Appaloosa Management Is Increasing its Positions in These Stocks

Gayatri is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Appaloosa Management, L.P. is a long/short hedge fund founded by David A. Tepper in 1993. David Tepper is well known for his long bets on financial stocks at the bottom of the markets in 2009. He is again betting on financial stocks and I have discussed some of his new positions in financial stocks in a previous article. In addition, it is also interesting to look at some other stocks where he has significantly increased his positions. The following is a list of three stocks where David Tepper added to his existing position in the last quarter.

Beazer Homes USA

Appaloosa Management bought 6,821,845 shares of Beazer Homes USA (NYSE: BZH) last quarter. Although Beazer reported disappointing order growth of 10% during the last quarter earnings call, I remain bullish on the company and believe its turnaround plan remains on track. The company guided that its 2013 EBITDA can increase by $30 million to at least $50 million in FY13 driven primarily by higher ASPs (Average Selling Prices), closings growth and higher gross margins. The company’s east region (which has higher ASPs) is expected to stabilize and contribute nicely in FY13. The company appears well placed with its recent capital market transaction addressing liquidity concerns. The company’s fundamentals appear to be in right place with a broader housing recovery helping it. Hence, I believe the stock is a good buy.

MGM Resorts International

Appaloosa Management bought 4,889,361 shares of MGM Resorts International (NYSE: MGM) last quarter. Although last quarter was a bit soft for the company, I believe its longer term Las Vegas recovery story is still intact. In addition, it appears like investors are underestimating the worth of MGM’s Macau assets. Although the company posted a decline in VIP volumes in Macau, its EBITDA still grew by 5% YoY due to good mass market trends. In addition to fundamental business, the company is also a good deleveraging story. The company’s management is taking a lot of steps to improve its balance sheet and refinance its debt at lower interest rates. These steps will improve the company’s FCF profile and reduce the need of asset divestures. Overall, I believe the company may be suited for investors with a high risk - high reward appetite.

Ford Motor Company

Appaloosa Management bought 3,964,523 shares of Ford (NYSE: F) last quarter. Ford has paid down ~$21 billion of debt over the last 2 years and the company is making substantial progress in its turnaround. The company reported strong last quarter results with North American auto pre tax margin of ~12%. I believe the company is well positioned to benefit from an auto recovery in North America. In addition to domestic operations, the company’s international operations are also making progress. The company recently announced its plans to restructure its European business which will help in improving profitability. The company is trading at just 7.67 times its forward earnings, has ~$10 billion in net cash on its balance sheet, and is continuing to make impressive progress in its turnaround. I believe it is a good buy at current levels.

To sum up, Beazer is a good bet on a continuing housing recovery while MGM is a high risk high reward play on the Las Vegas strip recovery. Ford Motors continued progress in its turnaround and low valuations make it a good buy.


GayatriSharma has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure