David Tepper Portfolio: How This Billionaire Crushes the Market

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Jacob Wolinsky
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David Tepper is regarded as one of the top hedge fund managers in the last 25 years. After a sting at Goldman Sachs in 1993 he founded Appaloosa Management with just $57 million.

Since the beginning of his career, his trademark was investing in distressed debt, and during the economic crisis in 2008, he showed off his talent by investing in Bank of America. That investment later handsomely paid off to Tepper. Currently, David Tepper Portfolio Holdings is valued at $6.51 billion.

Among 32 holdings in his portfolio, the biggest are Meta Class A, Nvidia, Microsoft, and Amazon. He is keen on investing in the tech sector because he believes that if chosen properly those investments can produce hefty returns. To learn more about Tepper’s current portfolio holdings, its performance, and its investment strategy, stay with us.

David Tepper Portfolio Overview

Top Current Holdings

  • Meta Class A (NASDAQ:META) with 13.8% of the portfolio

Tepper owned Meta stocks from 2014 when they were Facebook. He currently owns 1.95 million shares valued at $897 million. That comes after bolstering this position through 2023 by acquiring an additional 1.35 million shares. The current stake at Meta cost Tepper $345 netting him a gain of 160%.

  • Nvidia Corp (NASDAQ:NVDA) with 11.36% of the portfolio

This holding dates back to 2018 but Tepper very quickly sold his share. He invested again in 2023 by acquiring 1.03 million shares for $324 million. He bet that Nvidia shares will continue to rise and for now, he was right. Since his last buy at $448, the shares rose to $721. His investment went to $739 million in just half a year.

  • Microsoft Corporation (NASDAQ:MSFT) with 10.2% of the portfolio

Microsoft was for a long time a part of Tepper’s portfolio when in 2013 he sold his entire stake. In 2020 he restarted his investment and in this period he invested $463 million, while his current 1.64 million shares are valued at $664 million. Trading Microsoft shares for now brought him 43% gains.

  • Amazon.com Inc (NASDAQ:AMZN) with 9.71% of the portfolio

Tepper likes trading Amazon stocks, and he likes to have a large stake in this tech giant. In 2023 he increased his stake for an additional 2.1 million stocks reaching a maximum of 3.75 million. His investment in Amazon is $392 million, while his current stake is valued at $632 million resulting in a gain of 62%.

  • Uber Technologies (NYSE:UBER) with 7.7% of the portfolio

Uber is a relatively new holding in Tepper’s portfolio, dating to Q2 2021. In this period he invested $270 million in this position, and he currently owns 7.25 million shares. His stake is valued at $500 million, which brought him a gain of 85%. In 2023 he increased his position in this holding by buying more than 6 million shares. Uber stock’s value is on the rise. At the beginning of 2023, their value was $25 while their current value is $69.

  • Alphabet Inc Class C (NASDAQ:GOOG) with 6.18% of the portfolio

Tepper has been trading Alphabet stocks for ten years and it has brought him a lot of good. In the period between 2020 and 2022, he significantly reduced his stake in the company, but during 2023 he bought an additional 700 thousand stocks. In this holding, he has a total of 2.75 million stocks valued at $403 million. Since he has invested $129 million, this holding brought nice returns in a range of 213%.

  • Advanced Micro Devices (NASDAQ:AMD) with 6% of the portfolio

During 2023 Tepper exited his Apple position and started a new holding with AMD. He owns 2.3 million shares which he paid $237 million. While different investors pointed out that AMD stocks are currently overvalued, others who choose to invest in AMD believe that its value will continue to rise. For now, that is proving to be right, since the value of AMD stocks rose from $64 at the beginning of 2023 to the current $171. Tepper’s holding value rose to $390 million with an increase of 65%.

Diversification Across Asset Classes

Just when looking at Tepper’s largest holdings we can see that he is focused on buying in the technology sector. His portfolio is heavily concentrated with three quarters in tech companies, and the rest is divided among other sectors.

But, besides investing in stocks, he is also the owner of two sports teams – Carolina Panthers and Charlotte FC.

David Tepper’s Major Holdings and Position Analysis

When we look at Tepper’s current portfolio it is divided into these sectors:

  • Technology with 74.8% of the portfolio valued at $4.87 billion
  • Consumer Discretionary with 15.5% of the portfolio valued at $1 billion
  • Energy with 5% of the portfolio valued at $326 million
  • Industrials with 2.6% of the portfolio valued at $167 million
  • Finance with 1.6% of the portfolio valued at $103 million
  • Real Estate 0.5% of the portfolio is valued at $32.2 million.

The biggest 4 holdings are from the group of “7 magnificent” tech companies, with Alphabet being at 6th spot. He doesn’t own only two out of those seven – Tesla Inc (NASDAQ:TSLA) and Apple Inc (NASDAQ:AAPL). Among other big holdings, we can see all the major tech names like Advanced Micro Devices, Inc. (NASDAQ:AMD), Intel Corp (NASDAQ:INTC), and Alibaba Group (HKG:9988).

Investment Strategy and Philosophy

Approach to Risk Management

Due to his risky approach with a focus on investing in distressed debt, risk management is one of the pillars of his investment strategy. His opinion is that the only way to generate solid returns in the long term is to pay special attention to risk mitigation.

His first line of defense is diversification of the portfolio. It can be diversified among industries, geographies, and asset classes.

Tepper understands that you cannot avoid risk altogether. Once you decide to invest the risk is there, and the best thing you can do is to manage the risk and reward tradeoff. Once you choose to invest in an asset you must weigh the risk and compare it with potential gains. If the gains outweigh the risks, then it is worth taking the risk.

That is why Tepper would rather choose to invest in a risky company that can result in major wins than choose a low-risk and low-reward investment.

Tepper often uses stop/loss orders to limit potential losses. With this technique, you are setting a price after which you want to sell a stock. If a stock loses its value in the short term Tepper limits his losses by using this technique.

Besides stop/loss orders, Tepper is also often using hedging techniques. With hedging an investor is taking a position in one market to offset a potential loss in the other.

Take A Look At From Day Trader to Billionaire – Wild Investment Strategy of David Tepper:

Investment Philosophy and Principles

Key pillars of Tepper’s investment philosophy and principles are contrarianism, focus on long-term gain, timing the market, and focusing on concentrated investments.

There are several ways to approach trading on the market and contrarian is just one of them. When the market is bearish and the majority of investors are trimming their holdings, then contrarian investors go into buying sprees. David Tepper is one of those investors.

When the market is on the low, he is looking for companies he can buy at discount prices. Later, when the market and the company turn, he can sell them at a profit. However, a crucial element of this strategy is the analysis of potential investment targets. It is not enough for a company to be cheap if it doesn’t have good fundamentals and a potential for a rise.

When Tepper and his team are evaluating distressed debt opportunities they are looking for the company’s financial position, its management team, and the current industry trends.

By evaluating its current financial position Tepper can get a clear picture of its current state and its future potential. Debt levels, cash flow, and revenue trends have a major impact on the chance of the company to bounce back.

Next, they check the company’s management team. They investigate their track record, do they implement innovations, and how they cope with industry trends. And those industry trends are the last piece of the puzzle when choosing a company. If broader industry trends do not give enough room for a company to maneuver, Tepper usually backs down, because there is not much to work with.

The next pillar of the Tepper investment approach is concentration. Although he likes to invest in different geographical regions, industries, and assets, he believes that taking large bets on small numbers of companies can bring lucrative returns. He often points out that over-diversification can limit your potential returns, and that is why he doesn’t keep a large number of holdings.

Concentration comes with risks, but Tepper aims to buy a couple of quality holdings, resist the temptation to sell early, and reap the benefits of a good investment.

Tepper perfected his approach of timing the market. Do not confuse market timing with timing the market. If you are trying to predict market movements to capitalize on them, you are market timing. This is almost impossible, and we and Tepper advise you to avoid it.

But, timing the market is selling and buying stocks at the right time. Tepper has become an expert in this due to his analytical and research experience and knowledge. To successfully do it you need to monitor market trends and analyze economic data. It requires not only knowledge but also discipline and patience.

The final element of a successful investing strategy is the exit strategy. This is especially the case when dealing with distressed debt and other risky investments. Before Tepper invests in a stock he has an exit strategy that includes a desired price target.

Before selling Tepper advises to check the original investment thesis. Did anything change since the first investment was made? Are the company’s fundamentals still strong? If nothing changes and the fundamentals are going your way, it is still not the best time to sell. Timing to sell the stock is crucial. Avoiding a chance to sell too early or too late is an art.

Performance Analysis and Track Record

Historical Performance Overview

Appaloosa since its inception in 1993 has constantly generated over 20% annual returns. The biggest return was in its first year: 57%. In the last 10 years, cumulative returns are 127.24%, resulting in a median 12% annual return. In the last 5 years, returns are 66.4% which would translate into 13.3% annual returns.

Key Performance Metrics and Benchmarks

When we look at the available data going back to 2019 we can see that Appaloosa is constantly beating the S&P 500. The last year was especially good for Tepper’s fund, widening the gap between the gains of his funds and S&P 500 returns.

Market Insights and Outlook

Current Market Assessment

Tepper seems to be focused on investing in strong tech companies that have solid future outlooks. He pointed out that the current noise around cryptocurrencies can result in a bubble in the future. But, for now, he sees crypto as gold, and he will see how it will play out, and decide whether he will broaden his investment into it.

Outlook and Future Strategy

Tepper has shown an interest in investing in AI, and all these companies have significant stakes in these technologies. During 2023 he increased stakes in FedEx Corp (NYSE:FDX), and PDD Holdings Inc – ADR (NASDAQ:PDD).

He also likes investing in the semiconductor industry, already having large stakes at Qualcomm Inc (NASDAQ:QCOM), and Taiwan Semiconductor Manufacturing (2330). He further invested in the semiconductor industry buying stakes at Micron Technology Inc (NASDAQ:MU) and Lam Research Corporation (NASDAQ:LRCX).

Investment Decision-making Process

Research and Analysis Methodology

Research and analysis is the first and core principle of Tepper’s investment strategy. He is going deep with analyzing the company’s fundamentals, its competitive landscape, and its potential edge over the competition.

He is often betting on companies that are often overlooked because of their poor recent performance, but he is looking past that. He is willing to use a value investing method of buying undervalued companies that show promise of a turnaround.

To know if the company is capable of that he is ready to talk with the company’s management, check their financial records, and see if there is anything positive to find in all that data.

Factors Influencing Investment Decisions

The major factors that influence Teppers Investment decisions are:

  • Fundamentals of the company. The company may be down, but if the fundamentals are good it has a good future. This includes cash flow, revenue trends, and debt levels. He also prefers management teams that know what they are doing, and have the capacity to turn things around.
  • The precise timing of the market. Tepper with his deep analysis approach is aiming for the best moments to buy and sell. He is willing to wait out the company if he has made a judgment that it will be better to buy it at some moment in the future.
  • He is also overlooking macroeconomic trends that can have a major impact on a specific industry sector. Knowing how things can play out in the future is an important factor when dealing with companies that are not in the best shape.

FAQs

What Businesses Does David Tepper Own?

David Tepper owns:

  • Appaloosa Management and through its stakes in 32 companies
  • Carolina Panthers is an NFL team. He acquired it in 2018
  • Charlotte FC in 2019. Through it, he got naming rights and the team started competing in 2022.

What Are the Top Holdings of Appaloosa LP?

The top holdings of Appaloosa LP are:

  • Meta Class A with 13.8% of the portfolio
  • Nvidia Corp with 11.36% of the portfolio
  • Microsoft Corporation with 10.2% of the portfolio
  • Uber Technologies with 7.7% of the portfolio
  • Alphabet Inc Class C with 6.18% of the portfolio
  • Advanced Micro Devices with 6% of the portfolio
  • Intel Corp with 4.14% of the portfolio
  • Alibaba Group with 4.06% of the portfolio

Conclusion

Deciding to take the often risky investment road that brought fame and fortune to David Tepper is not the road for everyone. Finding distressed companies and waiting them out until they bounce back is often a long and unsuccessful way to invest. You need a lot of understanding of the market, experience in deep research analysis, and knowledge of the industry and its trends.

In late 2023 Tepper conducted a lot of trades, increasing his stakes in tech companies like Meta, Microsoft, Amazon, and Alphabet, whilst selling his entire stake at Apple. Appaloosa fund performance is solid and constant, but they are lagging compared to 20 years ago. But, 2023 was successful for Tepper, and we still have to see how his rehauled portfolio is going to fare.

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Jacob Wolinsky is the founder of HedgeFundAlpha (formerly ValueWalk Premium), a popular value investing and hedge fund focused intelligence service. Prior to founding the company, Jacob worked as an equity analyst focused on small caps. Jacob lives with his wife and five kids in Passaic NJ. - Email: jacob(at)hedgefundalpha.com FD: I do not purchase any equities to avoid conflict of interest and any insider information. I only purchase broad-based ETFs and mutual funds.