This 149-Bagger Has Bought DuPont, Citigroup, and Delta Air Lines

The latest 13F season is here, when many money managers issue required reports on their holdings. It can be worthwhile to pay attention, as you might get an investment idea or two by seeing what some major investors have been buying and selling.

For example, consider Appaloosa Management, founded by investing giant David Tepper and known for investing in the debt of companies in distress. In a letter to shareholders last year, 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.

Appaloosa Management's latest 13F report shows that it has initiated or increased its positions in Citigroup Inc (NYSE: C  ) , E I du Pont de Nemours, (NYSE: DD  ) , and Delta Air Lines (NYSE: DAL  ) .

Citigroup was hit hard in the credit crisis a few years back and hasn't had a great 2014, either. For example, while most banks subjected to recent Federal Reserve scrutiny passed its stress tests, Citigroup was among the minority that had its capital spending plan rejected. On the other hand, it topped earnings expectations in its last quarterly report, and my colleague Matt Koppenheffer declared that the company "ain't dead yet." At an investor conference this week, management warned that the company's second quarter would be disappointing, with trading revenue down as much as 25% due to global political instability and economic uncertainty, among other things. (It's not alone among big banks issuing such warnings, though.) A little more positive is news that Citigroup is looking to boost its mortgage lending business. The Wall Street Journal notes that some might question the wisdom of that, given the bad loans in the bank's portfolio, but the company plans to be "extremely careful" in its lending. With its forward P/E near nine, bulls see Citigroup's stock as undervalued, but bears still see it as risky.

DuPont is involved in a wide range of operations, such as agriculture (where it's a player in seeds and genetically modified organisms), industrial biosciences, nutrition and health, performance materials, and pharmaceuticals. The company's revenue growth has been slowing, so it has been restructuring itself, in part via spin-offs and investment in advanced biofuels, among other things. It has been shifting its focus from chemicals to agriculture, and it has been looking to unload its performance chemicals business. DuPont missed first-quarter expectations, blaming bad weather. The company's stock yields 2.6%.

Delta Air Lines' stock more than doubled over the past year, and it's near an all-time high. The company instituted a new dividend last year and is hiking it by 50% this year. Delta is has a lot going for it, such as actually being profitable when many airlines aren't and growing its earnings and profit margins. Its five-year goals are bold and include upping its operating margin from less than 10% to 11%-14% (admittedly, a wide range) and increasing its EPS by 10%-15% annually after this year. Delta has been enjoying robust free cash flow, which it's putting to good use, aggressively tackling its hefty debt load and aiming to please customers more via upgraded facilities and better cabin comfort. The airline industry has long been a tough one in which to turn a profit, but Delta is flying high. 

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  • Report this Comment On May 29, 2014, at 9:02 PM, funfundvierzig wrote:

    "DuPont is involved in a wide range of operations, such as agriculture (where it's a player in seeds and genetically modified organisms), industrial biosciences, nutrition and health, performance materials, and pharmaceuticals."

    A couple of observations:

    * DuPont is a lagging player behind global seeds leader, Monsanto, in both sales of seeds and ag chemicals. DuPont Management shells out hundreds of $millions in license fees every year to put Monsanto's superior GM traits into DuPont Pioneer's otherwise inferior seed line-up. DuPont is in sixth place in sales of ag chemicals, behind world leader, Syngenta, Bayer, BASF, Dow Chemical, and Monsanto.

    * Pharmaceuticals is one of the many once thriving DuPont businesses which have been jettisoned or liquidated during the course of DuPont's dramatic decline and shrinkage during the 21st century. Pharmaceutical revenue, royalty income, is now tiny and is not broken out in the last quarterly report, Q1 2014.

    ...funfun..

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