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Billionaire David Tepper is betting big on these 2 “Strong Buy” dividend stocks
Anyone trying to keep track of where the markets might go could be forgiven for showing signs of dizziness. Lately, the markets have been pulled violently in opposite directions, making it difficult to put in place a coherent investment strategy. It is in a time like this that some expert opinion could provide a clearer picture. Hardly anyone on the streets is more famous than billionaire David Tepper. Co-founder of global hedge fund Appaloosa Management, Tepper is known for his bold and confident style, traits that could come in handy in today’s confused climate. Tepper made his fortune – and built his hedge fund – by investing in distressed assets and profiting hugely when markets reversed later. And with $ 14 billion in assets under Appaloosa’s leadership, it’s only natural for Wall Street to take notice when Tepper has something to say. “Basically, I think rates have temporarily benefited from the move and should be more stable in the next few months, making it safer to be in equities for now,” Tepper noted. The billionaire believes that the rate hike should stabilize and points out that with the approval of the Senate of the coronavirus fiscal stimulus plan, it is currently “very difficult to be bearish”. With that in mind, we opened up the TipRanks database to get the inside scoop on two of Tepper’s recent new positions. These are Strong Buy stocks – and perhaps more interestingly, both are good dividend payers, with annual returns above 7%. We can turn to Wall Street analysts to find out what might have attracted Tepper’s attention to these stocks. MPLX LP (MPLX) We’ll start with a well-established name in the energy industry. Marathon Petroleum, one of the Big Oil giants, operates across the United States, in the Rocky Mountains, in the Midwest, and along the Gulf Coast, transporting oil and gas products from wells to storage facilities. and distribution. MPLX benefited from the general economic reopening in the second half of 2020, with inventory rising as more people returned to work and demand for fuel increased. Overall, stocks have risen 98% in the past 12 months. At the top line, revenue rebounded from a decline in 2Q20, gaining 8.5% to $ 2.17 billion in the fourth quarter. Profits, which turned sharply negative in 1Q20, rose steadily for the remainder of the year and stood at 64 cents per share in the fourth quarter. But perhaps the most important metric, for investors, was MPLX’s net cash position – for the full year of 2020, the company generated $ 4.5 billion in cash and returned over $ 3 billion. dollars to shareholders. In its most recent declaration of dividend, the company announced a payout of 68.75 cents per common share, or $ 2.75 annualized. This gives a yield of 10.5%, well above the average yield. And David Tepper, last quarter, invested heavily in MPLX, recovering more than 3.45 million shares. At current prices, those stocks are now worth $ 89.77 million. As stated, this is a new position for Tepper, and it is a substantial position. Covering this title for RBC Capital, 5-star analyst TJ Schultz believes the company’s strong balance sheet warrants positive sentiment. “[We] believes MPLX is well positioned to maintain stable cash flow and distributions through 2021+. Management reinforced MPC’s commitment to MPLX contract renewals. A slight price slippage on renewable energy from short-term barges, but larger contracts have been concluded more recently (longer track) or are already linked to the oil dynamics of the FERC. We appreciate the improved FCF profile and strong balance sheet of MPLX, which we believe gives management more options to return value through unit buybacks over the next year, ”said writes Schultz. To that end, Schultz gives MPLX a price target of $ 29, which implies a 12% hike. , to match its outperformance rating (i.e. buy). (To see Schultz’s track record, click here) The strong appreciation in MPLX’s stock has pushed the stock price close to the average price target. The shares are now selling at $ 25.92, with an average target of $ 27.67 suggesting room for further growth of around 7%. The stock holds a Strong Buy consensus rating, based on 5 buys and 1 hold in the past 3 months. (See MPLX market analysis on TipRanks) Enterprise Products Partners (EPD) in the energy sector, we’ll take a look at another middleman that caught Tepper’s attention. Enterprise Products Partners, with a market capitalization of $ 50 billion, is a major mid-segment player and operates a network of assets comprising over 50,000 miles of pipeline, storage facilities for 160 million barrels of oil and 14 billion cubic feet of natural gas, and shipping terminals on the Texas Gulf Coast. The story here is similar to that of MPLX. The company has been hit by lockdowns put in place to fight the COVID pandemic, but over the past six months, stock values and earnings have rebounded. Stocks rose 40% during that time, while fourth-quarter revenue topped $ 7 billion. Overall, Enterprise’s performance in 2020 showed declines from 2019, but one important metric showed a gain. Of the company’s total cash flow, $ 5.9 billion, $ 2.7 billion was Free Cash Flow (FCF), or cash available for distribution. This increased 8% year over year and allowed the company to maintain its regular dividend payment – and even increase the payment in the most recent statement, from 44 cents per common share to 45 cents. With an annualized payout of $ 1.80 per share, that works out to a robust 7.7% return. Tepper’s new position in EPD is substantial. The hedge fund leader bought 1.09 million shares for his first position, a purchase that is now worth $ 25.23 million. JPMorgan analyst Matt O’Brien sides with the bulls, reiterating a buy note and a price target of $ 28. This target expresses confidence in EPD’s ability to climb 20% from current levels. (To see O’Brien’s story, click here) “With the slowdown in investment needs, EPD expects to achieve positive discretionary free cash flow in 2H21, allowing investments to be fully funded, increasing cash distributions and opportunistic buyouts … Overall, we continue to believe that EPD offers the optimal combination of attack and defense, with attractive built-in operational leverage, notable barriers to entry, low impact best-in-class leverage and financial flexibility, ”commented O’Brien. Wall Street analysts can be very controversial – but when they agree on a stock, it’s a positive sign for investors to take notice. This is the case here, as all of the recent reviews on EPD are buyouts, making the consensus rating a strong unanimous buy. Analysts gave an average price target of $ 27, indicating a rise of about 15% from the current share price of $ 23.38. (See EPD Stock Analysis on TipRanks) To get great ideas for dividend-paying stocks traded at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that brings together all the information about TipRanks stocks. . Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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