Tepper Tactical

Alibaba trades at a steep discount to global e-commerce and cloud peers despite owning dominant positions in Chinese retail, a fast-growing cloud segment, and a portfolio of international assets including Lazada and AliExpress. The restructuring into six business units unlocks hidden value and puts pressure on management to surface it through buybacks, dividends, and potential spinoffs. We hold it as a value rerating play where the gap between price and intrinsic worth closes as sentiment on China tech normalizes.

Alphabet runs the dominant search and digital ads franchise while quietly building one of the most profitable cloud businesses on the planet. Google Cloud is now a real earnings contributor, and the AI infrastructure buildout puts Gemini-powered products directly inside the tools billions of people use every day. We hold this as a core compounder that anchors the portfolio with durable cash generation and genuine AI exposure without the binary risk of a pure-play bet.

Amazon runs three distinct growth engines: AWS, advertising, and retail fulfillment, and all three are accelerating at the same time. AWS is the real prize here, a high-margin cloud platform growing north of 17% annually as enterprise AI workloads migrate to the cloud and Amazon's own Bedrock platform pulls developers deeper into its ecosystem. We hold it as the portfolio's core technology compounder, a business that compounds free cash flow across multiple durable segments with no single point of failure.

Micron is the clearest pure-play on the AI memory supercycle, with HBM3E chips shipping into Nvidia GPU clusters and pricing power returning across both DRAM and NAND after a brutal down-cycle. Revenue is inflecting hard as data center demand overwhelms supply, and management has guided for record revenue quarters ahead. We hold it as the portfolio's primary cyclical lever on AI infrastructure buildout, capturing semiconductor upside without paying the premium multiples of logic chipmakers.

Meta runs the largest social advertising network on the planet, with Facebook, Instagram, and WhatsApp giving it an audience no competitor can replicate at scale. AI-driven ad tools are lifting returns on ad spend for buyers, which is pulling budget share away from rivals and driving the margin expansion we have seen over the last several quarters. We hold it as a core growth anchor: steady revenue compounding with improving free cash flow and a Reality Labs optionality layer that costs us nothing to carry.

TSM manufactures the most advanced chips on the planet and every major AI, smartphone, and high-performance computing buildout runs through its fabs. NVIDIA, Apple, AMD, and Broadcom all depend on TSMC's 3nm and 5nm nodes in ways that no competitor can replicate at scale today. We hold it as the single most direct exposure to the structural AI infrastructure wave without having to pick a winner at the application layer.

NVIDIA owns the compute stack that every major AI lab, cloud provider, and enterprise is racing to buy, with H100 and Blackwell demand so far ahead of supply that pricing power stays intact for years. Data center revenue has compounded at triple digits recently and the software layer, CUDA, keeps customers locked in well beyond any single hardware cycle. We hold this as the portfolio's highest-conviction growth engine, the name most directly levered to the AI buildout.

Whirlpool is the dominant North American appliance brand trading at a deep discount to its own historical multiples after a painful cycle of cost inflation and housing market softness. The setup is simple: as mortgage rates ease and housing turnover recovers, appliance replacement demand snaps back and margins follow. We hold it as a cyclical lever that pays us a meaningful dividend while we wait for the turn.

NRG is a vertically integrated power generator and retail energy provider that benefits directly from surging electricity demand driven by AI data centers and industrial reshoring. The Vivint Smart Home acquisition expanded its consumer platform beyond commodity power into recurring home services revenue, giving the business a stickier earnings base than a pure-gen play. We hold it as a cyclical lever on the structural power demand supercycle while collecting a growing dividend along the way.

Microsoft compounds across three dominant franchises: cloud infrastructure via Azure, productivity software via Office 365, and a growing AI monetization layer baked into both. Azure is growing north of 30% annually and the Copilot rollout is converting that AI spend into recurring enterprise revenue at scale. We hold this as the portfolio's core technology compounder, a position that earns its weight through durable cash flow and reinvestment optionality.

American Airlines is the largest airline by passenger volume in the US, and a cyclical recovery play on sustained travel demand holding up better than the market prices in. The balance sheet is still debt-heavy from the pandemic era, but free cash flow generation is improving as the cost restructuring plays out and loyalty revenue from the AAdvantage program adds a more durable earnings stream. We hold it as a leveraged cyclical lever: when the macro stays soft but travel holds, AAL outperforms its valuation multiple on any positive re-rating.

PDD runs two distinct growth engines: Pinduoduo dominates value-conscious Chinese consumers through its group-buying model, while Temu is pushing hard into the US and European markets with ultra-low price points that are genuinely disrupting incumbent e-commerce players. Revenue growth has been exceptional even as peers across Chinese internet slowed, which tells us the model still has room to run. We hold this as a high-conviction growth anchor to capture the continued share shift toward price-first shopping globally.

Qualcomm owns the dominant smartphone baseband modem franchise and is now pushing its Snapdragon silicon into PCs, cars, and industrial IoT, which reduces the revenue concentration risk that has kept the multiple compressed. The automotive design-win pipeline is the real story: it has grown to over $45 billion and gives us a multi-year revenue ramp that the market is still underpricing relative to legacy chip peers. We hold it as a platform compounder that earns its keep through licensing cash flows today while the auto and edge AI segments re-rate the stock over the next two to three years.

South Korea trades at a persistent discount to global peers, driven by the so-called Korea discount tied to complex cross-shareholding structures, and reform pressure from regulators and activists is slowly closing that gap. EWY gives us concentrated exposure to Samsung, SK Hynix, and a handful of dominant exporters that are direct beneficiaries of a global semiconductor and memory upcycle. We hold this as a tactical cyclical lever that profits when the tech cycle turns and valuation rerating accelerates.

KWEB gives us concentrated exposure to China's dominant internet platforms, names like Alibaba, Tencent, Meituan, and JD that trade at steep discounts to comparable Western peers. The regulatory crackdown cycle appears to have peaked, and Beijing has shifted toward stimulus and tech sector support, which sets up a re-rating opportunity for a basket that has been left for dead by most Western allocators. We hold it as a tactical cyclical lever with meaningful upside if sentiment toward Chinese equities continues to recover.

Vistra is the largest competitive power generator in the US, with a fleet that spans natural gas, nuclear, and a growing battery storage business that positions it directly in the path of soaring data center electricity demand. The nuclear segment is the real edge here: zero-carbon baseload power commands premium pricing as hyperscalers chase clean energy contracts and grid reliability tightens. We hold it as our primary energy infrastructure lever, capturing both the AI power demand tailwind and a structural repricing of dispatchable generation.

Uber has quietly flipped from growth-at-all-costs to a real margin story, with EBITDA and free cash flow both inflecting positively as the platform scales across rides and delivery. The network is the moat: 150 million monthly active users and driver supply that is nearly impossible for a regional challenger to replicate at cost. We hold it as a high-conviction growth anchor that benefits from secular shifts in urban mobility and food delivery.

Corning is the dominant supplier of specialty glass and optical fiber, with two durable tailwinds: the AI-driven buildout of data center interconnects and a recovering smartphone display cycle. The optical communications segment is accelerating fast as hyperscalers pour capital into network infrastructure, and Corning's near-monopoly position on fiber and cable means it captures that spend with high incremental margins. We hold it as a steady growth anchor with real pricing power and a business model that compounds quietly through multi-year infrastructure cycles.

Deutsche Bank has quietly executed a multi-year restructuring that stripped out the investment banking drag and repositioned the firm around its core corporate and private banking franchises. Net interest income has been the primary engine as European rates stayed elevated longer than expected, and the German corporate client base gives DB a durable revenue floor that pure trading shops lack. We hold this as a cheap way to play European banking normalization: the stock still trades at a discount to book, and any further re-rating toward sector peers adds meaningful upside at a 4% portfolio weight.

JD.com is China's largest direct-sales e-commerce and logistics operator, with a first-party retail model that gives it supply chain advantages most local rivals cannot replicate. The company has been aggressively cutting costs, returning cash via buybacks and dividends, and the market is still pricing it like a broken growth story despite improving margins and a dominant position in electronics and appliances. We hold it as a value rerating play on a profitable, cash-generating business that China's consumer recovery should re-rate higher.

Owens Corning dominates two slow-moving but durable markets: insulation and roofing materials, where it holds number one or number two share and pricing power that outlasts most construction cycles. The 2023 acquisition of Masonite adds a third leg in doors, expanding the platform right as housing repair and remodel spending remains sticky even when new construction slows. We hold it as a cyclical lever with compounding characteristics, giving the portfolio direct exposure to residential and commercial construction activity at a reasonable multiple.

RTX runs two durable franchises: Pratt and Whitney jet engines and Raytheon defense systems, both benefiting from a sustained global rearmament cycle and a commercial aerospace recovery that still has years to run. The Pratt GTF engine fleet drives a high-margin aftermarket services stream that locks in recurring revenue for decades as those planes fly. We hold it as a steady compounder that adds defense exposure and cash flow durability to the portfolio without taking on speculative risk.

L3Harris sits at the intersection of two durable defense spending trends: electronic warfare and space-based intelligence, both of which are growing faster than the overall Pentagon budget. The 2019 Harris/L3 merger created a scaled prime contractor with sticky long-cycle programs that generate predictable cash flows even in budget uncertainty. We hold it as a steady defense compounder that cushions the portfolio when macro volatility spikes.

Baidu owns the dominant search engine in China and is now pivoting its core platform around AI, with Ernie Bot giving it a credible shot at monetizing the generative AI wave across search, cloud, and autonomous driving via Apollo. The stock trades at a steep discount to Western AI peers despite real infrastructure and a captive user base of hundreds of millions. We hold it as a value rerating play on Chinese tech re-engagement and AI monetization inflecting from here.

Mohawk is the world's largest flooring manufacturer, with pricing power tied to housing activity and a cost structure that benefits hard when input costs fall. We hold it as a cyclical lever: housing turnover is historically depressed, and any normalization in existing home sales directly lifts flooring demand and margins. At current multiples it prices in continued weakness, so we get the cycle recovery plus potential multiple expansion as the housing market unfreezes.