Billionaire David Tepper sold shares of Nvidia and Alphabet last quarter. Here are the “big seven” stocks he bought.

Billionaire David Tepper is making a name for himself on Wall Street. He runs Appaloosa Management, a hedge fund he founded in 1993. He has been called “arguably the greatest hedge fund manager of his generation” and has consistently outperformed his peers.

He correctly predicted the collapse of the housing market and the resulting financial crisis, which led to Great Recession He also bought bank stocks in 2008 at the height of the economic downturn, a strategy that ultimately produced handsome profits for Appaloosa investors. With a resume like that, it’s no wonder many investors are keenly interested in his move.

Tepper raised some eyebrows when he significantly reduced his stake Nvidia (Nasdaq: NVDA) and letter (NASDAQ: Google) (NASDAQ: Google) In the fourth quarter, he also chose to increase the shares of two other members of the “Seven Heroes”.

A person is considering graphs displayed on multiple mobile device screens.

Image source: Getty Images.

Changing of the guard

Tepper made some big changes at the top of Appaloosa’s portfolio in the fourth quarter, slashing his stake in Nvidia by 23%. He clearly still sees room for upside in the stock, as the hedge fund still holds 790,000 shares worth an estimated $678 million) Nvidia remains Appaloosa’s fourth-largest holding, accounting for nearly 7% of the portfolio .

This sale is likely to be a well-thought-out move by Tepper. After all, Nvidia’s stock price rose 239% last year, with a price-to-earnings ratio of 65 times and sales of 27 times, so its valuation is high.

Tepper also cut his holdings of Alphabet stock by 16%, but the stock remains the fund’s seventh-largest holding. Appaloosa currently owns 2.3 million shares, valued at approximately $388 million.

In this case, though, there’s no obvious catalyst to explain his decision to sell. The stock remained reasonably priced at year-end at 24 times earnings. He may be worried about the timing of a rebound in the digital advertising market – which accounts for the lion’s share of Alphabet’s revenue – or about how artificial intelligence will eventually impact Google’s near monopoly in search.

He switched to buying seven major stocks

Tepper increased his existing holdings in two of Appaloosa’s three stocks, a move that isn’t surprising since he clearly remains bullish on their prospects.

Microsoft (NASDAQ:MSFT) Tepper increased its stake by 4%, solidifying its position as the hedge fund’s second-largest holding. This brings the total number of shares to 1.7 million shares, currently worth approximately $710 million, or 11.3% of Appaloosa’s holdings. Microsoft’s controversial launch into artificial intelligence was revolutionary when it invested in Chat-GPT creator OpenAI and integrated generative AI capabilities into a broad cross-section of its workplace productivity tools.

However, the biggest opportunity may be Copilot, whose Artificial Intelligence Powered Digital AssistantMicrosoft has launched a number of job-specific versions of Copilot to help automate time-consuming tasks. The company gained market share in the cloud as a result of strong demand for its artificial intelligence tools.

Microsoft stock sells for a small premium of 34 times its sales at the end of the fourth quarter, but considering its rapid entry into the artificial intelligence market and profit potential, this valuation is very reasonable.

Amazon (NASDAQ: AMZN) is the second of the Big Seven purchased by Tepper. He increased his holding by 5%, bringing Appaloosa’s total stake to 3.95 million shares. At a current value of about $711 million, they represent 11% of the portfolio. As the undisputed leader in cloud infrastructure, Amazon has a loyal audience for its artificial intelligence products and services.

The company has released a series of useful tools on its e-commerce platform to simplify the process of selling and buying ads. In addition, Amazon has a long history of using artificial intelligence systems in part to manage its online retail operations, which helps it maintain adequate inventory levels, make relevant recommendations, arrange more efficient delivery routes, and more.

With shares trading at less than three times sales at the end of the fourth quarter, Amazon is a hot commodity.

Timely investing lessons

So far, Tepper’s efforts have had mixed results. Nvidia’s stock is up 80% year to date, making it the undisputed champion among the Big Seven. Alphabet shares rose 11%. During the same period, Amazon and Microsoft rose 20% and 12% respectively. This suggests things would have been better had Tepper not made any changes to his allocation to these stocks.

This is a lesson for investors. If your investment thesis for a stock you hold hasn’t changed—even if the stock’s valuation is nose-bleeding—sometimes it’s best to stay the course. The artificial intelligence revolution has just begun, and despite increasing competition, Nvidia’s AI processors are still the best in the industry. Alphabet has a long track record of successfully deploying AI algorithms to advance its business goals, and there’s no evidence this time will be any different.

Influential economist John Maynard Keynes is reported to have said: “Markets may remain irrational longer than you can remain solvent.” Applying this to this case , I think this means it’s better not to make investment decisions based on broader market expectations, but instead focus more on the company’s prospects.

Invest $1,000 now

When our team of analysts has a stock tip, you can pay to hear it. After all, they have been communicating for twenty years, Motley Fool Stock Advisor, the market size has more than tripled. *

They just revealed what they thought 10 Best Stocks Investors can buy now… Microsoft makes the list — but there are 9 other stocks you might be overlooking.

View 10 stocks

*Stock Advisor returns as of April 4, 2024

John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool; Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Danny Weiner Holds positions in Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool recommends the following options: Long the January 2026 $395 call option on Microsoft and Short the January 2026 $405 call option on Microsoft. Motley Fool has a disclosure policy.

Billionaire David Tepper sold shares of Nvidia and Alphabet last quarter. Here are the “big seven” stocks he bought. Originally published by The Motley Fool

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button