As David Tepper‘s Appaloosa Management shed its stake in several U.S. securities during the fourth quarter, its holding in Apple Inc. (NASDAQ:AAPL), which had earlier comprised 1.72% of the fund’s portfolio value, went out the door also. Even though Apple shares appreciated by 13.17% during the first quarter which would have added weight to the fund’s quarterly performance, Appaloosa still managed to post decent gains of 4.7% based on the 27 long positions in companies with a market cap of more than $1 billion, according to our methodology. In comparison, Kevin Kotler’s Broadfin Capital was the best performer for the first quarter with returns of 60.3% for his 11 qualifying long positions, based on the same metric. The S&P 500 ETF (SPY) on the other hand returned just 0.9% during the first quarter.
Tepper founded Appaloosa Management in 1993 after leaving Goldman Sachs when his partnership was turned down for the third time. His knowledge of the market had little to do with the whole Goldman Sachs episode and his departure in all likelihood marked the flight of significant value from the investment bank. True investment geniuses prove their mettle when the markets are turbulent and Tepper did just that in 2009 in the midst of the financial crisis, when he bought stakes in the most scary sector at the time, finance. After the US Treasury Department published a white paper detailing how it aimed to pull the big banks out of the abyss that they had slipped into, Tepper was confident that the plan was going to work, even though his stake continued to slide. That move eventually paid off with significant gains. Hence his strategy to roll back his exposure in the US securities during the fourth quarter must have had a sound reasoning behind it. Although the fund did miss the 13.7% returns from Apple Inc. (NASDAQ:AAPL) over the first quarter, some investment decisions are made on a longer time horizon. The top three holdings that won Tepper’s trust as of the latest 13F filing were General Motors Company (NYSE:GM), HCA Holdings Inc (NYSE:HCA) and Priceline Group Inc (NASDAQ:PCLN), which represented over 30% of the fund’s portfolio value.
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General Motors Company (NYSE:GM)‘s 8.29% first quarter returns were the highest gains among the fund’s top 3 picks during the fourth quarter. Appaloosa’s most valuable holding consisted of 14.68 million shares valued at $512.44 million. Other investors who held significant stakes in the automotive company were Warren Buffet of Berkshire Hathaway and Frank Brosens of Taconic Capital. While General Motors Company (NYSE:GM) continues to face costly adversity from its recalls due to faulty ignition switches, new concerns about the company’s performance are also popping up. The low price of fuel has meant that customers are fleeing to other gas guzzler options from rival companies. Although the shift in consumer patterns has increased GM’s March sales from the truck category by 14% compared to the same quarter last year, total sales slid by 2% year-over-year.
HCA Holdings Inc (NYSE:HCA), one of Obamacare’s beneficiaries rose by some 2.51% during the first quarter. However, the ground that the holding company, which operates 166 hospitals and 113 ambulatory surgery centers, has gained owing to Obamacare is in danger due to the latest King v. Burwell case. If a ruling is made in favour of Obamacare’s challengers in the above court case, this could mean that subsidies dished out through federal healthcare exchanges in 34 states are not legal. This would result in only 16 states who have their own exchanges qualifying for these subsidies, which doesn’t even come close to providing sufficient numbers for Obamacare to be feasible. HCA Holdings Inc (NYSE:HCA) underperformed the healthcare facilities & services industry, which was up by about 11% during the quarter. Among the funds that we track, Larry Robbins’ Glenview Capital had the highest stake with 6.18 million shares valued at $453.45 million.
Tepper’s third largest holding in his fund’s portfolio, Priceline Group Inc (NASDAQ:PCLN) consisted of about 316,900 shares valued at $361.30 million. The online travel company was recently upgraded by Stifel Nicolaus to ‘Buy’ and the new price target was set at $1,400. Both foreign exchange and macroeconomic concerns in Europe have been a sign of caution for investors to tread with care as far as Priceline is concerned. The $60.19 billion travel company acquired the Chicago-based startup Rocketmiles, which offers air miles as booking rewards, earlier this year. Although Priceline didn’t disclose the amount itself, it could be in the vicinity of $20 million, according to the Wall Street Journal. Rocketmiles continues to operate independently. Priceline Group Inc (NASDAQ:PCLN) is also one of the top picks of Stephen Mandel’s Lone Pine Capital.
Disclosure: None
