David Tepper has gotten off to a good start this year.
His Appaloosa fund is up nearly 10 percent net of fees while
his Thoroughbred fund which has less of an exposure to
equities is up close to 8 percent.
Tepper wont comment. Those familiar with the results
say the early returns are being driven by his exposure to the
equity markets and commercial mortgage backed securities.
At year-end, he had established 13 new equity positions, the
largest being Micron Technology, Dean Foods and General Motors.
In fact, at year-end, Appaloosa was the second largest holder
of Dean Foods, with more than 10.7 million shares.
Sure enough, in the first two months of this year, shares of
Dean Foods were up more than 19 percent while Micron surged
about 39 percent.
Entering the new year, Tepper also still had a big bet on
banks, which helped fuel his triple-digit returns in 2009. In
fact, his three largest equity holdings were Citigroup, Bank of
America and Wells Fargo.
Those familiar with his portfolio say Tepper, whose bullish
comments on CNBC back in September touched off what came to be
called the Tepper rally, still thinks the US
economy is in great shape, in large part because he sees fresh
new strong economic data being reported on a regular basis
these days, whether they are related to new auto sales or jobs,
to cite just two examples.
Even so, Tepper has reduced his risk somewhat in response to
recent global political developments. He has taken down his P/E
estimate from 15 to 14 1/2 times and at the beginning of March
removed all leverage.
Rising oil prices so far are not concerning him. He believes
the economy can handle $100 a barrel right now and $110 per
barrel in six months, for example, say people familiar with the
hedge fund firm.
At this point, he is not worried yet about inflation,
although he does believe the day of reckoning has moved closer,
to one to two years out now, say sources.
However, he is seemingly most concerned about developments
in the Middle East. Tepper is said to be especially concerned
about Saudi Arabia. Sources say if the oil fields in Saudi
Arabia are burning, Tepper would react to that by selling and
going heavily into cash. In general, he is said to believe if
the Middle East blows up, you can lose half your money.