Throughout 2024, David Tepper of Appaloosa Holdings sold more than 1.3 million shares of social media giant Meta (NASDAQ:META). The parent company of Facebook and Instagram has been soaring in recent years as it has developed and deployed new AI tools that are becoming increasingly popular.
Why did David Tepper sell Meta, and does the stock look appealing for investors today?
Tepper’s History With Meta
David Tepper has been in and out of Meta, previously Facebook, since 2014. The selling spree that ran throughout 2024, though, began in 2023 when Appaloosa sold a modest 5.1 percent of its holdings in the business.
That rate of selling accelerated quickly, though, when in Q1 of 2024 the fund sold 728,000 shares that represented almost 40 percent of its Meta holdings.
Between this and the fact that the selling kept going throughout the rest of the year, it had started to look as though Tepper planned to sell all or most of his META holdings.
In Q1, however, David Tepper pulled an abrupt about-face by buying 60,000 new shares of Meta at an average price of about $655. This was significantly above the prices he had been selling shares for during the previous several quarters. This leads to the rather interesting conclusion that Tepper likely changed his mind about Meta’s trajectory.
Why Did David Tepper Sell Meta Stock?
When it comes to Tepper’s selling activity, it seems likely that a combination of profit-taking and potential overvaluation provides the best explanation.
Appaloosa’s average buy price of Meta shares is just $180. When Tepper started selling in 2023, his average price was about $325.
By Q4 of last year, Appaloosa was getting an average of over $585 per share. With such large gains, it’s far from difficult to understand why Tepper and his team may have decided to take profits on Meta in order to reinvest elsewhere.
Tepper may also have determined that Meta shares could be trading above their intrinsic value during the period from late 2023 to late 2024.
As early as 2022, Meta was rapidly making changes to its Facebook platform to keep up with increasingly successful competitors, most notably TikTok.
Facebook has also struggled to engage younger users, though many of these users are more engaged on Instagram. Between a potential change in Meta’s market position in the highly competitive world of social media and a valuation that still put it at a premium, Tepper may have judged that the business was trading at or above its fair value.
The question of why Tepper reversed course and started buying Meta in Q1 is a slightly more complex one. However, looking at the rest of Appaloosa’s activity during the quarter may give us a few clues.
In addition to Meta, Tepper invested in Alphabet, NRG Energy and Energy Transfer, all businesses that stand to benefit from the ongoing surge in AI investment. As such, buying additional shares in Meta could be seen as part of a broader strategy of investing in promising AI businesses that Tepper appears to be pursuing at the moment.
Meta’s stronger-than-expected Q4 earnings could also go some way toward explaining why David Tepper began buying again when shares were trading at higher prices than he had sold them for just one quarter earlier.
Meta’s Q4 performance handily beat both top-line and bottom-line expectations from analysts, with revenue rising 21 percent and net income rising 49 percent on a year-over-year basis. The business also reported strong growth in its AI product offerings during the quarter, potentially making it a good fit for Appaloosa’s AI strategy.
It’s also worth remembering that Tepper has gone through multiple cycles of buying and selling Meta that go all the way back to 2014. As such, this may simply be the latest example of Appaloosa buying when the stock looks primed to rise and then realizing profits as it moves gradually higher.
This cycle of active buying and selling has proven quite profitable for Tepper over the years, and it may be that he sees an opportunity to capture additional gains as Meta moves higher on its strong Q4 performance.
A final decent possibility to explain Tepper’s reversal into buying is the fact that investors are increasingly expecting the Federal Reserve to cut rates later in the year, a move that would likely benefit high-growth stocks like Meta. Three rate cuts are expected in the later months of 2025, bringing interest rates down by about 0.75 percent.
Such a move would very likely send shares of high-growth tech firms, especially the so-called Magnificent Seven, higher. Given that Tepper is known to use a keen understanding of macro trends and interest rates as part of his investment strategy, it’s possible that this may have played into his decision to start buying Meta again.
What Tepper’s Activity Could Mean for Meta Shareholders
At first glance, David Tepper’s selling activity might look a bit worrisome for investors who own META. Tepper reduced his stake in Meta by double-digit percentages in every quarter last year, and the buying in Q1 only increased his holdings by about 12 percent.
The sudden reversal to buy at higher prices, however, may suggest that Tepper is more bullish about the stock on the back of Meta’s recent performance. Appaloosa also hasn’t released its Q2 13F yet, which may or may not show additional buying activity in Meta.
It’s also important to keep in mind that Meta is still one of the top five holdings in the Appaloosa portfolio, even after last year’s selling spree. With 6.6 percent of the portfolio in Meta shares, it doesn’t seem that Tepper has lost confidence in either the business or the stock’s ability to generate returns for his fund.
With that said, it’s possible that shareholders could be in for a period of slower returns going forward. Meta has kept climbing since Tepper bought it, rising to nearly $720 per share. Analysts currently project a 12-month upside of less than 2 percent for the stock.
While investors like Tepper who locked in a low cost basis by buying earlier have done very well on Meta’s bullish run, investors who don’t own the stock today may find it a bit too expensive to buy coming off a trailing 12-month return of more than 40 percent.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.