David Tepper is one of my favorite investors. He marries macro and bottom-up, he's ballsy, and he's having a ton of fun.
From 1993-2013, he compounded at 29% net of fees!
Three times was he down more than 25%, each time he came back stronger.
From 1993-2013, he compounded at 29% net of fees!
Three times was he down more than 25%, each time he came back stronger.
"Investing with David is like flying, with hours of boredom followed by bouts of sheer terror. He's the quintessential opportunist, but you have to have a cast-iron stomach."
"The media says that hedge funds are the new masters of the universe. We're just a bunch of schmucks."😭
"The media says that hedge funds are the new masters of the universe. We're just a bunch of schmucks."😭
Tepper grew up lower middle-class in Pittsburgh.
A “big kid” and “a joker” he had knack for math and got into investing.
“I used to think buildings were black because that was just the color they made them. But they were black because of the soot.”
A “big kid” and “a joker” he had knack for math and got into investing.
“I used to think buildings were black because that was just the color they made them. But they were black because of the soot.”
After getting his MBA he joined Republic Steel which was started failing and gave him a capital markets crash course.
“There's a lesson here. In life, get all the experience you can. While you're young, go for the experience versus a paycheck.”
“There's a lesson here. In life, get all the experience you can. While you're young, go for the experience versus a paycheck.”
Tepper used his experience to join Goldman Sachs's new junk bond desk. He came with a chip on his shoulder and quickly rose to head the trading desk.
But the prolific trader failed at office politics - and was passed over for partner several times.
But the prolific trader failed at office politics - and was passed over for partner several times.
The frustrated Tepper left to form Appaloosa.
“Leaving Goldman was a scary proposition. They didn’t give me my record. I didn’t raise $50 million because I had connections. I was from the inner city of Pittsburgh. I didn’t have any social contacts. The only thing I had was me.”
“Leaving Goldman was a scary proposition. They didn’t give me my record. I didn’t raise $50 million because I had connections. I was from the inner city of Pittsburgh. I didn’t have any social contacts. The only thing I had was me.”
His first wins came in emerging markets before getting battered by Russia's default in 1998. He lost 29%.
But he didn’t panic. Instead, he scooped up more Russian bonds during the the sell-off. The fund recovered with a 61 percent gain in 1999.
But he didn’t panic. Instead, he scooped up more Russian bonds during the the sell-off. The fund recovered with a 61 percent gain in 1999.
In 2002, he lost 25% when the telecom bubble imploded and took the high yield market down.
Bets on the distressed debt of large bankruptcies such as Enron, WorldCom, and Conseco paid off - he emerged up 149 percent in 2003.
Alan Fournier gifted him a pair of brass balls.
Bets on the distressed debt of large bankruptcies such as Enron, WorldCom, and Conseco paid off - he emerged up 149 percent in 2003.
Alan Fournier gifted him a pair of brass balls.
Tepper raised cash in early 2008.
"Everything in the markets, whether investors knew it or not, was a bet on financials at the time. It was the same bet regardless of what you bought.”
Still, he was down nearly 27 percent as everything sold off.
"Everything in the markets, whether investors knew it or not, was a bet on financials at the time. It was the same bet regardless of what you bought.”
Still, he was down nearly 27 percent as everything sold off.
In Feb 2009, the Treasury announced terms for capital injections. Tepper saw the inflection and started buying.
“The government told me in writing what it would do and at what prices”
"Normally one or two others are buying, this time there was no one - not even the guy in Omaha”
“The government told me in writing what it would do and at what prices”
"Normally one or two others are buying, this time there was no one - not even the guy in Omaha”
"Most of the upside was on the preferred and debt side. That's perhaps why so many people missed this trade."
He was right. In 2009, the fund was up 132 percent or $7.5 billion. It was Tepper's masterstroke at Appaloosa which he compared to a piece of art.
He was right. In 2009, the fund was up 132 percent or $7.5 billion. It was Tepper's masterstroke at Appaloosa which he compared to a piece of art.
My favorite lessons:
- Don’t do it for money alone.
- Lazy competitive.
- Smart enough to get lucky.
- Find your own style.
- Ahead of the herd.
- Don't bet the firm.
- Bouncing back.
- Unemotional under pressure.
- Stay nimble.
- Optimists win in the long run.
- Keep having fun.
- Don’t do it for money alone.
- Lazy competitive.
- Smart enough to get lucky.
- Find your own style.
- Ahead of the herd.
- Don't bet the firm.
- Bouncing back.
- Unemotional under pressure.
- Stay nimble.
- Optimists win in the long run.
- Keep having fun.
Don’t do it for money alone.
Tepper plays the game because he loves it. He follows intrinsic motivation. This allows him to remain confident even when he’s down.
“I was never afraid to go back to Pittsburgh and work in the steel mills.”
Tepper plays the game because he loves it. He follows intrinsic motivation. This allows him to remain confident even when he’s down.
“I was never afraid to go back to Pittsburgh and work in the steel mills.”
Lazy competitive.
There are two David Teppers. There’s the funny and affable person showing up in interviews. That’s off the field. During the trading day, Tepper is fiercely competitive.
"In the outside world, I’m that easygoing person. But if I’m on the field, I wanna win."
There are two David Teppers. There’s the funny and affable person showing up in interviews. That’s off the field. During the trading day, Tepper is fiercely competitive.
"In the outside world, I’m that easygoing person. But if I’m on the field, I wanna win."
Be smart enough to get lucky.
It's easy to think Tepper merely got lucky. But the headlines miss the preparation, the positioning. It takes work to get to a place where good fortune will materialize.
When it does, remain humble enough to not confuse it all with skill.
It's easy to think Tepper merely got lucky. But the headlines miss the preparation, the positioning. It takes work to get to a place where good fortune will materialize.
When it does, remain humble enough to not confuse it all with skill.
Find your own style.
Tepper left behind the narrow lane of credit and distressed investing.
@GrahamDuncanNYC wrote "he appears to move effortlessly across sectors and asset classes, scooping up dollars as he goes"
That's his unique style. You have to find yours.
Tepper left behind the narrow lane of credit and distressed investing.
@GrahamDuncanNYC wrote "he appears to move effortlessly across sectors and asset classes, scooping up dollars as he goes"
That's his unique style. You have to find yours.
Ahead of the herd.
“The Street follows us, we don’t follow the Street.”
Tepper is famous for making high conviction bets during panics.
“I don't know how you can really make money if you're not willing to lose money. That's what separates us from everyone else.”
“The Street follows us, we don’t follow the Street.”
Tepper is famous for making high conviction bets during panics.
“I don't know how you can really make money if you're not willing to lose money. That's what separates us from everyone else.”
But you must never confuse this with an invitation to buy just because there is fear or merely because the price has declined.
Tepper made high conviction bets when the setup became highly asymmetrical and when he had done a lot of homework on the asset.
Tepper made high conviction bets when the setup became highly asymmetrical and when he had done a lot of homework on the asset.
Don't bet the firm.
Tepper is highly risk aware. He never mistakes himself for being bigger than the market. He calibrates the risk in the portfolio with his exposure.
“When the shit hits the fan, no one does it better with distressed. But you need to get yourself unlevered.”
Tepper is highly risk aware. He never mistakes himself for being bigger than the market. He calibrates the risk in the portfolio with his exposure.
“When the shit hits the fan, no one does it better with distressed. But you need to get yourself unlevered.”
“Does being a risk-taker mean not being afraid of losing money sometimes? Then I’m a big risk-taker. Does it mean putting the firm in jeopardy? In that case I am not a big risk-taker.
... It’s okay to lose money in the short term. But we don’t ever want to jeopardize the firm."
... It’s okay to lose money in the short term. But we don’t ever want to jeopardize the firm."
Bouncing back.
Tepper’s career has been defined by his ability to take the hit and keep fighting. He turned setbacks, whether in his career or in markets, into the source of his next triumph.
Tepper’s career has been defined by his ability to take the hit and keep fighting. He turned setbacks, whether in his career or in markets, into the source of his next triumph.
"If I go through my career, it was a lot of a lot of disappointments. There's a lot of things that didn't go right. But those aren't the things that make you. It's how you bounce back and where you move on from there and how you, what you learn from those things."
Unemotional under pressure.
Tepper's ability to make good decisions under pressure is crucial.
"This is a good place to be during a panic. If you came to our office when we were down 20%, you wouldn't see a difference -it's another day at Appaloosa."
Tepper's ability to make good decisions under pressure is crucial.
"This is a good place to be during a panic. If you came to our office when we were down 20%, you wouldn't see a difference -it's another day at Appaloosa."
Staying nimble.
Tepper returned capital when the fund’s size was starting to constrain him.
“The dirty secret of Appaloosa is, we have been really good macro players for the past five years. We didn’t sit on the book. We are pretty good figuring how markets will run.”
Tepper returned capital when the fund’s size was starting to constrain him.
“The dirty secret of Appaloosa is, we have been really good macro players for the past five years. We didn’t sit on the book. We are pretty good figuring how markets will run.”
Optimists win in the long run.
“We have this saying: The worse things get, the better they get."
Tepper didn't let the crisis turn him into a doomsday prophet.
"Markets adapt, people adapt. Don’t listen to all the crap out there.”
“We have this saying: The worse things get, the better they get."
Tepper didn't let the crisis turn him into a doomsday prophet.
"Markets adapt, people adapt. Don’t listen to all the crap out there.”
Keep having fun.
Tepper loves taking shots at the industry.
“Would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.”
His humor and passion for the game make him one of my favorite investors to study.
Tepper loves taking shots at the industry.
“Would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.”
His humor and passion for the game make him one of my favorite investors to study.
And shared more quotes, my takeaways, and a list of sources for further reading here (paywall):
neckar.substack.com/p/what-i-learn…
neckar.substack.com/p/what-i-learn…
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