David Tepper's Appaloosa Management Buys Airlines: 13F Filing Analysis ~ market folly

Thursday, February 18, 2010

David Tepper's Appaloosa Management Buys Airlines: 13F Filing Analysis

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

This is the first time we've looked at David Tepper's hedge fund Appaloosa Management in-depth as they're now in our tracking mix. Before founding his fund, Tepper was a high yield bond trader for Goldman Sachs. He likes to dig up companies that everyone else has called quits on and Appaloosa focuses on concentrated positions in both equities and distressed debt. A prime example of this was their purchase of numerous financial stocks in the heart of the financial crisis, a bet that has paid billions. After being one of the top hedge fund losers of 2008, Appaloosa has bounced back strong with their play on the financials. Some interesting facts about Tepper: he is from Pittsburgh and an owner of the NFL team, the Pittsburgh Steelers, and he has previously been listed on Forbes' billionaire list.

The positions listed below were Appaloosa's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.

Brand New Positions
Wells Fargo (WFC)
Delta Airlines (DAL)
Willis Group (WSH)
US Airways (LCC)
Navistar (NAV)
Hospitality Properties (HPT)

Increased Positions
Newcastle Investment (NCT): Increased by 529%
Gramercy Capital (GKK): Increased by 108.8%
Maguire Properties (MPG)): Increased by 89%
Citigroup (C): Increased by 73.2%
Conseco (CNO): Increased by 38.7%
Hartford Financial (HIG): Increased by 28.8%
Royal Bank of Scotland (RBS): Increased by 26.9%
Goodyear Tire & Rubber (GT): Increased by 25.5%

Reduced Positions
BB&T (BBT): Reduced by 52.3%
Valassis Communication (VCI): Reduced by 23.5%
Brunswick (BC): Reduced by 20.3%
Rite Aid (RAD): Reduced by 17.6%
Office Depot (ODP): Reduced by 16.9%

Removed Positions (Sold out completely):
Dana Holding (DAN)

Top 15 Holdings by percentage of assets reported on 13F filing

  1. Bank of America (BAC): 20.4%
  2. Citigroup (C): 19.2%
  3. Wells Fargo (WFC): 12.46%
  4. Fifth Third Bancorp (FITB): 9.97%
  5. SunTrust Banks (STI): 7.27%
  6. Hartford Financial (HIG): 6.10%
  7. Capital One (COF): 4.83%
  8. Microsoft (MSFT): 3.84%
  9. AMR (AMR): 1.94%
  10. UAL (UAUA): 1.65%
  11. Delta Airlines (DAL): 1.45%
  12. Willis Group (WSH): 1.32%
  13. Goodyear Tire & Rubber (GT): 1.18%
  14. Brunswick (BC): 1.14%
  15. Valassis Communication (VCI): 1.09%

As you can see, Tepper runs quite a concentrated portfolio and his theme of 'long financials' from the third quarter stays strong. He also added Wells Fargo to his stable this time around as the large stake makes it his third largest US equity holding. While Appaloosa also trimmed their Bank of America stake by 4.8%, the only notable sale in this sector was over half of their BB&T (BBT) position.

Tepper also added an entourage of airlines to his portfolio. While they aren't nearly as sizable as his financial stakes, it is quite a sweep of the sector and they all land in the top 10 holdings of Appaloosa's portfolio. Overall, not a ton of maneuvers, but still a pretty concentrated portfolio.

Assets from the collective holdings reported to the SEC via 13F filing were $3.39 billion this quarter compared to $2.6 billion last quarter, a noticeable increase due both to asset appreciation and new investments. Remember that these filings are not representative of the hedge fund's entire base of assets under management. Therefore, the figures above represent the percentage of their reported 13F assets, not their entire portfolio.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, and Stephen Mandel's Lone Pine Capital. Check back daily for our new updates.

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