Appaloosa Bought Cisco Systems Shares Ahead of Biggest Decline Since 1994
By Rita Nazareth - Nov 12, 2010 5:25 PM CT
Appaloosa Management LP bought a new stake in Cisco Systems Inc. during the third quarter, before the shares posted the biggest one-day decline since 1994 yesterday.
Appaloosa, founded by billionaire investor David Tepper, purchased 6 million shares of Cisco during the quarter that ended in September, according to a filing today with the Securities and Exchange Commission.
Cisco, the world’s largest maker of computer networking equipment, plunged 16 percent to $20.52 yesterday after its profit and sales projection missed the average analyst estimates, according to data compiled by Bloomberg.
The stock ended the third quarter at $21.90.
The Short Hills, New Jersey-based firm also bought 3.7 million shares of Hewlett-Packard Co., the biggest computer maker, and 5.2 million shares of Pfizer Inc., the world’s biggest drugmaker.
The hedge fund, which bought bank shares in 2009 after the U.S. government announced plans to prop up the industry, cut stakes in financial companies for the third quarter in a row, according to a regulatory filing. His holdings in Bank of America Corp., Citigroup Inc. and Fifth Third Bancorp were reduced by 4.9 million, 6.5 million and 2.4 million shares, respectively.
Best Showing
As a result of the bank-stock investments last year, Tepper’s flagship fund, Appaloosa Investment LP, had a 117.3 percent return for the nine months ended Sept. 30, 2009. That was the best showing among hedge funds with assets exceeding $1 billion, Bloomberg data show.
The fund had a return, after fees, of 5.1 percent last month, The New York Times reported on Nov. 9 in its Dealbook blog, citing the monthly results released to its investors. The fund has returned 20.9 percent this year through the end of October, Dealbook said.
This wasn’t the first time that Tepper bought Cisco. He bulked up on technology companies like Cisco, Microsoft Corp. and Oracle Corp. in 2006 because he felt they had excess cash to pay dividends and buy back stock. He bought shares in 2007 as well, before selling gradually and exiting out of the position entirely by the first quarter of 2009.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
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