Here's What This 149-Bagger Has Been Buying and Selling

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.

Today let's look at Appaloosa Management, founded by investing giant David Tepper and known for investing in the debt of companies in distress. Tepper's investing history includes debt and stock in companies such as Enron and WorldCom. He made billions on bank stocks in 2009 after they had imploded and before they recovered. More recently, he invested in many housing-related companies.

Why should you look at Appaloosa Management's moves? Well, in a July letter to shareholders, Tepper noted that had one invested $1 million in his hedge fund in 1993, it would have grown to $149 million over the past 20 years. Investing in the S&P 500 instead would have left you with $5.3 million. Tepper's performance reflects an average annual net gain of 28%. Wow.

The company's reportable stock portfolio totaled $6.9 billion  in value as of June 30.

Interesting developments
So what does Appaloosa Management's latest quarterly 13F filing tell us? Here are a few interesting details.

The biggest new holdings are the PowerShares QQQ Trust and SPDR Dow Jones Industrial Average ETFs. Other new holdings of interest include Chicago Bridge & Iron (NYSE: CBI  ) and Trinity Industries (NYSE: TRN  ) . Chicago Bridge & Iron offers construction and engineering services to the energy and natural resources sectors, working on projects related to the water, hydrocarbon, and nuclear industries. Its second quarter featured revenue up 119% and net income up 64%. The company lowered its expected new orders for 2013 a bit, in part because of governmental delays, but its backlog remains substantial, topping $24 billion. The company bought Shaw Group last year, a company known for constructing nuclear-related buildings. Chicago Bridge & Iron's stock is up 64% over the past year and has averaged annual growth of 23% over the past 15 years.

Trinity provides products and services for the industrial, energy, transportation, and construction sectors -- making gobs of rail cars, for example. It has a new joint venture, too, designed to facilitate the leasing of $1 billion worth of rail cars. In May, the company raised its dividend payout by 18%, and it now yields 1.3%. The company represents a way to profit from the shale oil boom, as areas without pipelines are seeing rail cars used to transport oil. Its second quarter featured earnings up 26% over year-ago levels, revenue up 7%, and a backlog of orders topping $5 billion. With a forward P/E recently below 8, the stock looks attractive.

Among holdings in which Appaloosa increased its stake were Foster Wheeler and Fluor. It reduced its stake in companies such as Chimera Investment (NYSE: CIM  ) and Weatherford International (NYSE: WFT  ) . Mortgage REIT Chimera Investment recently yielded 12.2%, but its payout has been shrinking and may continue to do so. Chimera may become less attractive if interest rates rise, or if Congress cancels favorable tax treatment for REITs. It has taken on more risk than many of its brethren and has had some trouble filing reports on time. Some have questioned its hefty management fees. For its second quarter, management noted a modest bump in book value.

Oil and gas equipment and services specialist Weatherford has faced some accounting-related problems in the recent past but has been moving beyond that and seeing its stock rise, too. Its second quarter featured shrinking losses and a relatively rosy outlook for the rest of the year. Revenue rose 3% over year-ago levels. Management plans to focus more on the company's core operations and more profitable businesses. Some think the company might end up acquired.

Finally, Appaloosa Management's biggest closed positions included Two Harbors Investment (NYSE: TWO  ) and MFA Financial. Two Harbors is another mortgage REIT with more flexibility than some of its peers because it's a "hybrid" mREIT, investing in both government agency-backed mortgages and ones that are not so backed. The stock recently yielded a huge 13.4%. (Keep in mind that its payouts don't get the lower tax rates of other dividends.) As with other mREITs, rising interest rates and prepayments on loans are a worry, but Two Harbors has protected itself by hedging against some of that. It has also been diversifying its operations, for example buying a mortgage servicing company.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.

If you'd like another stock idea from another smart investor, The Motley Fool's chief investment officer has selected his No. 1 stock for this year, and you can learn all about it in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2608430, ~/Articles/ArticleHandler.aspx, 9/30/2016 11:37:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:05 PM
CBI $28.03 Up +0.30 +1.08%
Chicago Bridge and… CAPS Rating: ****
CIM $15.95 Down -0.19 -1.18%
Chimera Investment CAPS Rating: ***
TRN $24.18 Up +0.16 +0.67%
Trinity Industries CAPS Rating: *****
TWO $8.53 Down -0.04 -0.47%
Two Harbors Invest… CAPS Rating: ****
WFT $5.62 Down -0.06 -1.06%
Weatherford Intern… CAPS Rating: ****