With only a few weeks left in 2022, a couple stocks in David Tepper (Trades, Portfolio)s equity portfolio have closed in on their 52-week lows as the market continues to contend with rising inflation and interest rate hikes, among other geopolitical concerns.
Similarly, after posting a 28.7% total return for 2021, the S&P 500 Index has tumbled nearly 18% so far this year.
Since its founding in 1993, the gurus Florida-based hedge fund, Appaloosa Management, has earned an international reputation for producing strong returns among Wall Street investors. Known for being a distressed-debt specialist, filings show the billionaire gurus firm focuses on investing in equities and debt of distressed companies, exchange warrants, options, futures notes and junk bonds.
In 2019, Tepper converted the firm into a family office as a result of becoming the owner of the Carolina Panthers NFL football team.
As of Dec. 12, the stocks Tepper holds that collapsed to near their lowest prices in a year were Amazon.com Inc. (NASDAQ:AMZN) and Salesforce Inc. (NYSE:CRM).
The third-quarter 13F filing showed the gurus equity portfolio consisted of 22 stocks as of the three months ended Sept. 30, which was valued at $1.36 billion. The holdings have posted somewhat mixed performances so far in 2022, with nine of the top 20 positions declining.
Investors should be aware 13F filings do not give a complete picture of a firms holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Amazons (NASDAQ:AMZN) shares have tumbled more than 45% over the past year. The stock is currently 3.11% above its annual low of $85.87.
Tepper holds 1.45 million shares of the company, which represent 12.04% of the equity portfolio. GuruFocus estimates he has gained 35.48% on the investment so far, which is currently his third-largest position.
The Seattle-based e-commerce company, which also operates in cloud computing, online advertising, streaming and artificial intelligence, has a $903.46 billion market cap; its shares were trading around $88.71 on Monday with a price-earnings ratio of 81.25, a price-book ratio of 6.57 and a price-sales ratio of 1.82.
The GF Score of 89 out of 100 suggests the company has good outperformance potential on the back of strong ratings for profitability and growth and middling marks for financial strength, momentum and GF Value.
Although the company has issued new long-term debt in recent years, it is still manageable due to adequate interest coverage. The Altman Z-Score of 3.39 also indicates it is in good standing currently even though assets are building up at a faster rate than revenue is growing. The weighted average cost of capital eclipses the return on invested capital, meaning it is struggling to create value as it grows.
Amazon is also being supported by an expanding operating margin and returns on equity, assets and capital that are outperforming over half of its competitors. Further, the moderate Piotroski F-Score of 4 out of 9 indicates conditions are typical for a stable company. Due to a slowdown in revenue per share growth, however, the predictability rank of five out of five stars is on watch. According to GuruFocus research, companies with this rank return an average of 12.1% annually over a 10-year period.
Of the gurus invested in Amazon, Ken Fisher (Trades, Portfolio) has the largest stake with 0.49% of its outstanding shares. Baillie Gifford (Trades, Portfolio), Frank Sands (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Al Gore (Trades, Portfolio)s Generation Investment Management, Warren Buffett (Trades, Portfolio), Dodge & Cox, Andreas Halvorsen (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Chris Davis (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio) and several other gurus also have significant positions in the stock.
Shares of Salesforce (NYSE:CRM) have declined approximately 50% over the last 12 months. The stock is currently 2.21% above its yearly low of $127.02.
The investor owns 190,000 shares of the company, reflecting 2.01% of the equity portfolio. GuruFocus data shows Davis has gained an estimated 17.48% on the investment so far.
The tech company headquartered in San Francisco, which provides customer relationship management software and applications that are focused on sales, customer service and analytics, has a market cap of $133.32 billion; its shares were trading around $133.32 on Monday with a price-earnings ratio of 476.14, a price-book ratio of 2.23 and a price-sales ratio of 4.39.
Accordingto the GF Score of 86, the company has good outperformance potential. While it received high ranks for profitability and growth, the financial strength, GF Value and momentum ratings were more moderate.
The Altman Z-Score of 2.89 indicates the company is under some pressure since its assets are building up at a faster rate than revenue is growing. Further, the WACC exceeds the ROIC by a wide margin, so it is struggling to create value.
In addition to Salesforces operating margin declining, its returns are underperforming versus industry peers. It has a moderate Piotroski F-Score of 5, however, and the 4.5-star predictability rank is on watch despite recording consistent earnings and revenue per share growth over the past several years. GuruFocus found companies with this rank returned, on average, 10.6% annually.
With 1.27% of outstanding shares, Fisher is Salesforces largest guru shareholder. Other gurus invested in the stock include Segalas, Baillie Gifford (Trades, Portfolio), Gores firm, Chuck Akre (Trades, Portfolio), Halvorsen, First Eagle Investment (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
This article first appeared on GuruFocus.