(This post originally appeared on The Pragmatic Capitalist)
David Tepper isn’t exactly a household name, but he will be when 2009 is said and done. Tepper, who runs hedge fund Appaloosa Management, is estimated to return over 120% after fees in 2009 and Tepper will personally make over $2B. The manager of the $12B fund made a series of very bold bets that the U.S. economy would thwart depression and rebound sharply in 2009. He was right.
The fund specialises in distressed debt and as we mentioned earlier this year 2009 was a once in a generation opportunity. Tepper capitalised on it in a big way. He has been reported to keep a pair of brass testicles on his desk, but the real thing was on full display in late 2008 and early 2009 as Tepper moved his fund into the most dangerous of dangerous sectors – the banks. He reportedly purchased Bank of America near $3.72 and Citi near $0.79. With Bank of America trading at $15.33 and Citi at $3.34 Tepper’s fabulous year is perfectly summed up.
It hasn’t been all roses for Tepper’s investors over the years, however. Despite an average return of 30% per year Tepper’s fund is known for its volatility and finished 2008 down by 25%. An excellent year compared to the S&P 500, but a nail in the coffin for most hedge funds. Nonetheless, Tepper’s investors stood by the billionaire and they’re glad they did.
But what is he investing in now? Tepper doesn’t think the recovery move is over just yet. Much like John Paulson (who rose to infamy shorting & then buying beaten down names during the crisis) he says rates will stay low and that valuations on stocks and bonds remain favourable. Staying true to his brass, Tepper is running into the sector of the market where many analysts see the next crisis unfolding. He is piling money into commercial real estate. His fund currently has over $2B invested in CMBS and he remains a very large investor in the banks.
As of Appaloosa’s November 22nd SEC filing, the hedge fund was still largely invested in the banks. A lone position in Microsoft represents the extent of their tech holdings. Unlike John Paulson, who is broadly hedged with large holdings in healthcare and gold, Tepper is much more focused. Their largest positions are as follows:
1. Bank of America (BAC) $573MM
2. Citigroup (C) $385MM
3. Wells Faro (WFC) $286MM
4. Fifth Third Bancorp (FITB) $246MM
5. Suntrust (STI) $192MM
The full holdings can be found here. Please note that Appaloosa likely has substantial investments outside of their required SEC reporting:
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