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The Morning Brief: David Tepper Punctures Bubble Talk
David Tepper is still bullish despite the market’s long runup. The founder of Short Hills, New Jersey-based Appaloosa Management told Bloomberg TV in an interview at Friday’s Robin Hood Investors Conference in New York that he thinks the stock market will be higher six months from now, disputing the growing notion that there is a bubble building in the markets in general.
Tepper, who says he is up more than 40 percent gross this year, explains that unlike the 1995-to-2000 bubble period, price-to-earnings multiples have barely budged in the past five years. Since then, fears of the end of the financial system, Europe and China have abated. In fact, he says the hedge funds that will have the toughest time in the future are the long-short managers who can only be, say, 60 percent long. They will miss out on some upside gains. He also said you can’t go wrong being long an S&P 500 index fund or exchange-traded fund in this environment, although he thinks hedge funds like him will pick better stocks. That said, he does have a hedge against rising interest rates — a put on Treasury rates. His favorite stock group: airlines, which have already delivered big gains for him but still account for more than 10 percent of equities.
William Ackman’s promise to renew his attack on Herbalife at the Robin Hood conference was a dud. The head of New York-based Pershing Square Capital Management reportedly told the audience: “This is not a trade. We’re going to take this to the end of the earth.” However, investors were mostly unmoved. The stock closed up 4.72 percent, at $71.74, and is now up more than 10 percent in the past three trading days.
Retired hedge fund manager Stanley Druckenmiller told Bloomberg TV he is shorting IBM, believing its business will be overtaken by other technologies such as the cloud. “It’s one of the more higher-probability shorts I have seen in years,” said Druckenmiller in an interview at the Robin Hood conference in New York. “IBM is old technology being replaced by cloud technology.”
Pedro De Noronha, managing partner at hedge fund Noster Capital, believes Twitter’s stock could fall by up to 80 percent, asserting it is not backed by a “sound valuation.” He told a CNBC audience: “I don’t think there is any serious investor who’s really looking at Twitter and thinking, ‘I’m going to double my money.’ Maybe one day in the not too distant future we’ll be able to buy it at 80 percent off the current level.” It is not clear which investors may own the stock now since it went public after September 30, the most recent reporting period for stockholders.
Daniel Och and his OZ Management fund, managed out of New York-based Och-Ziff Capital Management, combined to report owning 8.61 percent of RE/MAX Holdings, Inc., a real estate brokerage franchiser. It went public at the beginning of October at $22 a share, above the expected range of $19 to $21 a share. It closed Friday at $30.12.