Tepper Buys Pipeline Operators as Appaloosa Stock Bets Rise

  • Hedge fund also adds to stake in Alphabet, which owns Google
  • Separately, Klarman's Baupost buys Antero Resoures Corp.

Stock picker David Tepper increased his firm’s U.S. equity holdings by 56 percent last quarter, led by a jump in his Alphabet Inc. position and new stakes in pipeline companies.

The billionaire founder of $18 billion Appaloosa Management bought 5.1 million shares of Energy Transfer Partners worth $173.5 million as of Dec. 31, and 9.4 million shares of Kinder Morgan Inc. with a market value of $140.9 million, according to a regulatory filing Friday. Appaloosa also bought 5.9 million shares of the Alerian MLP Exchange Traded Fund, which holds stocks of companies that earn cash from the transportation, storage and processing of energy commodities.

Tepper, whose firm has about 12 percent of its U.S. public equities in energy, joins value investor Seth Klarman in betting the stocks will rebound with the price of oil. The trade caused losses among a range of hedge funds last year, and oil continued to slump in 2016. Hedge-fund manager Pierre Andurand, who correctly predicted the slump in oil prices, said Jan. 22 the commodity has probably hit bottom and will end the year higher.

Klarman’s Baupost Group, which has been betting on energy stocks for a while and has 34 percent of its stock holdings in that sector, sold out of its 4.1 million shares in Pioneer Natural Resources Co. last quarter, a position valued at $503.2 million at the end of the third quarter. The fund increased its positions in Antero Resources Corp., an oil and gas producer, and Cheniere Energy. Cheniere was Baupost’s biggest U.S. equity position as of Dec. 31 with a market value of $971.8 million.

Cheniere and Antero, among the firm’s largest losers last year, contributed to a decline of about 6.7 percent in the partnership’s public assets in 2015, according to a Jan. 20 letter to investors. Cheniere fell another 30 percent this year, while Antero gained 19 percent.

Energy Transfer is down 30 percent this year, and the Alerian MLP ETF declined 29 percent. Kinder Morgan is little changed.

‘So Toxic’

With the energy sector now considered “so toxic to investors that almost no one wants to get involved,” prices may be approaching a bottom, Klarman wrote in the letter.

Appaloosa, which Tepper started in 1993, increased its position in Alphabet, which owns search-engine Google, by 349,500 shares. Its holding had a market value of $406.9 million by the end of last quarter, making it the second-biggest after General Motors Co.

The market value of Appaloosa’s publicly traded U.S. equities increased by about $1.6 billion to $4.4 billion last quarter. Appaloosa exited six positions including its 4.5 million shares in JetBlue Airways Corp.

Money managers who oversee more than $100 million in U.S. equities must file a Form 13F within 45 days of the end of each quarter to list their holdings in stocks that trade on U.S. exchanges, as well as options and convertible debt. Hedge funds are lightly regulated pools of capital whose managers can invest in any asset and share in annual profits.

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