentiments in the market. Lyft, Inc. (NASDAQ:LYFT) expects fourth-quarter earnings to total $105 million, which is better than the $85 million that analysts expect. The company also raised its outlook for bookings growth and adjusted earnings margins.
Lyft, Inc. (NASDAQ:LYFT) has already moved to strengthen its edge in the ride-sharing business with plans to introduce autonomous vehicles next year. It plans to establish partnerships with Mobileye Global and May Mobility to take on Uber, which also plans to offer autonomous rides.
