David Tepper Likes Equities (Hedge Fund Appaloosa Management) ~ market folly

Friday, September 24, 2010

David Tepper Likes Equities (Hedge Fund Appaloosa Management)

David Tepper, founder of $12.4 billion hedge fund Appaloosa Management sat down for a rare interview with CNBC this morning. He says that over time he has compounded 40% for himself and compounded 30% for his investors over the course of 17 years. In his chat, he revealed that he is moving into stocks because if the economy does well, stocks will do well. Conversely, he thinks bonds and gold will not. Interestingly, he believes the Federal Reserve is acting as a put for his strategy because if the economy worsens, the Fed will help with quantitative easing (QE). You can see what stocks are in Appaloosa's portfolio in our newsletter: hedge fund wisdom.

Appaloosa Management typically allocates 70% of their capital to bonds and 30% to stocks. Given Tepper's commentary, it's evident that he's increasing his equities allocation due to the perceived opportunity. While he has made the conscious decision to move more in that direction, he appropriately cautions people that he is not "going balls to the walls." (By the way, isn't it awesome that such a prominent fund manager would use such a characterization?) Additionally, keep in mind that Appaloosa's main funds do not employ leverage either.

Embedded below are the two videos from Tepper's interview with CNBC. Email readers will need to come to the site to view them. Video 1:

Back in May, Tepper advocated shares of Bank of America (BAC) and thought they could see $27 in the next year. He also liked Spanish banking giant Banco Santander (STD). However, Tepper mentioned that financials only comprise 10% of his equities portfolio at the moment. Tepper also decided to highlight that his son had bought Apple (AAPL) and Google (GOOG) as well to showcase how young investors are not afraid of equities like some strategists believe. Here's part two of the interview:

Overall, the Appaloosa manager likes to watch overall macro pictures such as trends in jobless claims, movement in M2, etc. Lastly, Tepper also made sure to highlight one of the best pieces of advice in financial markets, to take emotion out of the picture by saying, "we're pretty unemotional when we invest." To see what Appaloosa is invested in, you can find out in our latest issue of hedge fund wisdom.

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