Tepper is still optimistic on the U.S. market through 2012 based on earnings estimates. If 2012 S&P EPS hits 100+ with a 14-15 multiple, that's 1,400+ on the S&P. We are at 1,300. However, Tepper thinks there are downside risks:
1. Stocks have already gone up, "free ride" can't last forever
2. External forces out of Europe (liquidity/solvency) or China (overheating)
Tepper is still all in at 1,000 though, lol. "You want to go back to 1,000, I'm buying like crazy." He thinks Dean Foods (DF), a dairy/milk processor and distributor, is undervalued and their almond, soy and organic milk divisions deserve a higher multiple based on growth. $DF and milk prices are down since 2009. Look through the sources below for data and charts. Here's an interesting factoid about milk prices/production costs from this Fortune article on Dean Foods:
"Ben Mackovak, an analyst at Charlottesville, Va.-based hedge fund Rivanna Capital, says this trend of declining retail prices can't continue. He compiled data from the USDA and the Bureau of Labor Statistics going back to the 1980s and found that retail milk prices closely follow production costs. "Which makes perfect sense," Mackovak says. "The concept of selling milk is not new. But what's happened in the past year -- and it's really the first time this has happened -- is that there's a divergence.""
Appaloosa owns 7.35% of Dean Foods. Check out the descending channel on the chart from 2007. This could be an interesting turnaround play. What about competition in this space? I'm going to watch this.
Dairy experts predict modest recovery in 2011 (AP via SFGate, 1/19/2011)Goldman Sachs Retains Dean Foods Neutral Rating (DF) (Benzinga)
Milking profits from Dean Foods (Fortune, 1/11/2011)
Daily Dairy Report, futures (CME Group)
Milk Prices (Data & Graphs) - Understanding Dairy Markets (UW Madison)
DF (Dean Foods) - FreeStockCharts.com