Tepper Dumps Micron and Sandisk, Bets Against Apple

David Tepper's Appaloosa Management recently disclosed its quarterly holdings via Form 13F. The fund, known for producing annualized returns of about 25% through mid-2019, made significant moves in its portfolio during the second quarter.

Tepper sold two of his largest holdings: Micron (MU) and Sandisk (SNDK). He had established a position in Micron in late 2016 and held it for multiple earnings cycles. However, after the stock's huge run-up in price, he cut his stake by 41% last quarter. Although Micron remained the second-largest position in the portfolio at the end of the quarter, its weight in the portfolio decreased to around 15%. This suggests that Tepper sees better investment opportunities or needs to diversify away from memory-chip makers.

Tepper's decision to completely dispose of Appaloosa's position in Sandisk further supports this sentiment. Both Micron and Sandisk have benefited from growing demand for memory due to the rapid pace of artificial intelligence data center build-out, but the memory-chip market is historically cyclical.

In a surprising move, Tepper bought put options on Apple (AAPL), one of their biggest customers, which uses chips from both companies in its consumer devices. This bet against Apple's stock price may suggest that Tepper sees something the market doesn't. With rising memory prices continuing to pressure Apple's gross margin, investors should consider taking gains on Micron and Sandisk at their current prices.