Billionaire David Tepper owns the Carolina Panthers, one of the worst teams in the NFL. Heading into week 16, the Panthers are ranked 27th out of 32 teams according to the latest NFL power rankings. 

Fortunately for Tepper, he became a billionaire because of his investing prowess, not because of his ability to run a successful football team.

Tepper’s hedge fund, Appaloosa LP, finished September with $6.73 billion in assets invested in 38 stocks. The hedge fund’s largest holding is Alibaba (NYSE:BABA), which accounts for 15.76% of its portfolio.  

Interestingly, Tepper’s firm made many changes during the third quarter, and Alibaba’s weighting increased by 352 basis points despite the hedge fund selling 500,000 BABA shares during the quarter. 

However, the big move in Q3 2024 was Tepper dumping all 605,000 shares of United Parcel Service (NYSE:UPS) held, pouring all of the proceeds and then some into Vistra (NYSE:VST), one of America’s hottest utility stocks. 

Here’s why he likely did so.

Key Points About This Article:

• Billionaire David Tepper goes nuclear with his latest stock buy.  
• His hedge fund has lost confidence in United Parcel Service (NYSE:UPS). 
• Although Appaloosa has made a big bet on China, seeing what happens once Trump takes office will be interesting. 
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.

UPS Stock Continues to Sputter in Neutral

According to Whalewisdom.com, Appaloosa first bought UPS stock in Q3 2023, so the hedge fund held a position in the shipper for four quarters. It is estimated to have paid an average of $152.94 a share. Based on the high ($148.15) and low ($123.12) share price during the third quarter, the hedge fund received approximately $82.1 million in proceeds from the sale. 

So, over a year, Appaloosa’s bet on UPS lost 11%. Fortunately, it was only the hedge fund’s 26th-largest position, accounting for 1.34% of its assets. The loss won’t break the bank. UPS has turned out to be dead money for the past three years, with its shares down almost 50% since hitting an all-time high of $233.72 on Feb. 1, 2022. 

What’s gone wrong with Brown? Revenues and profits have shrunk.  

Its revenues peaked at $100.34 billion in 2022 and are expected to be $91.1 billion in 2024, only about 10% higher than in 2020. Further, its adjusted operating profit for the year will be less than $9 billion for the first time since 2020.

Analysts are lukewarm about its stock. Of the 32 analysts who cover it, only 53% rate it a Buy, with a median target price of $152.50. What’s shocking is that three analysts rate it a Strong Sell. That suggests that UPS will take some time to regain its mojo. 

However, on Dec. 10, BMO analyst Fadi Chamoun upgraded the stock to Buy from Hold. 

“A combination of cyclical tailwinds; moderating unit cost-inflationary pressures, including positive contribution from cost-reduction programs; and low valuation render the near-term risk/reward favorable,” Barron’s reported the analyst’s comments. 

Vistra Tops Appaloosa’s Four New Buys

The hedge fund bought four new stocks in the third quarter. 

Vistra (NYSE:VST) entered the portfolio in the 12th spot, accounting for 2.24% of its assets. Tepper’s firm acquired 1.27 million shares of the greenish utility in the third quarter for $108.8 million or an average of $85.63 a share. Appaloosa’s investment is up 60% from the price it paid for the stock.

That’s a much better use of the funds than UPS.

Vistra completed its $6.8 billion acquisition of Energy Harbor on March 1. The company expects the combination to deliver $125 million in annual synergies. 

According to RBC Capital Markets, the deal brings together “two major players in sustainable, diversified power generation and retail operations,” emphasizing nuclear power, which has become popular in an AI world. The combined entity will be the second-largest non-regulated nuclear provider in the U.S.

Analysts are very bullish on Vistra. Of the 17 analysts who cover it, 15 rate it a Buy (88%). Their target price is $164.76, considerably higher than where it’s currently trading, despite a 260% year-to-date gain. 

The other three new purchases are all outside Appaloosa’s top 20. Vistra is the only new holding with a market value of $100 million or higher. 

Vistra Wasn’t the Only Large Purchase by Tepper

In addition to the new buys during the third quarter, Appaloosa added to four existing positions. None were more significant than its purchase of 3.36 million shares of PDD Holdings (NASDAQ:PDD), the Chinese owner of the Temu online marketplace.   

PDD is Appaloosa’s second-largest holding, valued at $535 million as of Dec. 20, down from the value quoted in its 13F holdings report. However, the purchase increased hedge funds’ holdings in PDD by 173% over the second quarter. It now accounts for 10.62% of the hedge funds’ portfolio, 176 basis points higher than Amazon (NASDAQ:AMZN), which is in third place.

Tepper’s two most prominent positions account for over 26% of its portfolio. That’s a very aggressive bet on the Chinese e-commerce industry, specifically, and the country’s economy, more broadly. 

 

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