David Alan Tepper is the founder of Appaloosa Management, which is a $3 billion hedge fund investment firm based in Chatham, N.J., just west of New York City. David Tepper initially became interested in the stock market as a young boy watching his father trade stocks in his hometown of Pittsburgh. Today, as president and founder of Appaloosa Management, Tepper has earned an international reputation for producing some of the highest returns amongst fund managers on Wall Street. He earned a master of science in industrial administration from Carnegie Mellon in 1982. He donated a record $55 million to the Graduate School of Industrial Administration. The gift is the largest donation to Carnegie Mellon University in its 104-year history.
He is a distressed-debt specialist, was once considered to be the hottest investor on wall street.
Several major deals highlighted David Tepper’s career before he established his fame by making the all-time record payday of $4 billion investing in near-bankrupt banks in 2009. The distressed debt specialist actually made his all-time record return of 148% back in 2003 and has had a 30% average annualized return since he founded his firm, Appaloosa Management, in 1993. Read more...
Hedge fund manager David Tepper of Appaloosa Management has been voted as the Investment Guru of the Year 2010 by GuruFocus users. He got more than 31% of the total votes casted up to today. Read more...
Several major deals highlighted David Tepper’s career before he established his fame by making the all-time record payday of $4 billion investing in near-bankrupt banks in 2009. The distressed debt specialist actually made his all-time record return of 148% back in 2003 and has had a 30% average annualized return since he founded his firm, Appaloosa Management, in 1993.
Tepper primarily specializes in distressed debt investing. He tends to buy distressed debt of companies on the verge of implosion and sells it when it matures. His firm now manages about $4 billion.
Power Companies (2001-2004)
Tepper’s assurance that the government would not let banks fail had at least one precedent. He made a small fortune in 2004 in a similar situation during the California electricity crisis. In 2000 and 2001, large swaths of the state of California faced blackouts and prominent electricity companies went bankrupt. The disaster began when energy companies created an artificial shortage by shutting down power plants for maintenance during times of peak usage. They then increased the price, allowing traders to sell power at significantly higher rates.
The government had also placed a price cap on retail electricity charges, which forced the industry to sell electricity at a loss. Drought and population growth in California exacerbated the situation. Consequently, Pacific Gas and Electric Company (PCG) went bankrupt, and Southern California Edison nearly went bankrupt as well.
The state of California stepped in to save the dying companies, which had together accumulated $20 billion of debt by early 2001 and had their credit ratings reduced to junk status. On January 2001, the state authorized the California Department of Water and Resources to buy power for Southern California Edison, and later it did the same for SDG&E. Companies resumed purchasing their own power in 2003.
David Tepper bought millions of shares of the two most affected power companies, Pacific Gas and Electric and Edison International (EIX), from 2001-2003, mostly when their stock traded in the teens or lower. He sold out of both companies in the beginning of 2004, when their stock had risen to the mid-$20s.
Enron, Worldcom, Conseco Bankruptcies (2002-2004)
In 2002 Tepper purchased at least $1 billion of the $14 billion of distressed debt and securities of one company that went bankrupt in the fallout of the energy crisis – Enron. Enron was accused of gaming the energy market and collapsed due to unethical bookkeeping and other causes.
Another company’s epic bankruptcy that year that paid off for Tepper. Worldcom concealed losses and misled the public about earnings, causing bond investors to lose about $7.6 billion when it defaulted on its debt, which Tepper purchased. “I’m buying a little bit today. It’s a big company with a lot of revenue so we probably will end up making money,” Tepper told the Seattle Times.
Conseco Inc., a U.S. insurance company that filed Chapter 11 bankruptcy in 2003, canceled its stock and gave ownership of the company in large part to bondholders. Tepper bought a large amount of cheap Conseco bonds when it was on the brink of bankruptcy. Conseco emerged from bankruptcy in 2003.
In 2003, Tepper returned 148% and in 2004, he was the second highest paid hedge fund manager, making $510 million, according to Institutional Investor.
Tepper’s seminal trades were made in 2009. Similar to John Paulson, he bought into financials confident that the government would not let the largest banks fail. While banks were teetering on the brink of bankruptcy and the majority of investors were believing the government would nationalize them, Tepper amassed bank-related securities, such as common and preferred shares and junior-subordinated debt.
In the first quarter of 2009, he bought 47.55 million shares of Bank of American at an average price of $6.73 per share. He then decreased his stake steadily as the stock rallied, reaching an average price of $15.79 in the fourth quarter of 2009.
He bought Bank of America preferred shares at 12 cents on the dollar and Citigroup bonds at 19 cents, and other bank debt of Washington Mutual and common and preferred shares of Wachovia, NBC reported. By the end of 2009, the companies’ stocks had recovered and he made billions.
In 2009 he made the highest payday in history of $4 billion, and achieved his second highest return of 132.7%.
With few large companies or sectors going under, Tepper has turned to one of the most distressed industries available – housing. He bought KB Homes (KBH), D.R. Horton Inc. (DHI), Pulte Group Inc. (PHM), Beazer Homes USA Inc. (BZH), Ryland Group Inc. (RYL), and Masco Corp. (MAS) in the first quarter of 2011.
Though none of the companies have balance sheets that forebode bankruptcy and none have announced an intention to, their stocks are cheap. The once-thriving companies now sell in the teens or lower.
Tepper is profiting less from disaster in the first quarter. His top five holdings are Citigroup (C), Prizer Inc. (PFE), Hewlett Packard Co. (HPQ), Bank of America Corp. (BAC), Goodyear Tire & Rubber (GT).
December was a solid month for American automakers. General Motors Company (GM)had its best December sales month since 2007, with sales up 19.3% over last year. Full-year sales were up a respectable 5.3%. Ford Motor Company (F) had its best December since 2005, though its full-year growth numbers were actually down slightly due to, among other things, retooling to make way for its new aluminum-body F-150. More...
David Tepper (Trades, Portfolio) believes 2015 could play out like 1999 as both years were preceded by trouble in Russia and “worldwide money” that was “made too easy for where USA fundamentals were in both late 1998 and 2014,” he told CNBC on Wednesday. More...
Seth Klarman (Trades, Portfolio) is an investor from America who founded the Baupost Group. The Baupost Goup is a private investment partnership and hedge fund. The Baupost Group has made over 20% annualized gains over the past three decades. Seth Klarman (Trades, Portfolio) is known for being the author of a book on value investing called Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor. More...
David Tepper (Trades, Portfolio), co-founder of Appaloosa Management, spoke with Bloomberg TV's Stephanie Ruhle and Erik Schatzker on "Market Makers" today about a wide variety of subjects, including the bond market, the U.S. stock market, Bill Gross' departure from PIMCO and Roger Goodell. Appearing alongside Tepper for the interview was David Saltzman, executive director of the Robin Hood Foundation. More...
David Tepper (Trades, Portfolio), leader of the $20 billion hedge fund Appaloosa Management, told Bloomberg today after the European Central Bank announced it would cut interest rates: “It’s the beginning of the end of the bond market rally. We’re done.” More...
The top net buys of the investing gurus in Q1 of 2014 were American Airlines (AAL), National Oilwell Varco (NOV), Gaming and Leisure Properties (GLPI), Symantec (SYMC), and Verizon (VZ). I found the net buys by using the S&P 500 Grid at GuruFocus. I adjusted the settings to include all investors and examined the results for both S&P 500 companies and non-S&P 500 companies. More...
CBS Corporation (CBS) is a mass media company. The company operates in the following segments: entertainment segment (55% of 2013 revenue) consists of the CBS Television Network, CBS Television Studios and CBS Global Distribution Group, CBS Films, and CBS Interactive; Cable Networks (11%), which is composed of Showtime Networks, CBS Sports Network, and Smithsonian Networks; Publishing (5%), which consists of Simon & Schuster; Local Broadcasting (18%), which is composed of CBS Television Stations and CBS Radio; and Outdoor Americas (9%), which provides advertising space on various structures, including billboards, transit shelters and benches, buses, rail systems, mall kiosks, stadium signage, and in retail stores. More...
Comcast Corporation (CMCSA) is a media and technology company with two businesses, Comcast Cable and NBCUniversal Media LLC. The company has five segments: Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks. More...
Halliburton Company (HAL) is a provider of services and products to the energy industry related to the exploration, development, and production of oil and natural gas. In this article, let's take a look at this company and try to explain to investors the reasons this is an apparently appealing investment. More...
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC.
Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.