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, according to the folks at GuruFocus.com, Appaloosa gained a whopping 1,335% in the first decade of this century, compared with just 16% for the S&P 500.
The company's reportable stock portfolio totaled $3.2 billion in value as of June 30, 2012. Its top three holdings, representing 34% of the portfolio's total value, were PowerShares QQQ (a Nasdaq-focused ETF), Apple, and Citigroup.
So what does Appaloosa's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Lam Research (Nasdaq: LRCX), a semiconductor equipment maker that has been posting very lumpy revenue and earnings numbers in recent years. Now combined with Novellus, the company has laid out plans to boost its market share in key markets over the coming three to five years, and expects to soon be realizing $100 million annually in cost savings from its merger. Some worry, though, that it's dependent on just a few customers.
Among holdings in which Appaloosa increased its stake were Fusion-io (NYSE: FIO) and NetApp (Nasdaq: NTAP). Fusion-io is a leader in the fast-growing solid-state drive market, posting strong growth rates. It's not yet profitable, but it's moving in the right direction. Like Lam, it's reliant on relatively few big customers, such as Facebook, but it's been adding to that roster. Some wonder whether Fusion-IO might get bought out, and one possible buyer is fellow storage company NetApp. NetApp, named one of the world's most innovative companies, is poised to prosper as cloud computing grows, but in the recent past it has faced some weak demand and hasn't been experiencing explosive growth. (Still, its growth outstrips plenty of rivals.) My colleagues have referred to the promising company as a "middle-class millionaire-maker."
Appaloosa reduced its stake in companies such as Nuance Communications (Nasdaq: NUAN). Nuance has benefited from having its speech-recognition software in Apple devices (Siri, anyone?). It's developing new business applications that may boost profits, too -- such as ones for the medical field and voice biometric technology that can identify customers without passwords or questioning. Its move into the auto industry has been a success, with its technology now in some 70 million vehicles. It's not the bargain it was a year ago, but it's still intriguing as a possible investment.
Finally, Appaloosa unloaded several positions, including CVR Energy (NYSE: CVI). The petroleum refiner and chemical company had been the target of a hostile bid by Carl Icahn, but Icahn ended up withdrawing his bid, saying it "isn't feasible" because of conditions in the industry.
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. 13F forms can be great places to find intriguing candidates for our portfolios.
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