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Billionaire investor David Tepper has a better track record in the stock market than his Carolina Panthers National Football League team has on the gridiron this year. His Appaloosa Management hedge fund has annualized returns of 25% since its founding in 1993, a remarkable track record especially when compared to the 1-and-4 record of the football team so far this year.
Much like the Panthers going deep to try and score a touchdown, Tepper isn't afraid to unload a Hail Mary pass to generate a big score in the market. Nearly one-third of his portfolio is held in just three stocks and his top two investments account for almost 25% of the total.
Alibaba ( NYSE:BABA ) represents 12.2% of Appaloosa's holdings, or $756 million, while Amazon ( NASDAQ:AMZN ) represents almost as much at 10.9%, or $671 million.
With both being the biggest e-commerce players in their respective markets -- China and the U.S. -- and both being multifaceted by offering major cloud computing services, digital media, and more, which of these stocks is the No. 1 David Tepper stock to buy? Let's dig in and find out.
Key Points About This Article:
- Billionaire hedge fund manager David Tepper doesn't mind making big bets on stocks that he foresees paying off big time over time. E-commerce giants Alibaba and Amazon are his two largest holdings, representing 23% of the total portfolio.
- His Appaloosa Management fund has produced annualized returns of 25% since 1993, much better than Tepper's Carolina Panthers football team's lifetime record of 215 wins, 256 losses, and one tie.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.
The case for Alibaba
Alibaba founder Jack Ma
Chinese e-commerce behemoth Alibaba has been a laggard. While shares of BABA are up 53% in 2024, the stock is down 29% over the past three years and has lost more than a third of its value over the past five.
There are several reasons for the underperformance. One has been the regulatory cloud Alibaba has operated under for the past few years. Beijing began scrutinizing Alibaba's business practices, particularly in areas like data privacy and antitrust, and ultimately fined the online retailer a record $2.75 billion. It also thwarted Alibaba's plans to spin off its cloud business and logistics operations, as well as impeding founder Jack Ma's Ant Financial from going public.
But that is now in the past. The government recently announced Alibaba was no longer operating as a monopoly , which lifted the regulatory shadow over its stock. Much of the gains BABA shares have made this year came after the declaration last month. It's up 45% in just the past 30 days.
That comes as China is also enacting stimulus measures for its economy. The government plans to pull forward from next year's budget 100 billion yuan ($14.1 billion) while using an additional 100 billion yuan for construction projects. Nikkei Asia reports Beijing will also issue ultra-long-term special government bonds next year.
The flood of money entering the economy, coupled with Alibaba being unleashed from regulatory scrutiny, could see BABA's stock make a straight-line attack on its previous highs.
The case for Amazon
Digital representation of the world with a keyhole to unlock a cloud
Most of the many pies Alibaba has its fingers in were directly copied from Amazon's playbook. The U.S. e-commerce leader has been operating similar lines of business for far longer than its rival. And despite the Chinese population being orders of magnitude larger than the U.S., Alibaba generates much less revenue than Amazon.
In the second quarter, Amazon saw revenue jump 10% to $148 billion while Alibaba generated just $33.5 billion. The U.S.-based business also trounced its rival in cloud services, pulling in $26.3 billion in sales versus less than $3.7 billion by its foreign counterpart. Amazon Web Services is also rapidly growing, with sales up 18% year-over-year compared to 5.9% growth by Alibaba's Cloud Intelligence unit.
AWS continues to be Amazon's profit center, accounting for 64% of total operating profits, which surged 72% from the year-ago period to hit $26.3 billion.
AMZN stock has long been the better investment, too. While shares are up just 10% this year, they've more than doubled over the past five years. And if we look back over the past decade, BABA has returned just 5% versus the 1,050% gain by Amazon.
Because Alibaba will always play against the tension a capitalist business in a communist society creates, which could result in mercurial government crackdowns in the future, Amazon stock remains the better David Tepper stock to buy.
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