David Tepper is one of the most successful hedge fund managers of the past few decades. He founded Appaloosa Management in 1993 and has built a reputation as a savvy distressed debt investor and macro trader. Tepper is known for making big, concentrated bets based on his macro views and deep fundamental analysis.
Tepper employs a flexible, opportunistic approach that allows him to invest across asset classes and strategies. He’s particularly known for:
- Distressed debt investing – buying bonds of troubled companies at deep discounts
- Macro trading – making large bets based on his economic outlook
- Concentrated positions – taking large stakes in his highest conviction ideas
This approach has led to stellar long-term performance. Appaloosa has reportedly generated annualized returns of about 25% since inception in 1993. Tepper’s personal net worth is estimated at over $16 billion, much of it from his fund’s profits.
Top-Scoring Tepper Holdings
Let’s examine five of Tepper’s current 13F holdings that score highest according to Validea’s guru models, which are based on the strategies of legendary investors like Warren Buffett, Peter Lynch and Martin Zweig along with academic research.
Google’s parent company scores highly across multiple Validea models:
Patient Investor (Warren Buffett) Score: 100% Alphabet exhibits the steady, predictable earnings growth Buffett favors. Its earnings per share have grown consistently over the past decade, from $0.99 in 2014 to $5.97 in 2023. The company’s average return on equity of 18.5% over the past 10 years demonstrates a durable competitive advantage.
P/E Growth Investor (Peter Lynch) Score: 91% Lynch’s famous PEG ratio (Price-to-Earnings relative to Growth) for Alphabet is a very attractive 0.80, indicating the stock may be undervalued relative to its growth rate. The company’s long-term EPS growth rate of 28.9% is impressive for a company of its size.
P/B Growth Investor (Partha Mohanram) Score: 88% Alphabet scores well on Mohanram’s growth criteria, with above-average return on assets (18.47% vs. industry average of -0.60%) and strong cash flow from operations to assets (24.44% vs. industry average of 3.30%).
Facebook’s parent company also receives high marks from several Validea models:
Earnings Revision Investor (Wayne Thorp) Score: 100% Meta has seen consistent upward revisions in its earnings estimates, with 3 upward revisions for both current year and next year estimates in the past month. This suggests strong momentum in the company’s fundamental performance.
Momentum Investor Score: 89% Meta exhibits strong price momentum, with its stock price within 15% of its 52-week high and a relative strength of 91, indicating significant outperformance compared to the overall market over the past year.
P/B Growth Investor (Partha Mohanram) Score: 88% Like Alphabet, Meta shows strong fundamentals with a high return on assets (16.83% vs. industry average of -0.60%) and impressive cash flow from operations to assets (28.57% vs. industry average of 3.30%).
3. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
The world’s largest contract chipmaker scores well on several models:
Twin Momentum Investor (Dashan Huang) Score: 94% TSM exhibits both strong fundamental momentum (ranked in the 14th percentile) and price momentum (12-month return excluding most recent month in the 7th percentile), a powerful combination according to Huang’s research.
Multi-Factor Investor (Pim van Vliet) Score: 93% TSM fits van Vliet’s criteria for low volatility (3-year standard deviation of 36.4% vs. market median of 39.6%) combined with strong momentum and shareholder yield.
Patient Investor (Warren Buffett) Score: 86% TSM demonstrates the consistent profitability Buffett seeks, with a 10-year average return on equity of 25.3% and return on total capital of 21.8%.
4. UnitedHealth Group Inc. (UNH)
The health insurance and healthcare services giant receives high scores from:
Growth/Value Investor (James P. O’Shaughnessy) Score: 100% UnitedHealth passes all of O’Shaughnessy’s criteria for market cap ($530 billion), cash flow per share ($20.17 vs. market average of $1.64), shares outstanding, and trailing 12-month sales.
Earnings Revision Investor (Wayne Thorp) Score: 80% UNH has seen positive earnings estimate revisions, particularly for next fiscal year, indicating analyst optimism about its future performance.
P/B Growth Investor (Partha Mohanram) Score: 77% The company shows strong fundamentals, with return on assets (8.05%) and cash flow from operations to assets (6.60%) both well above industry averages.
5. United Parcel Service, Inc. (UPS)
The global shipping and logistics company scores highly on:
Growth/Value Investor (James P. O’Shaughnessy) Score: 100% UPS meets all of O’Shaughnessy’s criteria, including market cap ($114 billion), strong cash flow per share ($10.21), high number of shares outstanding, and substantial trailing 12-month sales.
P/B Growth Investor (Partha Mohanram) Score: 66% UPS demonstrates above-average profitability with return on assets (9.39% vs. industry average of 4.60%) and cash flow from operations to assets (12.60% vs. industry average of 9.60%) both exceeding industry norms.
Further Research
