Billionaire David Tepper Sells Key Stocks Amid Wall Street Surge
Wall Street is currently buzzing with optimism as major indices continue to climb. Factors such as the AI boom, shifts in political leadership, a robust U.S. economy, and declining inflation rates have all contributed to this upward trend.
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Recent activity from billionaire investor David Tepper, head of Appaloosa Management, shows a stark contrast to many of his peers. Tepper is selling shares in six of the top ten U.S. companies that have reached a trillion-dollar market cap, as reflected in his latest Form 13F filings with the Securities and Exchange Commission.
According to Tepper’s recent filings, he has sold shares in six major companies from October 1, 2023, to September 30, 2024. These companies have all consistently outperformed the S&P 500 over the past five years, largely fueled by the excitement around artificial intelligence (AI).
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This selling could be interpreted as profit-taking. Despite the optimism surrounding AI, historical trends indicate that investors often overvalue early-stage technologies. If an AI bubble were to burst, companies like Nvidia, a top provider of GPUs, and Taiwan Semiconductor, a leading chip maker, might suffer significantly.
Moreover, Tepper’s strategy may also reflect his concerns about high stock valuations. Prior to a recent drop, the Shiller price-to-earnings (P/E) ratio for the S&P 500 was near its third-highest level in over a century. Past trends show that such elevated valuations often lead to declines of 20% or more in the index.
Notably, Microsoft’s current forward P/E is 13% higher than its five-year average, while Meta Platforms’ forward P/E is 21% above its average. Tepper, who usually focuses on undervalued stocks, appears to be seeking better opportunities elsewhere.
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Tepper Shifts Focus to China-Based Stocks
Despite the selling, Tepper is still making significant purchases. His latest reports show substantial investments in three key companies:
- Alibaba Group (NYSE: BABA): 6,400,000 shares purchased (178% increase)
- JD.com (NASDAQ: JD): 5,625,000 shares purchased (336% increase)
- Baidu (NASDAQ: BIDU): 760,000 shares purchased (114% increase)
These companies are all headquartered in China, which has faced economic challenges since easing COVID-19 restrictions in December 2022. Although there have been struggles, China’s growing middle class presents potential for significant growth.
Alibaba and JD are leaders in online retail, while Baidu dominates internet search in China. All three companies are leveraging AI for future growth, with Alibaba Cloud holding a 36% share of China’s cloud infrastructure market.
Additionally, their strong financial positions allow for aggressive investments in growth and stock buybacks, which enhance earnings potential and may make these stocks more appealing to investors.
The common thread among these companies is their relatively low P/E ratios. At 9.2, 9, and 9 for Alibaba, JD, and Baidu respectively, they are viewed as attractive buys, especially as the S&P 500 climbs to historically high valuations.
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Suzanne Frey is a board member of The Motley Fool, alongside other notable individuals. The Motley Fool holds positions in various companies mentioned. Full disclosure is available upon request.
The views expressed here are those of the author and do not reflect opinions of Nasdaq, Inc.
