Appaloosa 1st quarter changes in its portfolio

The other day  I read an interesting article on ZeroHedge (http://www.zerohedge.com/news/2018-05-18/tepper-trounces-competition-outperforms-peers-600-ytd). It was related to the portfolio changes on the Appaloosa’s portfolio. Appaloosa Asset Management is outperforming its peers, this is why I decided to investigate what they are doing differently from the rest. Reading the 13-F from the biggest hedge funds can help you understand how they take the investment decisions. However, you won't be able to know the price in which they entered or exited the positions.

I´ve only focused on the new positions:

Lam Research Corp (LRCX)

    Lam Research Corp, source: TradingView

The strong fundamentals and the high margins will help the stock to go up.

Lam Research Corp ratios, source: TradingView                               

Wells Fargo (WFC)      

    Wells Fargo, source: TradingView

This company has been punished in the markets due to the regulatory constraints. However, it showed earnings that beat expectations. I think Wells Fargo is capable to provide good returns for investors via earnings growth, dividends. The net margins are good and the P/E ratio is better than its sector peers.

UBS Group AG (UBSG)

    UBS AG Group, source: TradingView

This investment brings geographical diversification. It’s the largest global wealth manager and has a large exposure to Asia.  It offers a 4% dividend plus buybacks. It showed the best quarterly results in 3 years on the 23rd April. The lower revenues and rising cost are one of the main concerns. I think investing long term in this company is not a bad idea. However, I would prefer to buy under 15CHF.

Applied Materials (AMAT)

    Applied Materials, source: TradingView

The strong fundamentals are driving the price of this stock higher. The sound financial situation allows the company to increase the investments. The biggest concern at the moment is that the makers of displays and chips to store data in high-end phones are slowing some projects. (The best example is the disappointing sales from the iPhone X)

SMH semiconductor ETF (SMH)

    SMH semiconductor ETF, source: TradingView

This chart shows the incredible performance of this semiconductor ETF. I would like to remind you that I am not an expert on this sector. I can understand the growth from 2013 until now, basically, it has been driven by a strong demand for this devices. When something becomes popular there is two ways of making money:

                -Mass production with the smallest cost possible

                -Limited production of high performance devices

At this point is up to the clients. Will we see strong demand in the best devices out there? (We have seen disappointing sales in some of them) Will the price of these devices decrease ? If so, the net margins will do as well and their rating will be downgraded. I’m not saying that is a bad investment, I have only expressed my point of view.

ALPS ETF

There are 16 ETFs listed under this asset management. I believe that they use for diversification purposes. 

Knight Swift (KNX)

    Knight Swift, source: TradingView

This company has great fundamentals. The financial leverage is really small. The main concern is to hire and retain truck drivers as the company said when the 1st quarter earnings were released.

Boyd Gaming (BYD)

    Boyd Gaming, source: TradingView

It has good fundamentals for a short-term investment. The resistance is around 40 so it doesn’t have a lot of upside potential (in the short-term). The analysts think that this kind of business has one of the lowest growth prospects.

Platform Speciality Prods Cor (PAH)

    Platform Speciality Prods Corp, source: TradingView

It has an attractive P/E ratio and upside potential. I believe that Appaloosa bought under 10. One of the biggest problems is the financial situation.

United Contl Hldgs Inc (UAL)

    United Continental Holdings, source: TradingView

The enterprise value to sales under 0.80 and the P/E under 10 make it attractive for investors.

Nvidia (NVDA)

    Nvidia, source: TradingView

Nvidia is a successful company that its share price can continue to rise in the following year. The sales growth forecast is positive for the next years and if we consider that the margins are high, we will see this stock higher.

Sum Up

Today’s article has been different from the other ones. I haven’t analyzed all the stocks properly but I’ve given a quick overview. In the case of the stocks above, they have good fundamentals and some of them are down around 20% from the last max. If the market continues rising, Appaloosa will deliver a strong performance.

As I said, we can learn a lot with the 13 F even if we don’t know the prices in which the trades were executed.  Obviously, we should do our own research but we can compare if some of the biggest funds are taking the same positions. Another thing to consider, that I haven´t mentioned, is the type of investor, maybe they are looking for a short-term investment while you can be considering a longer time frame.

Have a good trading!!

Disclaimer

I wrote this article myself, and it expresses my own opinions that shouldn't be used as a trading advice. Trading carries considerable risk due to the high leverage involved