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Chit Chat Stocks 팟캐스트의 슈퍼인베스터 시리즈 중 David Tepper 편. Tepper는 1993년 Appaloosa 설립 후 1993~2013년 연 28.5% 순수익률을 기록한 것으로 추정되며, 2019년 패밀리오피스 전환. 1987 크래시 채권 매입, 1998 러시아 디폴트 채권 저가 매수(일시 -29%) 후 회복, 2023 엔비디아 매수·2025 축소 등 사례를 다룸. 진행자들은 시간 기반 투자, 위기 시 현금 여력, 매크로 조건 활용, 테마 투자의 단순함을 교훈으로 정리. 특정 시점 예측 발언은 없고 개별 종목 가격 전망은 명시되지 않음.
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For the past 3 years, Interactive Brokers individual clients average 24.3% annually, beating the S&P 500. Lower costs and access to 170-plus global markets matter. Visit ibkr.com/performance. Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Shafer analyze businesses and riff on the world of investing.
As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome into the Chit Chat Stocks podcast, the podcast to help you find your next great investment.
My name is Brett Shafer, and I'm joined as always by my co-host Ryan Henderson. This week on our Wednesday episode, we are continuing our super investor series. Well-known for his sharing of drinks with American football opponents, Carolina Panthers owner David Tepper actually earned his wealth as a hedge fund savant in 1990s and 2000s under And this is I think how we say the name.
It's a very difficult one to spell. Appaloosa Management. He's not as known as the Buffets or the Peter Lynches or the Ben Grahams of the world because of his rare public appearances. I don't think he's written any books. I didn't notice anyone looking anything up online. There have been a few profiles in books, but not much besides that.
But his returns are just as stellar as some of these legends. In fact, even better over a 20-year period, you can officially say he is in the pantheon of what you'd call market movers, legends of the industry, people that when they say something on CNBC can move an entire sector or country's trades.
But before we get started covering David Tepper, let's make sure to, if you're listening to the show, follow the Chit Chat Stocks podcast wherever you're listening right now. Give us a five-star review on Apple Podcast or Spotify, and for further discussion on investing in the stock market, join our riveting chat community that's completely free by signing up for our newsletter in the show notes.
We're winding down our list of super investors covered in the last few years. I think we're going to finish out with the big dogs like Charlie Munger, Warren Buffett close out 2026, maybe even Ben Graham. I thought of him when we were writing this down. We haven't covered him, I don't think. Sometimes, given the level of episodes we do on a weekly basis, it's hard to remember every single one.
There's one you want us to cover before the end of 2026, let us know. The introduction is going long here. So, Ryan, I'm going to kick things over to you. Tell the listeners who exactly David Tepper is, and then we'll go into his investing style, his track record, and his portfolio today. David Tepper was uh born in 1957 in Pittsburgh, Pennsylvania to a father who was an accountant and a mother who was an elementary school teacher.
And from what I read, what I gathered, it it it seemed like he was a part of a pretty ordinary American family. He was the middle of three children. The family was pretty much middle class. He attended a public high school called Peabody High School. He ended up becoming the valedictorian there. Um and he had a major interest in sports, as pretty much any Carolina sports fan now knows, because he is the owner of the NFL uh Carolina Panthers and the MLS team there in Charlotte, as well.
But, in all the articles I read about his early life, the only thing that really stood out as sort of like indicative of of what he might, you know, one day become was that his brother said he was very analytical. He I mean, he always seemed to be a pretty good student and apparently his grandfather would get him baseball cards and he had a unique ability to memorize the player statistics.
I don't know where this source was, but someone, it might might have been Tepper himself, claimed or maybe jokingly said he had a photographic memory. I kind [clears throat] of shrugged my shoulders at that, but but basically he was analytical, smart, and and had a good memory from a young age. After high school, he attended the University of Pittsburgh, where he graduated in 1978 with a bachelor's in economics, and then he earned what now equates to an MBA at Carnegie Mellon.
His college is named after him now. Yes. Yeah, correct. I think it's the Tepper School of Business, if I'm not mistaken. Something like that. The He also started trading stocks and options while he was in school. So, I think he probably knew that that was probably the path he wanted to go down in the long run.
The apparently he was very money motivated from a young age. I mean, I guess all fund managers typically are. His sister has said that he used to claim, "I'm going to be a millionaire by the age of 30." Um but anyways, he he after his MBA, he took a position in the Treasury Department of a company called Republic Steel based out of Ohio.
I put a side note in here. I feel like the being a part of a Treasury Department is fantastic experience for an investing career, especially like at an early age. You get to see the true ins and outs of how capital is deployed or budgeted at a big organization. I just feel like that'd be very valuable when you start looking at securities and analyzing companies down the road.
Uh anyways, in 1984, he was recruited to join Keystone Mutual Funds in Boston as a credit analyst and just one year after that he was recruited to Goldman Sachs to join their new high yield group out of New York. Within 6 months he apparently became the head trader there and in reading some of the interviews with his colleagues and classmates as well, David was apparently a very confident guy.
Uh, he's Uh, people describe him as a bit of a character. To help paint a picture, in 2018 it was reported that he kept a quote cartoonish oversized pair of brass testicles affixed to a plaque on his desk to symbolize the courage it took to go against the market. Now, you'll see why maybe that's somewhat symbolic of some of his uh, investments over the years, but it kind of speaks to I think the character of David Tepper.
Apparently their offices today are very much like someone likened it to a sports bar. Uh, it's like TVs everywhere. Kind of kind of maybe what you would think of sort of a typical Wall Street guy potentially. Uh, anyways, while he was at Goldman, I think this is where he really started to kind of make a name for himself.
It's said that he played a major role in their survival after the 1987 crash. So, he was apparently short a bunch of stuff on October 19th when the market plunged 22% in a single day and he bought really cheap bonds during the crash which paid off big time in the following years. And then because of this role in helping them survive, Tepper was under the impression that he had earned the right to become a partner.
However, in 1991 and then again in 1992 he was passed over as a partner because some people at Goldman were not fond of his quote loud and profane manner. So, after being passed over a second time, he left Goldman. Initially, he started trading literally just his own personal account full-time out of a desk at Michael Price's office, who was a big mutual fund manager at the time.
Apparently, they were friends, so he got a desk from Michael Price and just traded his own personal account. And the goal was to generate enough money trading his own PA that he could start a fund of his own, and that's exactly what he did. By 1993, he had made enough money that he started Appaloosa Management, which is the fund he still runs.
Well, I believe he still runs it, probably not as active, but uh the the fund structure he still has today. Yes, it is a family office today, so I think all outside capital has been returned, but given the returns he has generated over the years, it's still sizable with just his own money. I think it's fascinating.
Maybe it's just a coincidence that two of the best hedge fund managers of the modern era, Tepper and Druckenmiller, are both from Pittsburgh. Both Pittsburgh people. Feels like a little bit of a coincidence. Uh so, shout out to Pittsburgh. I think you are right. Having a and that is a classic uh I don't want to call it the Rust Belt because I feel like that's an offensive term to people that live in that area, but it's a classic manufacturing company, Republic Steel, based out of Ohio.
Feels just gray offices, iron ore everywhere, that's what I'm envisioning. And yeah, he got to probably experience what it was like in the real world, but that Goldman story is also fascinating. Let's kick things off in 1993 with the start of the fund. Do we know what inspired the name? I've no clue.
No, but I'll check. All right, yeah, you can do this research live while we're recording. It started with $57 million in 1993, and given the secrecy around his story, um he doesn't post public letters, doesn't post public returns, never written a book, doesn't go on media appearances much, we really don't know what his mandate was in the early days, and we don't know exactly what his returns are, but we can estimate things.
And his reputation at the time, as Ryan mentioned, he's not just an equity investor. Uh he buys a lot of distressed debt, and that's the reputation he started to build. Similar to Howard Marks, who we have covered on the show. Now, through to today, he has built up maybe a reputation as an all-weather investor, similar to Druckenmiller, or maybe Buffett in his heyday, where you invest in the best opportunities to maximize absolute returns without the risk of blowing up.
Now, Tepper's track record, as I mentioned, is not official, but from reading the tea leaves, looking at the public statements, looking at what people have said, it is much better than I thought it was going to be, and one of the best track records over 20-year periods for any investor in history. I think the only one that is actually better would probably be Renaissance Technologies.
Uh maybe some others that I'm thinking of over a 20-year period. But from 1993 through 2013, Appaloosa generated a 36% gross annualized return, or 28.5% net of fees. That means $1 million invested with Tepper in 1993 was worth $181 million by the end of 2013. As for hedge fund returns, I think only the 30% for 30 years from Druckenmiller at Duquesne, maybe what Soros did as well.
We've covered him before. But those are the only ones that can rival it under that structure in the modern era. Uh before I get going on kind of his investing style and some quotes here talking about him, Ryan, did you figure out what inspired the name? Yeah, apparently at the time, a lot of funds wanted to be named after mythical creatures.
Um Greek myth mythological creatures. So, he was he wanted to do the name Pegasus. But, it had already been filed. Someone already had the name and he refused to pay $300 for the rights. So, he asked his team to open a book of horses horse names. An Appaloosa was one of the first ones they found. So, yeah, not not the most inspiring, I guess, of stories.
But, yeah, it was a horse name that was early in the uh book he found. All right. Yeah, now we're in the era of nature, trees. Uh you know, so they River Rock Management. Yeah, all things all things yeah, geography. All right. Well, continue on the story. The fund got to the size of about $20 billion and 2019 was converted to a family office.
He has not been in totally quiet. I don't think he's entirely in retirement mode. I believe they still have an investment team working with him. But, it seems like he's not working with outside clients anymore. It's just his money now. His wealth is quite sizable. I mean, he was able to buy the Carolina Panthers for I'm assuming a few billion dollars if not even more than that.
Uh so, he's still playing with a lot of funds. And we'll talk about how with the China pitch and the China trade that he did a few years ago as a case study of what he's doing today. Now, Ryan mentioned the belief in himself. He mentioned the grouchiness that kept him independent from the crowd and well, independent from the employment at Goldman Sachs.
Uh he can be considered, I think, one of the few investors that simply cares about maximizing returns. There's a blog post talking about him from a capital allocator that talks about him as one of the investing greats and why he is so successful. Quote, "Tepper appears to be using multiple mental models when he invests, choosing what works for a moment or context rather than being constrained by his historical role as a distressed debt investor." If If monitor the 13F filings of the stocks he owns, he appears to move effortlessly across sectors and asset classes, scooping up dollars as he goes.
You would have a difficult time deciding what benchmark or comparable fund to judge him against. And that is not a good example of how you don't want to pigeonhole yourself as, "Oh, I'm small cap value. I'm fast growth guy. I only invest in growth stocks. I only invest in stocks with a PE below 15." He stays extremely flexible.
He'll buy, as we talked about later maybe a little bit, you know, he bought Nvidia for the AI trade, but he buys extreme deep value distressed debt as well. Um and here's a here's another quote, a direct quote from Tepper on why they were so successful, quote, "We're value oriented and performance based like a lot of funds, but I think what differentiate differentiates us is that we're not afraid of the downside of different situations when we've done when we've done the analysis.
Some other people are very afraid of losing money, which keeps them from making money." Thoughts on this, right? Is he right? This is very descriptive of his investing career. He was not linear growth, linear returns the whole time like you might have found with uh Duquesne um and Druckenmiller. So, it was very much that they were big down years.
He's often called the bounce-back king or the king of bouncing back in sort of the fund world because he's had big down years and he would often follow them up with big up years. So, yeah, I think that's pretty descriptive of the the way he invested and I don't know if necessarily it's great for everyone to adopt that philosophy, uh but in his case when he was able to find that the businesses were going to survive or the securities were going to get paid out.
Um, he had the courage uh to double down when I think a lot of other people maybe would not have. Here's another quote I have uh not from him, but someone describing why investors like him are so good at making money. Quote, keeping score in dollars extracted from the market rather than whether a piece of analysis was correct is one of the most most effective strategies for maintaining the optimal grip on your investment ideas.
While any fixed identity may constrain someone's viewpoint, the identity of quote, I am great at making money allows greater flexibility than quote, I am smart and therefore I make money or quote, I'm an invest expert in investing in financial stocks. Level four investors, which he's putting David Tepper in, seem at one moment to focus on the business then switch to see the business as a stock then switch again to identify the moments in time when one factor is driving the entire stock market.
I think an example here is the investment in Nvidia in 2023. Started heavily He began buying a bunch in 2023. I think he might still own a little bit right now. We'll go about that in the portfolio update, but he started heavily trimming in 2025. So it was a little bit of a short-term trade. I don't think it's a coincidence that the other legendary hedge fund manager Druckenmiller and others, you know, were piling to the stock at the time.
This is when Tepper probably realized, like I just mentioned in that quote, there was a huge theme building. There was one factor that was going to drive a bunch of the stock market and you're riding this theme if only for a short while. You're not going to get in earliest, you're not going to get out right at the top, but you can ride that sort of theme for easy returns over a few years.
It sounds much easier in hindsight, but this is something I think he is probably quite good at and I think investors like ourselves, individual investors, we generally fall short in having that skill set. You research your investments, you analyze markets, you manage risk, but have you researched your broker?
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Over time, the broker you choose matters. Interactive Brokers, member SIPC. If you care about performance, find out why the best informed investors choose Interactive Brokers at ibkr.com/performance. Again, visit ibkr.com/performance. Yeah, I I think a lot of investors myself included, they want to do the work on a company, they want to have a thesis, they want to I think often a flaw maybe with some investors is that they want to feel like the most knowledgeable on on a certain company and have sort of this eloquent reasoning as to why the the security is going to be worth more in the future.
Right. 10,000 hours on a single sector. Yeah. Right. David Tepper I got the sense, I mean, he obviously did the work and understood, but I got the sense that he didn't care how he made money as long as he made money. And he was willing to go anywhere in the capital stack for a company. He was willing to go into various different industries and just basically saw saw it as a vehicle for returns and wasn't that thesis oriented.
He didn't care about publishing his thesis for the world to know he was smart, he just wanted to make money. All right, let's get into our case studies, Brian. We're going to cover things like the dot-com bust, the great financial crisis where he unlike a lot of investors during those times made a ton of money, but we're going to start with one of the earliest case studies with one you looked at, the 1999 Russian financial crisis.
Yeah, I got to learn a little bit about market history with this one cuz I didn't know this even happened. Um but in 1998-1999 Russia had a large financial crisis. Uh there was apparently a lot of things that went wrong, but it initially stemmed from the fallout of the Asian financial crisis in 1997.
So, the Asian Asian crisis ruined investor appetite for emerging markets. So, Russia was having a difficult time at after that raising money through bonds. And at the time they had been running consistent fiscal deficits and using short-term debt raising from uh global investors uh to cover it. So, the tightening of the credit markets presented a big issue for them.
On top of that, oil prices dropped by more than 50%, which was their largest export by a long shot. So, incoming dollars for the Central Bank plummeted. Uh well, 3 years prior Russia had also set up a currency peg between the ruble and the US dollar. So, in 1995 they were facing basically uh a ton of hyperinflation and consumer confidence in the Russian ruble or consumer trust was very low.
People didn't want to hold it. So, Russia set up this currency peg with the US dollar to basically stabilize it. Well, that helped for a short time a short time, but when the crisis started emerging, the Russian Central Bank was having to spend so much money buying up rubles to keep the price artificially pegged that they had no choice really but to abandon it cuz it was a waste.
And when they did, the value of the ruble got cut by more than 60% overnight. So, in 1998, as this crisis was unfolding, David Tepper started buying up Russian bonds betting that Russia would not default on its debt, but in August 1998, Russia did default on their debt and Appaloosa had to report an $80 million loss virtually overnight.
This was part of what destroyed certain levered funds like Long-Term Capital Management. And that year, Appaloosa reported a 29% drop for 29 a negative 29% return for investors. Typically, I think most investors would [sighs and gasps] or at least most funds would try to get out of those positions. There would be too much pressure from investors maybe that it it it feels like what are you doing?
Russia's defaulting on their debt. Why are you owning these things? However, he kept buying the Russian debt as the prices kept dropping. He was buying both the Russian domestic debt, which was what the country actually defaulted on, and he was buying Russia's foreign US dollar denominated debt, which they largely avoided defaulting on.
And apparently, he was buying these as low as 5 cents on the dollar. Now, quick caveat, when you hear the term default, I think often it kind of sounds scary in the world of credit, but that simply means the issuer missed an interest or principal payment. So, you can still make a lot of money on defaulted debt if they restructure their debt, they liquidate assets, they fall into good times potentially, and that's what Tepper was betting on.
So, Tepper recognized the physical assets and the economic capacity of a nuclear superpower meant that the ultimate recovery value was going to be higher than zero. So, when Russia did eventually restructure its debt, the new payout significantly exceeded his low entry price, and he was collecting interest payments along the way.
The bonds carried a pretty high interest rate, too, if I'm not mistaken. So, Russia's making interest payments on certain restructured debt, and which was actually allowed Tepper to recoup his entire investment purely just through the cash coupons in a short time frame. And then on top of that in late 1999 and 2000, global oil and commodity prices began to rally again.
Uh so Russia's treasury quickly filled with cash and their creditworthiness began to rise. Tepper's bonds rose back towards par value and naturally Appaloosa made a killing. They not only um generated money from the interest payments, but they got a massive spike in the price of the bonds as well. They posted in 1999 a 61% return for investors.
We're going to talk about this. Th- This was kind of indicative of his career. Uh there were several times where he had what looked like a bad year on paper, but he hadn't sold the securities and he was just kind of early and trying to bet on recoveries and ultimately he ended up getting paid out and the returns were worth it in the long run if you were able to hold through those difficult down periods.
Yeah, that this is indicative of my next case study here, which is the telecom bust, the tech boom, and the distressed debt of a little-known company called Enron, who most people think everyone lost money on. Yeah, the Russian one is interesting because I think it goes to part of his thesis of buying the Enron debt at pennies on a dollar is if you have physical assets that can help recover some of the value there, you can maybe set a floor on the price regardless of what uh the panic or the bankruptcy or what how distressed everything is because if you are that front line of who gets to say of uh what uh for Enron, these pipeline assets, well, the stock is going to go to zero.
But, you can still recover not the entire debt, but you know, a good chunk and still make a little bit of money. So, I will say uh for Enron, along with my grandpa, whose financial advisor has convinced him to sell his Enron shares before the collapse, perhaps Tepper is the only other investor who has made money on this business, at least in the 21st century.
It's also why the 1999 to 2002 period were golden years for Tepper. Uh starting with that 1999 Russian crisis that Ryan just mentioned. So, Tepper, as we talked about, likes heading into disasters that the rest of the investing world finds toxic. Enron, after its fraud was revealed, was exactly that.
You know, 99.9% of the market would not touch anything close to Enron with a 10-ft pole. I mean, for us, Ryan, if we were there back then, and yeah, we don't have the opportunity to really invest in the debt, but we would just say, "Yeah, there's fraud. Ignore it. We're not touching getting anywhere even analyzing this business or any of its assets."
Yeah, 100%. It there's so many situations where he made money kind of just going into industries and securities that nobody wanted to be around. Like when there was a fire in industries and everyone would run from them, he was it was like a a calling for him to go find, you know, with some element of the capital stack that is potentially mispriced, and it seems like Enron was a good example of that.
Yeah, let me try to sum up the story of what happened quickly. So, for those that don't know, I know a lot of people do know this story. Enron was historically a natural gas pipeline company that got into a myriad of other businesses and began faking their financial figures to boost earnings per share.
I think that sums up the entire book, right? And eventually, they got exposed and they collapsed. Now, the fraud laid stank over the entire business, but the pipeline assets still had value, right? They were still there to some buyer. Now, Enron's debt at the time was trading at pennies on the dollar.
Don't know the exact pricing uh because Tepper again doesn't share a lot of things, and the it's not public what, you know, debt is trading at. It's a more mysterious market. But, it was trading at pennies on the dollar, maybe 10 cents, 5 cents, who knows. Tepper bought $1 billion worth in 2002 for Appaloosa.
When the assets were reorganized, Tepper was able to make multiples of his investment back in a short time period, meaning multiple years uh because there was a lot of time in the bankruptcy proceedings and all that, which is a great internal rate of return. Now, we don't know the exact figures, but the Enron Recovery Corporation was able to win $15 billion from Wall Street banks that were complicit in the fraud, and the sale of the physical pipeline assets both in the United States and abroad.
I think Tepper was able to see see that the bonds were trading below intrinsic value for these physical assets with some upside from that Wall Street case settlement. And even if you aren't going to get all of the debt back at par, if you buy this debt at 10 cents, and you get back 16 cents, 20 cents, or maybe even higher, there is significant upside there, plus what's likely some interest payments as well.
Appaloosa was able to repeat this strategy with WorldCom, which was a telecom and internet infrastructure company that started fraudulently stuffing capital expenditures to mask the collapse in demand from the internet buildout. May or may not remind me of some recently IPO'd companies today. May or may not.
Uh like the pipeline companies with Enron, the equity went to zero for WorldCom, but the physical fiber infrastructure remained. So, Tepper went in, bought the debt for pennies on the dollar again, and made a good amount of money. What's funny is that Tepper shorted the Nasdaq bubble in 2000, but was convinced to get out of the trade after just a few months from his investors who didn't like the short-term losses, even though it was almost timed to perfection.
I ask, and maybe I'll answer this my own question here first, is what lessons can we learn from the Enron and dot-com bust investments? Is that maybe investors are even more uh willing to put up with buying the debt of a fraud a fraud that's already exposed versus going against the tape and trying to short a thematic bubble.
Cuz it seems like no one puts up with that. Even though it would have made a killing. I mean, it's so hard to do when markets are soaring. Like, especially if you're managing outside capital to be the the the bear in the room. So, yeah, he would have made a killing, but evidently, uh I mean, it was probably hard to report those losses when things were going well.
The with Russia. It's interesting how people have zero tolerance for betting against a bubble. Yeah, I don't know if um I don't know a if people were critical of him during the Russia period, but also I I think it's different when you're saying something's not going to happen or something's overpriced as opposed to this is underpriced, but the stock keeps going down.
Uh or the the the value of the securities keeps going down. Like, you can still double down in those situations. I mean, you can obviously double down on a short, too, but it just I I know. It it I think with the dot com bubble to be the vocal spokesperson that's saying this is overpriced, you probably get a lot more criticism than the person that's like, "Yeah, I think there's value in this distressed debt from Russia." Like, you probably just don't have that much attention on that event as opposed to the dot com crisis uh or dot com bubble.
The I find this interesting. It It For anyone that's not familiar with distressed debt investing, I'd say may- maybe don't dabble in it if you're a beginner. But, there is a lot of benefits of distressed debt investing when it works well because you get the uh you can get the price improvement, right?
So, you know, if you're buying bonds at 5 cents on the dollar, if if those bonds start to trade back towards par value, you get that price appreciation. You get the interest payments as well, and then you typically have a higher margin of safety because you have better preference when uh in the event that there's a liquidation or a bankruptcy.
So, there is some some major benefits uh in when you are a good distressed debt investor. I'll hop to my second case study. And we we ended up spacing out all these uh case studies fairly well in terms of like his actual career. So, the case study I'm looking at is the GFC rebound. This is probably the most famous investment that Tepper ever made.
It was certainly his most profitable. The Tepper bottom. Yeah, and you are probably noticing a theme here by now. Basically, all of Tepper's best investments have come by picking up distressed assets during financial crises. It is worth noting though, and we already talked about this, his timing is not always exceptional.
Uh but if he's right, the rewards are typically large enough to compensate for any short-term losses. In 2000 to 2008 2007 2008, things were starting to look pretty shaky in the US. There was already cracks starting to show. Uh and stocks were beginning to drop. And in fact, I believe by 2008 there had already been some major Well, maybe by 2009, there were some major banks that had already uh gone bankrupt.
But Tepper thought the US economy was actually healthier than the market was saying. So, as these stocks were dropping, he began buying up shares in tech and financial companies and ended up evidently being very early. In fact, in 2008, Appaloosa's flagship fund posted a 27% down year. However, as the GFC progressed, instead of getting shaken out of his positions, he continued to accumulate assets at cheaper and cheaper prices.
His thesis here was essentially that the US Treasury was going to do what they said. So, let's let's kind of bring people back to that timeframe. It's 2008 mid-2008 late-2008. Several major financial companies had already collapsed by this time. Lehman Brothers, Bear Stearns, Washington Mutual, and there was widespread concern that this was the tip of the iceberg.
There were legitimate fears that all the big banks were going to be maybe not all, but most of them were going to be nationalized and that the equity and the bondholders were going to be wiped out. So, in early 2009, the US Treasury released a white paper outlining its financial stability plan and the capital assistance program.
The white paper stated that the government would purchase preferred stock in the banks that could eventually convert into common shares. Crucially, the document specified a conversion price that was far higher than where bank stocks were currently trading in the open market. So, that that was if you were a distressed debt investor at that time, the the US government basically gave you sort of a backstop.
And keep in mind, the concern wasn't necessarily that these were companies were going to go bankrupt. It was that they were going to be nationalized, and that the bondholders are and the equity holders are screwed. But, Tepper, given his experience with other government crises, said that was not possible, essentially.
According to one article, he says he looked at the capital structure and realized the US government could not afford a true nationalization because it would completely destroy the credit markets. Tepper realized sort of the opposite of what everyone was thinking. There wouldn't be a nationalization, and in fact, the government was creating a permanent safety net, which is music to the ears of a distressed debt investor.
With this line of thinking, he decided to double down on a bunch of his uh financials bets. So, one in particular was Bank of America. He accumulated 47 million shares of common stock in Bank of America, buying some as low as $3 per share. Using the government's own internal buy-in framework that was laid out in that white paper, it valued it closer to $6 a share.
So, Tepper knew he was buying assets at a steep discount to what the government had already said or had already agreed to pay, and had put in writing that they agreed to pay, which is a big deal because obviously that it's harder for them to go back on it. He also bought Citigroup bonds for 19 cents on the dollar.
He bought AIG debt for 10 cents on the dollar. He bought Wachovia and Washington Mutual preferred shares right before JPMorgan and Wells Fargo were basically forced to buy them out. If anyone who remembers their GFC history, uh there were basically a bunch of these forced mergers. And by the end of 2009, Appaloosa reported a 132% return.
Appaloosa earned a $7 profit and Tepper himself pocketed $4 that year alone. Well, I I mean, you can look back on this and it's kind of easy with hindsight to say, "Okay, so he just took the government at their word." And and he trust the white paper and he believed that the sky wasn't falling, that that America could survive this.
How is that that unique? But, he was really one of the only big investors willing to take this leap at the time. Here's one quote I found. It says, "In March 2009, Appaloosa's traders reported back to Tepper that they were the only major institution buying bank equity and debt." So, as they're going in trying to buy as much as they could, they everybody was selling.
There was they were the only bid, it seemed, the only meaningful bid, which you can think about how discouraging that might be. It's enough like it's it's hard sometimes when you stick your neck out there and have a thesis that you're that you think is a little different. But, when you are literally the only big bid, you can tell like, "Okay, we better be right because what we're thinking differently here." Evidently, it like I said, totally worked out.
132% return in 2009. That is one of the big reasons that he's considered the bounce back king. Again, the returns are not consistent, they're lumpy, but they have been exceptional over 20 or 30 years. It's also nice if people aren't well, if you're the one of the only buyers and you think there's a value for if people are willing to sell at pretty much any price to try to scrape together some value, you can probably get a good price on your end.
Uh for reference, I know he doesn't own it today, but Bank of America's at $63. Pays a dividend yield of 2%, so probably a 100% dividend yield on that cost basis if you held on through to today. And he's also during that time, I think credited with being it's not like a it's just a saying, but the saying don't fight the Fed came about because of his type of trades and his mentality during that time, which worked quite well.
He's used that again uh throughout the last few decades, probably even before as well, just wasn't as popularized in the media, where whatever the Fed is doing, for example, fighting inflation in the 2022-2023 time horizon, you don't want to be long bonds. Don't fight that. Uh most likely, if they say what they're going to do, you know, the the best move is probably to short bonds at that point.
And this leads into If I can chime in here, I think that's a good point to raise. Nowadays, it's kind of just seems to be universally accepted that there's the Fed put or there's the Fed will kind of backstop any market if things go terribly or things go awry, like the Fed will save markets or they have enough capital to do it.
I imagine going into 2008-2009, that was not the thinking. That that was uh people were probably skeptical about the Fed after the returns from 2007 and 2008 after Bear Stearns and Lehman Brothers and some of the largest financial institutions started declaring bankruptcy, it probably seemed like the Fed didn't have control.
Yeah, and you have to make decisions under high pressure. It's a lot different than looking out in hindsight. Uh apologies for anyone listening, there might be a siren in the background, but I think it's going to go away in a couple of seconds. We'll close out with a case study here, which relates a little bit to his balancing of macro and micro and making investments, and that is the recent bet on China.
This one's going to be quick because to be honest, there's not much literature literature besides 13F and CNBC appearances, but we can kind of read through the tea leaves of what he said here. Uh in recent years, he's been vocal about betting on cheap Chinese stocks uh as a good risk reward, and he even went on CNBC multiple times to discuss it as a family office, and I think someone that's more interested in the Carolina Panthers and philanthropy nowadays.
He said he didn't put his entire portfolio into a stock of a communist uh the stock market of a, you know, not an ally of the United States, little riskier, uh but he did put a bunch of money into Russia back in the day, and that can maybe be considered in the same boat. He said though he limited the the percentage of portfolio that was in this, and I think the first question I have, and maybe we can save to answer this until the end of the section, at one point or at this point, has he graduated to someone who can move stocks solely based on what he says?
I think the answer is probably yes. And the thesis on China was pretty simple. He articulated in public on CNBC. One, they are there were and are Chinese technology AI and hyperscalers like Alibaba, and they traded at single-digit PE ratios in 2024. And second, at the time in late 2024, the Chinese government put on major stimulus to get out of the housing bust and to increase consumer spending, which uh you know, there's a for those that don't know, there has been, I think still ongoing a little bit, a gigantic housing bust in the Chinese market from like 2021 through 2024.
Kind of did a similar thing where they wanted to fix that, I guess. I don't know the exact details, but there's a huge amount of stimulus for the economy in 2024. Tepper thought that combination would create a floor and help with these technology stocks in the country. He ended up buying a bunch of specific tech stocks like Alibaba ETFs and said to buy, quote, "Anything related to China." I'm not sure what the exact returns were on these stocks, but they rebounded nicely in 2025.
It looks like Alibaba doubled in less than a year and it was trading at PE ratio below 10 or right around 10 in late 2024. Now, I don't know if there's anything else here to analyze besides there being a few different factors causing Tepper to try and catalyze his own move with these stocks. He mentioned he liked the buybacks as well, so maybe that was also a nice floor that you could put in with some of these companies, but besides that, it seems like he saw an interesting risk-reward on a trade.
Not something I really enjoy doing or if I don't have any grasp on the underlying nature of the business, their competitive environment, or what have you, but he, I don't think saw it as a business he wants to own for the long term given that he sold a lot of these companies already. But strictly, all right, there's a setup here.
They're trading extremely cheap ratios. There should be a catalyst with the Chinese consumer stimulus. They're buying a lot of stocks. Probably a good risk-reward to start piling into here. Do you think, Ryan, he actually believes in these businesses or did he believe in the trade? Probably more so believed in the trade.
I think there were a lot of big hedge fund managers that kind of did the same thing. Um, maybe at least some of the vocal ones. I know Burry Michael Burry did this as well. He's still in them, I think. It's probably hard not like if you have some familiarity with the Chinese market and you know that Alibaba's an exceptional or highly influential business there that's growing and then they've should grow for some time and you see them at a single digit PE multiple.
I could see how people get drawn into this. It's not really for me, but yeah, you don't you don't have to love the company to make money. Uh I think Tepper's a good example of that. Uh That that's a lesson. A lesson to take away from this episode. Maybe be a little bit flexible. That that could be something that us and our kind of style the market individual investors buy and hold high-quality businesses, maybe that's a fault we have where if we don't understand something perfectly, but the pieces are lining up, the stars are aligning we still don't invest.
Probably a mistake. Something like Nvidia in 2023, a business we knew fairly well uh that year. Yeah. Yeah, if we look at the portfolio today, Appaloosa Management, according to the latest 13F, I'll just rip through some of the largest holdings here. Amazon is the largest, Micron second largest, Google, Uber, Vistra.
I actually don't know this other one. Energy play. AI energy play. Yeah. Okay. Nvidia, NRG, Meda, SanDisk, Corning, Taiwan Semiconductor. There's a lot of semiconductor exposure here. I I would guess probably How much you want to bet the next 13F he's out of SanDisk and Micron completely? I'd have high conviction for this.
Yeah, certainly possible. I mean, this is one of those where it's hard to follow a 13F for someone like that. I mean, he's a hard investor to follow to begin with cuz he trades in and out very regularly. He doesn't say anything. Yeah, there's no public communication. So, yeah, I'm not sure there's much to take away here.
Uber position, that's nice. Maybe Uber and Amazon are long-term bets. Yeah, I mean, maybe he just has a mix of both these days, where it's just some are just long-term and he's less involved and, you know, they'll he thinks he'll hold those positions for a long time and then some are more secular or thematic.
Let Let's talk lessons learned. What did you take away from studying Tepper and then is there anything that you think you can apply to your own investment process? Okay, first one I have is focus on time or the length of when the length of time it's going to take for your returns to either materialize or you're going to realize you're wrong and can get out.
Which is really incorporating IRR as opposed to, well, I think the stock can go up 2x over who knows how many years. For example, in my own portfolio last year, there was a time-based component to a stock called Oscar Health. It's done well, uh but I was going to either figure out in 2026, less than a year later, whether I was right or wrong on the investment.
I think the ability to get the outcome, whether good or bad, is almost better than sitting in something that is just stagnating for 5 years, going nowhere. For example, on the other side of things, maybe I could have learned this lesson to be more patient in uh buying or targeting Nintendo stock until the Switch 2 was imminent or there was a better setup for I want to own this for the long term, but over the next year, I kind of have this catalyst that can maybe create a better risk reward versus what I could do with something else in my portfolio.
So, I think that's a lesson. I have I'm I'm I explaining this right? Ryan? I feel like I'm saying it a little bit differently, but he definitely does this as opposed to a lot of individual investors like ourselves. Entry timing matters, basically. Being cognizant of what's in front of you in terms of short-term catalysts when you when you buy something.
Honestly, studying David Tepper, I'm not sure there's a ton that's applicable to my own investing just cuz I'm not managing my portfolio as actively and he's he was in his prime and maybe still today is was very active. Um and very time-based in his investments. Like you know, it none of the investment case studies we talked about today were long-term successful compounders.
They were usually you know, had had a specified duration. So, not sure there's a ton to take away. The one thing I would maybe One thing that was recurring in looking at his case studies is he did well buying stuff when the crisis was unfolding. Now, part of that is he had the ability to recognize what was an opportunity and what was, you know, actually trash.
Um like like what what bonds were worth something. But he also had the money to actually do it, which was part of the the biggest issue was a lot of the other big funds probably recognized the same thing, but either they didn't have the investor base, either they didn't have the cash on hand, or they didn't have the other assets they could rotate out of to actually capitalize on that opportunity.
So, I guess that's kind of my way of thinking. If things feel frothy, um try to have some capital or dry powder or um I guess counterweight type positions that you can rotate out of or apply towards better opportunities when things go badly. Like just be patient. It might be yeah, good lesson is it might be easier to bet on kind of distressed assets and this doesn't mean debt which a lot of us don't have access to.
But stocks, you know, in in a market crash might be easier to do that than betting against a bubble or bull market or overvalued sector. Uh let's see my other ones. I think this is a nice one that a lot of people can use is use macro conditions as a guiding tool. Like I personally may disagree on the China bet.
I think it's much more of like them pushing on a string for stimulus, but regardless when Tepper is trying to time up this big bet on the sector which did work out for him. I will say I I was someone that was wrong on that specific one. Unsurprising, he's a legend, I'm not, but using the fact that there was government stimulus to uh kind of propel the economy or make a floor or maybe change things with the Chinese economy.
This seems to work out well for him when combining that and you don't just have to say I'm making a macro bet on the Chinese economy. But that kind of changes the winds a little bit in your favor just like with don't fight the Fed in 2009 and that can help be a guiding principle when like he didn't just make a bet on the economy of the United States.
He made a bet on the banking stocks specifically, but the macro conditions and decisions from the government helped guide his thinking there. Uh the last one here I have is thematic investing can be simple. Like Druckenmiller, he saw Nvidia was a way to play the AI theme. He bought it, wrote it to some solid gains.
Really good IRR over maybe a 1 to 2 year period. And he sold. That's it. Yeah. Like Well Same with Micron today, I'm guessing. Yeah, Druckenmiller is famous for saying the only thing that really matters is the next 18 months. I think you would have probably made a lot of money with some of them memory chip stocks if over the last year or so maybe last 2 years.
If you knew what was going to happen to revenue over the next 18 months, so um Yeah. I'm glad we studied Tepper. I I didn't realize who he was and his investment track record. He's done a good job, exceptional job. He's probably in the top five uh returns-wise of the investors we studied. Making money for clients, too.
Yeah, maybe top three. The uh And And now when we see him at Carolina Panthers games or or on TV, you'll know how he how he got there. So Yeah, you could see where that grouchiness comes out some of his actions with fans. And speaking of his portfolio, Uber stock as we're recording under $70, so maybe kind of do 13F digging.
You can buy what super investors bought at a lower price. Not a recommendation, but it's a good starter points potentially research. It's one we've looked at quite a bit. Ryan we want to do Munger, Buffett, maybe Graham to close out the year. Is there anyone else we're missing in super investors and listeners let us know as well.
No, I think we'll have our homework cut out for us there with uh with those three. There's so much written on them. It's hard to distill it down into a 1-hour podcast. Not the uh who's who's the four invest investors? We're not going to do them. The All-In The All-In crowd? We're not going to cover them?
Yeah, don't know if they'll be on my hard to do VCs. Um No, I think those three would Those are probably the biggest ones we haven't done that are top of mind right now. Um You want to do Munger and Buffett together or separate? Separate. Separate. There's plenty of partnership info for Munger. There's so much I've said this word twice, literature on both of them.
We'll have enough for two episodes. All right. Well, I think that's going to do it. Thank you, everyone, for tuning in. Uh want to remind listeners that Brett and I are not financial advisors. Anything we say or discuss here on We may buy, sell, or hold any of the securities discussed on this podcast. Thank you all again. We'll see you next time.
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