Study of David Tepper
- Tepper’s view on macro economy is so simple, yet so useful Hedge fund billionaire David Tepper’s stock market advice in 2010 worked all decade
- Tracking David Tepper’s Appaloosa Management Portfolio – Q2 2019 Update – it is so amazing to see Tepper allocate such big percentage in calls of SP500 and TQQQ. I have made some money on these two after learning Tepper from gurufocus video. But I have not tried to invested such big percentage of my portfolio in this two. I should be very good at understand the macro and market cycle.
- David Tepper’s 13F portfolio value increased from $3.49B to $9.26B this quarter.
- Tepper added two large leveraged positions in SPDR SP& 500 and Invesco QQQ index ETFs through Calls.
- Appaloosa decreased Micron and dropped Alibaba during the quarter.
SPDR S&P 500 ETF (SPY) Calls and Invesco QQQ ETF (QQQ) Calls: These two leveraged long positions through Calls were established during the quarter. The huge ~58% of the portfolio SPY Calls stake was purchased as the underlying traded between $275 and $296. It currently trades at $292. The ~17% QQQ Calls position was established as the underlying traded between $170 and $191. It is now at $188.
From a May 19, 2015 Forbes article. Tepper has successfully taken this position before…”One of the biggest and boldest option trades of the first quarter was made by billionaire hedge fund manager David Tepper. Tepper has perhaps the best track record over the past 20 years, returning close to 40% annualized, before fees. According to his recent filing, he initiated a more than $1.3 billion call option on stocks, via both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ). The notional value of this option position represents about one third of Tepper’s equity assets under management. This is no surprise, given he recently said he thinks the S&P 500 is still cheap and should return 15% this year. That’s another 11% from current levels.”
- How David Tepper Became a Billionaire – Tepper made a lot of money in PCG in 2001 during its bankruptcy, I might can learn and repeat the same thing?
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 (NYSE: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 (NYSE: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.
one recent example of investment in distressed bonds
Puerto Rico Bonds Soar, Pointing to Hope for Restructuring
A deal would clear one of the largest obstacles to emergence from the bankruptcy court protection. Puerto Rico bond prices soared Monday after the federal oversight board that runs the U.S. territory’s finances released a revised fiscal plan that raises expectations for disaster funding and economic growth. Bond price rises from 20 cents on the dollar in Jan to 60 cents on the dollar today.
