In this article, we discuss the 10 stocks David Tepper is buying for the rest of 2022. To skip the details of David Tepper’s achievements, investment philosophy, and information about Appaloosa Management, go directly to David Tepper Initiated Buying These 5 Stocks for the Rest of 2022.
David Tepper is an American billionaire and a hedge fund manager. He owns the NFL team, the Carolina Panthers, and Charlotte FC in Major League Soccer.
Achievements
David Tepper is one of the world’s most notable hedge fund managers. In 2010, the New York Magazine considered him an “object of a certain amount of hero worship inside the industry,” while being called “a golden god” by one investor. In 2012, Tepper’s hedge fund made $2.2 billion, and according to Institutional Investors Alpha, it was the biggest pay-check for a hedge fund manager. Furthermore, he earned the third position in Forbes 25 highest-earning hedge fund managers and traders in 2018.
The path to David Tepper’s success was paved in 1987 when the whole stock market crashed worse than the Great Depression in 1929. Tepper predicted the crash, shorted his entire portfolio, and was the only trader at Goldman Sachs to make money instead of losing it.
Appaloosa Management and Investment Philosophy
Appaloosa Management was founded by David Tepper and Jack Walton with $7 million of Tepper’s money and another $50 million of outside capital. As of 2019, the fund has returned at an annualized rate of 25% since its inception. At the inception of the fund, it specialized in distressed bonds. The fund now invests in public equity and fixed income markets, focusing on “equities and debt of distressed companies, bonds, exchange warrants, options, futures, notes, and junk bonds.”
Tepper’s strategy has been fruitful since he started his own firm. In the early 90s, during the Latin America crisis, he bought several bank debts before the recovery and made a 30% return in 1996. In 1998, David Tepper lost $80 million he had invested in Russian Bonds when Russia defaulted and he called it “the biggest screw of my career”. However, Tepper made 61% against his 29% loss by betting again on Russian bonds as they became severely undervalued.
Tepper explained the investment strategy of Appaloosa Management in the following words:
“We’re value-oriented and performance-based like a lot of funds. But I think what differentiates us is that we’re not afraid of the downside of different situations when we’ve done the analysis. Some other people are very afraid of losing money, which keeps them from making money.”
As of Q2 2022, Appaloosa Management has $1.593 billion in managed 13F securities, excluding distressed debt and fixed income equities. In the June quarter, the fund made 8 new stock purchases and sold out 12. Moreover, the firm increased its stake in 4 stocks and reduced positions in 16.
Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META), and Amazon.com, Inc. (NASDAQ:AMZN) are some of the most notable names in Appaloosa Management’s portfolio.
Our Methodology
The stocks on the list were taken from Appaloosa Management’s Q2 2022 13F portfolio. Eight of the stocks on the list were added to the firm’s portfolio in Q2 2022, while the firm increased its positions by a significant margin in the other two. For better understanding, the analyst ratings and hedge fund sentiment around the stocks have also been added.
The hedge fund sentiment was taken from Insider Monkey’s database of 895 elite hedge funds.
David Tepper Initiated Buying These Stocks for the Rest of 2022
10. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 109
The Walt Disney Company (NYSE:DIS) is an American mass media and entertainment giant headquartered in California. Appaloosa Management added the company to its portfolio in Q2 2022 with 50,000 shares worth $4.72 million at an average share price of $118.35. The company represents 0.29% of the fund’s portfolio.
In late August, The Walt Disney Company (NYSE:DIS) got the broadcasting rights of all International Cricket Council from 2024-2027. According to an anonymous ICC Board member, the company is paying approximately $3 billion for the rights. For the Indian Premier League 2023-2027 cycle alone, the media rights were sold for Indian Rs. 570.5 million per match for TV and Rs. 500 million for the digital platforms. Furthermore, The Walt Disney Company (NYSE:DIS) won the cricket rights in Australia and EPL rights in 10 countries.
On August 11, Credit Suisse analyst Douglas Mitchelson maintained an Outperform rating on The Walt Disney Company (NYSE:DIS) shares and lowered the price target to $157 from $170. The price target revision came after the company’s June quarter results, mainly because of the low streaming value.
Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META), and Amazon.com, Inc. (NASDAQ:AMZN) are some of the most notable names in David Tepper’s portfolio, along with The Walt Disney Company (NYSE:DIS).
Here is what Oakmark Fund had to say about The Walt Disney Company (NYSE:DIS) in its Q2 2022 investor letter:
“Disney (NYSE:DIS) is one of the most beloved consumer companies in the world. Its media business has a rich library of intellectual property, which provides a powerful engine for creating new content across the Disney, Pixar, Marvel, and Star Wars brands. This content also contributes to the success of Disney’s theme parks, which generated nearly half the company’s earnings and grew more than 10% annually in the decade prior to the pandemic. Shares have fallen nearly 50% over the past year as investors worried about the company’s ability to transition its media business to a direct-to-consumer streaming world. This transition has required management to make investments in its Disney+ streaming service that are depressing profitability today. However, we believe these investments will ultimately produce attractive returns as Disney+ continues to grow subscribers and increase pricing over time. As a result, we were able to purchase shares at a substantial discount to our estimate of intrinsic value.”
9. MPLX LP (NYSE:MPLX)
Number of Hedge Fund Holders: 7
MPLX LP (NYSE:MPLX) is a mid-stream oil and gas company headquartered in Ohio, United States. On July 27, US Capital Advisors analyst James Carreker downgraded the company shares to Hold from Overweight with a $34 price target.
MPLX LP (NYSE:MPLX) has a dividend yield of 8.5% as of September 12. On July 26, the company declared a quarterly dividend of $0.705, paid out on August 12 to the shareholders of record on August 5. Moreover, the company announced an additional $1 billion repurchase program on August 2. The repurchase program has no expiration date.
As of the second quarter of 2022, Schonfeld Strategic Advisors was the most significant stakeholder of MPLX LP (NYSE:MPLX), with 450,000 shares worth $13.118 million. Appaloosa Management increased its stake in the company by 60% to 192,325 shares, valued at $5.6 million in the quarter.
8. Caesars Entertainment, Inc. (NASDAQ:CZR)
Number of Hedge Fund Holders: 59
Caesars Entertainment, Inc. (NYSE:CZR) is a Nevada-based hotel and casino operator with over 50 properties. The company was added to the Appaloosa Management portfolio in Q2 with 150,000 shares worth $5.745 billion, representing 0.36% of the firm’s portfolio.
After its pandemic-induced downfall and over-time debt load, Wall Street analysts have recently become bullish on Caesars Entertainment, Inc. (NYSE:CZR). On August 3, B Riley financial analyst David Bain reaffirmed his Buy rating on the stock with a $102 price target, down from $128, and added that the stock is “woefully undervalued.” Similarly, Cowen analyst Lance Vitanza kept an Outperform rating on the company stock and told the investors that the remainder of the year seems reasonably optimistic for the company.
According to the Insider Monkey database, 73 hedge funds held stakes in Caesars Entertainment, Inc. (NYSE:CZR) in Q2 2022, compared to 72 in the previous quarter. HG Vora Capital Management was the most prominent stakeholder in the second quarter and increased its position in the company by 186% to 5 million shares worth $191.5 million.
Here is what Carillon Tower Advisers had to say about Caesars Entertainment, Inc. (NYSE:CZR) in its Q4 2021 investor letter:
“Caesars Entertainment, a diversified casino-entertainment, and resort company, underperformed in the period as its quarterly earnings update was viewed as disappointing by investors. The firm highlighted a number of one-time headwinds that ultimately weighed on margins, as well as some negative impacts brought on by the surge in COVID cases. Despite this, we believe that the sizeable overall margin improvements Caesars has realized coming out of the pandemic will ultimately prove sustainable in the long run.”
7. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 95
Netflix, Inc. (NASDAQ:NFLX) is an American subscription model streaming service and production company. The company offers TV series, documentaries, feature films, and mobile games on its platforms. Appaloosa Management initiated its investment in the company with 50,000 shares worth $8.74 million in Q2 2022.
In early July, Netflix, Inc. (NASDAQ:NFLX) announced its partnership with Microsoft for an ad-supported subscription plan. The company added that with the new program, it will also keep the ads-free basic, standard, and premium plans. Previously, the company was opposed to adding advertisements to the platform.
On September 7, Jefferies analyst Andrew Uerkwitz reiterated a Hold rating on Netflix, Inc. (NASDAQ:NFLX) and lowered the price target to $230 from $243. Uerkwitz lowered his price target owing to the company’s U.S. password sharing policy, the planned ad-supported tier, and market conditions. The analyst added that the company’s September quarter is essential and he “wouldn’t step in front of it”.
Here is what Oakmark Funds had to say about Netflix, Inc. (NASDAQ:NFLX) in its Q2 2022 investor letter:
“Netflix‘s stock price was down considerably after providing a weaker than expected outlook for both subscriber growth and profit margins. After meeting with management and scrutinizing our investment thesis, we lowered our estimate of business value to account for the company’s softer near-term guidance. However, we believe the decline in the company’s share price more than adjusts for this. Indeed, Netflix now trades for a discount to the S&P 500 Index on next year’s GAAP earnings despite our view that the company remains a much better than average business run by a highly accomplished management team. We believe the company’s lead in streaming remains intact, and we expect terminal operating margins to be substantially higher than they are today. Furthermore, we are encouraged by Netflix’s potential to enhance revenue growth through advertising, the monetization of password sharing and further penetrating international markets.”
6. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 106
Alibaba Group Holding Limited (NYSE:BABA) is a Chinese e-commerce, retail, internet, and technology company. In Q2 2022, Appaloosa Management added the company to its portfolio with 100,000 shares worth $11.368 million, accounting for 0.71% of the fund’s holdings.
The pandemic negatively affected the Chinese markets, including Alibaba Group Holding Limited (NYSE:BABA). Until 2020, the ROCE of the company was above 100% at an average of 143%, which is now down to 63%. Moreover, the net earnings decreased by 43% from the beginning of the year. However, the company keeps afloat and has a strong balance sheet. The company generated $21 billion of operating cash in trailing-twelve months as of September, with debt interest expenses of $500 million. The long-term debt is $20 billion, while the company’s cash position stands at $69 billion. Even with a significant drop, Alibaba Group Holding Limited (NYSE:BABA)’s ROCE remains number three among the most prominent and best-performing publicly traded tech stocks.
On August 8, Deutsche Bank analyst Leo Chiang reaffirmed a Buy rating on Alibaba Group Holding Limited (NYSE:BABA) shares and raised the price target to $160 from $155. Chiang sees the current company valuation as “defensive” and faster than expected macro recovery could lead to upside potential.
Just like Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META), and Amazon.com, Inc. (NASDAQ:AMZN), Alibaba Group Holding Limited (NYSE:BABA) is also one of the most notable names in David Tepper’s portfolio.
Here is what Alger Capital said about Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2022 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) is a leading e-commerce and cloud computing company in China. It also serves the big data analytics, digital media and entertainment markets. Alibaba’s shares have previously suffered from concerns about heightened regulatory oversight of the Chinese internet sector by the Chinese Communist Party. additionally, many investors became concerned about the potential for U.S. exchange listed Chinese ADRs to be delisted if they failed to meet U.S financial reporting standards by 2024. The shares have since outperformed in response to statements by the Chinese government supporting stable markets and overseas listings. The Chinese government also stated that its intensified regulatory efforts aimed at tech companies may end soon. Alibaba’s first quarter earnings and revenues exceeded estimates as determined by a consensus of analysts at financial services firms and provided by FactSet. The quarterly results benefited from better direct sales and increasing marketing efficiency.”
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Disclosure. None. David Tepper Initiated Buying These 10 Stocks for the Rest of 2022 is originally published on Insider Monkey.
