As of March 2013, his top two positions were Citigroup Inc (NYSE:C) and United Continental Holdings Inc (NYSE:UAL). Citigroup Inc (NYSE:C), with more than 8.5 million shares, was his biggest position, accounting for 8% of his total portfolio. United Continental Holdings Inc (NYSE:UAL) ranked second, representing around 5.8% of his total portfolio.
An impressive first quarter
In the first quarter of 2013, Citigroup Inc (NYSE:C) witnessed a decent year-over-year revenue growth of 6% to nearly $20.5 billion. Although net interest revenue declined 1% to $11.88 billion, its non-interest revenue jumped 15%, from $7.46 billion in the first quarter last year to more than $8.6 billion. Net income came in at more than $3.73 billion, or $1.23 per share, 30% higher than net income of $2.88 billion, or $0.95 per share, reported last year.
Its deposits increased by 3%, from $906 billion to more than $933.7 billion, while the book value per common share reached $62.51. The net interest margin in the first quarter of 2013 stayed at around 2.95% while the return on average common stockholders’ equity was 8.21%. The market values Citigroup Inc (NYSE:C) at only 9.7 times forward earnings and at only 82% of its book value.
Bank of America Corp (NYSE:BAC) offers a decent total yield and is cheaply valued
Both Bank of America Corp (NYSE:BAC) and Citigroup’s capital plan was approved by the Fed in March 2013. While Bank of America planned to buy back $5 billion in common stock and redeem $5.5 billion in preferred stock, Citigroup Inc (NYSE:C) intended to repurchase around $1.2 billion worth of shares. At the current trading price, Bank of America Corp (NYSE:BAC) offers shareholders a dividend yield of 0.3%. With a $5 billion share repurchase plan, investors could get an additional yield of 3.4%. Thus, the total yield of Bank America could reach 3.7%. Citigroup, with a $1.2 billion share repurchase, offers shareholders only around 1% as total yield.
Recently, Bank of America settled MBIA Inc. (NYSE:MBI) claims. It would pay MBIA Inc. (NYSE:MBI) around $1.6 billion in cash and remit all of its 5.7% Senior Notes due 2034. Moreover, all of its outstanding CDS protection agreements would be terminated. Because of this settlement, Bank of America would have to record $1.6 billion in charges for the first quarter of 2013, reducing its first-quarter earnings by $1.1 billion, or $0.10 per share. Bank of America, at $13.50 per share, is worth $145.6 billion on the market. It is valued at only 67% of its book value, a bit cheaper than Citigroup.
An airline is narrowing the losses
United Continental Holdings Inc (NYSE:UAL), the owner of United Air Lines and Continental Airlines, is one of the biggest global airline companies, operating in four main geographical segments. Most of its revenue, $21.3 billion, or 57.3% of total 2012 revenue, was generated from the Domestic (U.S. and Canada) segment, while the Pacific and Atlantic segment contributed $6 billion and $6.58 billion, respectively, in total revenue.
In the first quarter of 2013, although United Continental Holdings Inc (NYSE:UAL) grew its revenue 1.4% to $8.72 billion, it still incurred an operating loss of $264 million. However, compared to the first quarter last year, the operating loss was narrowed down by 2.6% from a loss of $271 million. In the first quarter of 2013, its net loss came in at $417 million, or $1.26 per share. At around $34.30 per share, United Continental is worth $11.45 billion on the market. The market values the airline at 6.64 times EV/EBITDA.
My Foolish take
Among the three companies, I like both Citigroup Inc (NYSE:C) and Bank of America due to their global leading positions. Their earnings would probably rise in the near future, partly due to the release of their loan loss reserves. Citigroup and Bank of America, trading at less than their book values, are certainly good long-term investment opportunities.
The article The Top 2 Stocks in David Tepper’s Portfolio originally appeared on Fool.com and is written by Anh Hoang.
Anh HOANG has no position in any stocks mentioned. The Motley Fool owns shares of Bank of America and Citigroup Inc . Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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