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David Tepper runs a successful hedge fund called Appaloosa Management. In the recent past, Tepper has been publicly vocal about making aggressive bets on stocks. For example, in late September 2010, Tepper made this point in an interview [emphasis added]:
Government intervention in the financial markets virtually guarantees that most investment choices will go up, hedge fund manager David Tepper told CNBC.
Tepper’s comment above was in reference to an upcoming Federal Reserve monetary intervention, now known as QE II. In August 2010, Fed Chairman Bernanke made remarks suggesting that another round of QE would be forthcoming. Tepper believed that either the economy would rally or, if it did not, the Fed would intervene strongly so he bought stocks aggressively. Stocks rallied and continued rallying after QE ll was formally announced in November.
Of course, that was then. Now, Tepper seems to be spooked by the vortex of risks that is forming both here at home and in Europe. As a result of this view, Tepper seems to be getting more cautious.
This report from Institutional Investor suggests that Tepper’s fund, Appaloosa Management, has built up as much as 30-40% in cash or fixed income securities such as Treasuries [emphasis added]:
…Even some of the savviest players are baffled about what is going on and have therefore turned very cautious.
Case in point: Appaloosa Management's David Tepper. Yes, the hedge fund manager who has ice-water in his veins and who likes to ride roller-coasters with his hands in the air, has turned cautious.
Sources say he has gone 30 percent to 40 percent in cash, which is very high for him. Some of his cash is invested in U.S. Treasuries, which have in turn risen in value in recent weeks.
Keep in mind that Tepper had about 30 percent in cash entering 2009, shortly before he started buying up banks such as Bank of America before anyone else had the guts to do the same and racked up triple-digit gains by the end of the year.
Sources say he is not preparing to aggressively start spending this cash any time soon, except to pick up some shares of stocks he already owns on the dips.
If you recall, last September Tepper helped to touch off a market rally when he offered his famous win-win analysis on CNBC, asserting stocks would either do well if the economy strengthened or with government stimulus.
…Word is he will remain cautious until there is improvement in the European bank crisis. Of course, if the markets tank, you can be sure he'll be aggressively scouring for bargains.
And, remember Tepper has historically been the one who has had the most guts to buy when absolutely no one else has the stomach to tolerate it…
If you want to check out the 13F SEC filing for Appaloosa, go here. Word is he has been selling financials aggressively including Bank of America, Citigroup and other big banks.
Hat tip: Zero Hedge
Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.
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