Billionaire David Tepper Goes Bargain Hunting: 6 Stocks He Just Bought

One of the best ways to understand what the “smart money” on Wall Street is thinking is to comb through 13F quarterly filings. Large hedge funds must file a 13F each quarter, showing the stocks they buy, hold and sell.

One of the best money managers of the last 30 years is David Tepper of Appaloosa Management. Between 1993 and 2013, Tepper averaged a staggering 40% annualized return and a net historical return of approximately 23% to 25% from 1993 to present.

Needless to say, investors might be interested to know which stocks Tepper likes right now. With an appetite for high-quality growth stocks and bargain-priced value stocks, Tepper appears to have swapped one type of stock for another in Q1 2024.

Carving out the Magnificent Seven for China’s “Magnificent Seven”

Tepper has clearly benefited from a bet on the artificial intelligence wave, with many of its major holdings entering 2024 ahead Seven magnificent actions or large-cap semiconductor stocks, both categories benefiting greatly from the AI ​​revolution sweeping through corporate America.

But in the first quarter, Tepper trimmed the vast majority of these top U.S. tech stocks and reinvested the gains in the Chinese tech sector – essentially swapping five Magnificent Seven U.S. stocks for a basket of “Magnificent Seven” Chinese tech stocks. . actions.

Appaloosa’s new purchases included four stocks, Ali Baba, Securities in PDD portfolio (formerly Pinduoduo), BaiduAnd JD.comas well as two China-focused exchange-traded funds (ETFs), the iShares China Large Cap ETF and technology-focused KraneShares CSI China Internet ETF.

Data source: Whalewisdom.

As you can see, Tepper made a very big bet on Alibaba, making it its largest position at the moment. But this optimism likely extends to China’s entire tech sector and the country’s economy as a whole. While there’s a big bet on tech stocks here, the FXI ETF also contains some public and state-owned banks in its top 10 holdings.

Crucially, Tepper and his team may have concluded that a long-awaited turnaround in China’s economy may be within reach.

The story continues

The Chinese economy could recover

China’s economy has actually been in recession since COVID-19, as the country is not using US vaccines and therefore tries to lock down the country every time there is a new outbreak, disrupting business. In addition, the government has moved to tighten regulations on the country’s leading technology companies, limiting their growth and often suggesting or imposing spin-offs and asset sales. Additionally, China expanded its real estate bubble, causing many major real estate developers to go bankrupt, leaving many prepaid housing projects unfinished.

But over the past year, the government appears to have done an about-face, easing the regulatory burden on tech companies while trying to boost the economy and encourage growth. The result has been six consecutive months of positive growth in China’s manufacturing sector, as shown by the Caixin/S&P Global Manufacturing PMI. And perhaps most importantly, Chinese authorities have recently considered buying unfinished housing projects from bankrupt developers and turning them into affordable housing or rental properties. Healing the real estate sector would be key to stabilizing China’s economy.

Chinese tech giants are extremely cheap

It appears that Tepper’s team anticipated a resumption of growth in the country, or that AI could help Chinese tech giants, which own U.S. tech stocks. At the same time, major Chinese tech stocks have fallen to absolutely ridiculous valuations, especially compared to high-flying US tech stocks. PDD Holdings now trades at just 12 times earnings, while Alibaba, JD and Baidu each trade between 8 and 9 times this year’s estimated earnings.

In light of cheap valuations and resuming growth, most Chinese technology companies have rationalized costs and launched large share buyback programs. Alibaba increased its repurchase authorization by $25 billion in the first quarter and repurchased $4.8 billion of its shares in the first quarter, reducing its share count by 2.6% in a single quarter. JD.com repurchased $1.2 billion, or 2.8% of its shares, in the first quarter, before authorizing another $3 billion program. And Baidu authorized a $5 billion stock repurchase program in February, repurchasing $898 billion of its stock this year according to its first-quarter earnings report.

So, it’s perhaps not surprising to see Tepper trim some of his U.S. AI winners while rebalancing toward much cheaper Chinese tech stocks by buying back their shares, especially if he and his analysts also believe that the Chinese economy will continue to recover.

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Billy Duberstein and/or its clients have no position in any of the stocks mentioned. The Motley Fool ranks and recommends Baidu and JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Billionaire David Tepper goes bargain hunting: 6 stocks he just bought was originally published by The Motley Fool