After beating the S&P 10 consecutive years, and returning
around 30% last year,
's Appaloosa Management is again up more than 10% year to date.
The index-beating return is being imparted partially from strong
gains in a sector
particularly dislikes - airlines. The three with the largest
weighting in Tepper's portfolio are: United Continental Holdings
), US Airways Group Inc. (
) and Delta Air Lines (
Tepper, founder of the $15 billion hedge fund company Appaloosa
Management, is extremely bullish on the stock market, telling
CNBC in January, "The country is on the verge of just an
explosion of greatness," and affirming the view last week. He is
expecting the S&P to rise 20% or more this year, primarily
because the economy looks good, first quarter GDP should grow by
about 2.25%, and big investors have not put money from fixed
income to stocks yet,
someone familiar with his thinking told CNBC
Tepper has a background in distressed debt and equity investing
and often gets involved with companies that are near bankruptcy.
United Continental Holdings (
Tepper initiated his United Continental Holdings position back in
the fourth quarter of 2010 and sold down the bulk of it over
2011. In the first half of 2012, he amassed an even larger
position - almost 9.5 million shares - at even lower purchase
prices - $20 and $23 per share, respectively. UAL stock has
increased almost 53% over the past year to trade for $31.09 per
share on Thursday afternoon. Tepper trimmed 700,352 shares in the
fourth quarter of 2012 and ended the year with just over 9
million, equal to a 4.6% weighting in his portfolio, making it
his third-largest holding.
United Continental Holdings is an airline with an average of
5,472 flights a day, connected to 381 airports in six continents
and had the most passenger traffic of all airlines in the world
UAL's financial results increased substantially in 2011 after the
company began integrating United and Continental airlines into
one business in October 2012, a merger it expected to generate $1
billion to $1.2 billion in net annual synergies on a run-rate
basis in 2013 - $800 million to $900 million of which would be
annual revenue synergies. It incurred costs from the merger in
both 2011 and 2012.
In 2012, UAL reported a 0.1% year-over-year increase in operating
revenue of $37.15 billion, which fell short of its revenue goal.
It also had a net loss of $723 million, or $2.18 per share, due
to $1.3 billion in special charges. Merger charges cost the
airline $739 million in 2012, and it is expecting lower charges
in 2013 of $250 million. UAL's fourth quarter was also impacted
by Superstorm Sandy, which reduced fourth-quarter revenue by
approximately $140 million and net income by approximately $85
UAL has a P/E ratio of 25.7 and P/B ratio of 21.4, which are both
lower than 86% of companies in the U.S. airlines industry. It has
a P/S ratio of 0.278, which is close to a five-year high.
US Airways Group Inc. (
Though he has held US Airways Group stock since the fourth
quarter of 2009, Tepper's biggest moves most recent occurred in
2012. He purchased more than 10 million shares in the first three
quarters at share prices of $11, $11 and $12, respectively, on
average. His total holding size at year-end was 12,069,029
shares. The stock has gained 127% over the past year and trades
for $15.98 on Friday afternoon, which is close to a five-year
US Airways revenue has been increasing annually since 2009, and
it has been profitable since 2010. In the first nine months of
2012, its net income increased year over year to $245 million
from $76 million, and operating revenues increased 6.6% to $10.55
billion, on higher passenger demand and record consolidated third
US Airways ended the period with $2.8 billion in cash, increased
from $2.4 billion in the prior-year period.
The airline announced on Feb. 14 that it would merge with
American Airlines (
) to create a global carrier with a combined equity value of
approximately $11 billion. The merger is expected to drive $1
billion in annual net synergies in 2015, $900 million of which
should be network revenue synergies. The cost for the transaction
is estimated to be $1.2 billion total over the next three years.
Delta Air Lines (
After selling out of his holding in the fourth quarter of 2011,
Tepper bought 10,375,718 shares of Delta Air Lines cumulatively
over the first three months of 2012 at average prices of $10, $11
and $10, respectively. He reduced the position by 71,583 in the
fourth quarter. Delta stock has gained almost 71% over the past
year, and trades for $16 on Friday afternoon, which is close to a
Delta Air Lines has roughly 160 million customers annually, and
flies to 318 locations in 59 countries across six continents.
Over the past 10 years its revenue has increased annually,
reaching $36.67 billion in 2012, and net income has been
increasing for the past three years, reaching $1 billion in 2012.
In the fourth quarter of 2012, Delta reported $238 million, or
$0.28 per diluted share, in net income, including a $100 million
reduction resulting from Superstorm Sandy on its refinery
operations. Net income for the full year was $1.6 billion, a $362
million increase from 2011, all excluding $231 million in special
items. Operating revenue increased 2% in the fourth quarter to
$203 million year over year, including a $75 million decline
resulting from Superstorm Sandy.
Delta is focused on paying down debt and ended 2012 with adjusted
net debt totaling $11.7 billion after paying down $5 billion of
its $7 billion reduction target since 2009. The company also
ended the year with $5.1 billion in cash on its balance sheet.
Delta has a P/E ratio of 13.3 and P/S ratio of 0.38, which is
close to a two-year high.
's portfolio here. Also check out the Undervalued Stocks, Top
Growth Companies and High Yield stocks of David Tepper.About
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