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. 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. 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 new positions in Verizon Communications (VZ 0.96%), Schlumberger N. V. (SLB 1.51%), and E.I. DuPont de Nemours and Company (DD).
Verizon offers investors more than its fat 4.5% dividend yield. Its fourth quarter was its fourth in a row to feature double-digit earnings growth, with earnings up 74% over year-ago levels. Operating revenue for the quarter was 3.4% higher than in the year before at $31.1 billion. For the full year, free cash flow surged 45% between 2012 and 2013. Verizon recently bought the 45% of Verizon Wireless that it didn't own from Vodafone. Bulls like Verizon for the fat margins and growth rate of Verizon Wireless, as well as its dividend. Analysts at Morgan Stanley and JPMorgan Chase recently rated the stock favorably, too.
Energy services giant Schlumberger has many investors excited thanks to great potential in shale, which might fuel earnings for years to come. The company's fracking technology is helping to grow the natural-gas business, and its geographic diversification has it profiting all over the globe. Its fourth quarter was solid, featuring revenue up 7.5% over year-ago levels and earnings up 28%. Schlumberger stock yields 1.7%, which reflects a recent 28% dividend increase. The $121 billion company also aims to buy back some $10 billion worth of its stock. Schlumberger's forward price-to-earnings ratio of 13.5 suggests that it's appealingly valued despite having risen 21% over the past year.
DuPont's operations are more far-flung than you probably think, including 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 also by investing in advanced biofuels, among other things. It has been becoming less of a chemicals company and more of an agricultural one. DuPont's fourth-quarter revenue was up 6% over year-ago levels, and its operating earnings per share nearly tripled. DuPont stock yields 2.7%.