David Tepper’s Appaloosa hedge fund is one of the most respected and closely watched funds on Wall Street. Tepper makes frequent appearances on CNBC and Bloomberg TV, and often his comments alone will move the markets. In the first half of 2013, the fund returned 16.8%, outperforming the S&P 500. This continued an outstanding record of strong returns for investors. Net annualized returns over the past 20 years are an incredible 28%. The fund was started as a distressed debt fund, but has morphed into a more traditional go anywhere hedge fund. Here is a list of some of the top new stocks added to the Appaloosa portfolio and the positions that were increased.
Axiall Corp. (AXLL) is a brand new position for Appaloosa. The company matched revenue expectations and beat on earnings per share when it reported last week. Axiall operates as an integrated chemicals and building products company in North America and Asia. The Thomson/First Call price target for the stock is at $52, and investors are paid a small 0.7% dividend.
Carnival Corp. (CCL) has had a very difficult year, and the addition to the Appaloosa portfolio is a huge uptick for the cruise line. The company provides cruises to various vacation destinations with a fleet of 100 cruise ships under the brand names of Carnival Cruise Lines, Holland America Line, Princess Cruises and Seabourn in North America, as well as AIDA Cruises, Costa, Cunard, Ibero Cruises and P&O Cruises in Europe, Australia and Asia. The consensus price objective for the stock is $36, and shareholders are paid a 2.7% dividend.
Chicago Bridge & Iron Co. N.V. (CBI) was among the top new additions in the hedge fund. This is also a top holding in Warren Buffett's portfolio. The company is an energy infrastructure focused company, providing conceptual design, technology, engineering, procurement, fabrication, construction and commissioning services to customers in the energy, petrochemical and natural resource industries worldwide. The consensus price target is $71.
Hertz Global Holding Ltd. (HTZ) was another new position added to the portfolio. The company is redesigning, updating and unveiling its locations worldwide. The transformed locations are a complete rethinking of what a car rental location and experience should be as the company unveils "Road Trip by Hertz" retail stations located on-site that allow travelers to access everything they would need for business or leisure travel. The consensus price target for the stock is $30.50.
Ply Gem Holdings Inc. (PGEM) was a rather unknown name to go in to the portfolio. The company had a recent initial public offering and has gone straight down since the deal priced in May. The stock was crushed after worse-than-expected earnings results. Weather was blamed for some of the disappointment, and higher costs in anticipation of demand growth has hurt the bottom line. The consensus price target for the stock is $25. That would he a 65% move up from current trading levels.
Terex Corp. (TEX) operates as an equipment manufacturer of specialized machinery products. Its Aerial Work Platforms segment designs, manufactures, refurbishes, services and markets aerial work platform equipment, telehandlers, light towers, bridge inspection equipment and utility equipment, as well as related components and replacement parts under the Terex and Genie brands. The consensus price target for this infrastructure play is $36.50.
Appaloosa also initiated new positions in two broad market exchange traded funds: the SPDR Dow Jones Industrial Average (DIA) and the Powershares QQQ (QQQ), which tracks the Nasdaq 100. The analysts added to their position in the SPDR S&P 500 (SPY). This gives the hedge fund broad overall market coverage while they place individual bets on certain names they feel can add alpha to the portfolio.
Individual stock positions that were added to during the quarter include Bank of America Corp. (BAC), Citigroup Inc. (NYSE: C), Delta Air Lines Inc. (DAL), Fluor Corp. (FLR), Foster Wheeler A.G. (FWLT), Goodyear Tire & Rubber Co. (GT) (in which Appaloosa is the largest shareholder), Lincoln National Corp. (LNC) and Prudential Financial Inc. (PRU).
Investors who mimic the holdings of top hedge fund managers often can do surprisingly well in their own portfolios. When to buy and sell is always the top question, and caution needs to be taken when adding stocks now. However, the long-term success of David Tepper and Appaloosa is a matter of record. His stock picks could be a good road map to success.