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In the select group of so-called super-investors, David Tepper has been one of the few who bet heavily on China and was right, achieving excellent returns so far this year and largely avoiding the significant falls in the North American stock market. In this video we will initially review Tepper's track record and then analyze what this super-investor was able to observe about China to make the right investment theses.
and finally try to state some investment principles and the strategy that have led to his success. David Tepper is one of the best investors of recent years. His fortune in mid-2024 was about $21.3 billion, placing him 93rd in the ranking of the richest people in the world. Their investment fund, Apalusa Management, has achieved extraordinary profits for many years, reaching an annual return after fees of 23%.
Her education includes a bachelor's degree in economics from the University of Pittsburgh and an MBA from Carnegie Mellon University. His experience includes managing junk bond operations at Goldman Sachs. His management was precisely what was fundamental in keeping the firm afloat during the 1987 crisis.
In 1992 he decided to go independent after being rejected twice as a possible partner at Goldman Sachs. In its early days, it operated with its own resources from the office of a friendly manager, Michael Price, who was also a Goldman Sax client. One of the operations that allowed him to improve his reputation was managing to turn $3 million into $7 million in just over a year.
Thanks to that reputation, he managed to raise 57 million dollars to found his fund Apalosa Management in 1993. By 1996, he was already managing $800 million . Later, the fund would become one of the most important in the world, managing up to $20 billion. Just a few months ago, I reviewed the current state of this super-investor's investment theses.
To be more precise, in September of the previous year, Teper was quite positive about the stocks in China and Europe. Among the elements that Tepper considered were the double-digit growth rates for large companies listed on the Chinese stock exchange , in addition to share buyback plans , and the government's proposed stimulus plans to encourage economic growth, which allow for a good performance of the Chinese economy in the coming years.
Tepper analyzed how at that time the European index was at about 14 times while the American index was at 22 times. He stated at the time that Europe found it interesting, an investment thesis in which he was undoubtedly right, in addition to warning that the American stock market was not a cheap market, since historical valuations showed it to be overvalued.
He defines himself as a value investor. The previous year he stated that he did not like the American market from a value perspective, but he was not necessarily going to sell positions massively, as he would not feel comfortable shorting or investing against the market either, since the economy was relatively good.
Although in the first quarter of 2025 it has increased its position in Nvidia. The previous year, Tepper stated that he had some doubts about the long-term growth potential of this company. Well, in the short term, for the years 2024 and 2025, the company's performance could possibly be quite positive, but in the medium term, for the years 2026 and 2027, the outlook was not entirely clear.
In fact, in his statements about this company, he made clear one of his investment principles, skepticism, since he did not completely believe in his analysts, and sometimes he did not even fully trust himself, as it is complex to try to project the profits of technology companies in the coming years.
By February of this year, Tepper had increased his bets on China, allocating 37% of his portfolio to Chinese stocks, even going so far as to say he was willing to buy everything related to China. In the first quarter, it increased its stake in Alibaba, China's largest e-commerce company, known as the Asian Amazon, by 18.4%.
This company has had a tremendous rally, achieving a valuation of over 80% in the last 6 months. Currently, the PER multiple is 21 times higher than its recent values. This graph shows how Tepper made purchases in large volumes, mainly in the previous year, taking advantage of low prices. But it is also observed how in 2021 and 2022 it sold positions taking advantage of the good share prices.
Another of the main positions that corresponds to another Chinese company is Pinduodo, another e-commerce company that represents 8% of its portfolio. Unlike Alibaba, Teper began investing in this company in 2023 with significant purchase volumes in the third quarter of the previous year. Although it is a fairly volatile stock, the appreciation since September of the previous year is over 40%.
Currently the company has a reasonable P/E multiple of 12 times. One particularly interesting option is the ETFXI, which brings together a good number of companies from the Chinese stock exchange. Teper managed to make purchases at practically the lowest values of the previous year. The value of this ETF in the last year is already over 60%.
The P/E ratio of this ETF is at 11 times, which shows that despite the tremendous rally, there are still reasonable multiples should the economic recovery of the Asian giant consolidate. But beyond trying to assert that China is still an interesting investment opportunity, we will try to elucidate the investment principles and strategy that have allowed it to succeed in its investments.
The first principle is to take into account market multiples and the macroeconomic environment. Although Tepper does not explicitly state it, in his statements he considers the market multiple to be an element to consider when making investment decisions. He defines himself as a value investor, which is why he seeks to buy good companies at reasonable prices.
It also takes into account the economic cycle and the Fed's monetary policies, as well as expectations for economic growth and inflation levels. This investor is sometimes on the lookout, waiting for markets to show signs of upward trends before aggressively taking positions. Therefore, it can be considered that, while primarily focused on fundamentals, they also perform technical market analysis.
In his early days he had a rather aggressive investment style, even going so far as to acquire shares of companies in distress in simple details, such as keeping abreast of the decisions of the Bank of Japan. Teper demonstrates that he is aware of relevant news not only from the United States, but from the world's major economies, gaining in- depth knowledge of expectations regarding Fed interest rate movements in the coming months.
The second principle is the contrarian investment technique, where he does not follow the crowd, a situation that was observed precisely when investing a good part of his portfolio in China. at a time when others saw this country as a bad place to invest. Another example is in the 2008 crisis, where Tepper invested in some of the companies that at that time were viewed negatively by a large part of the market, such as banks, for example, Bank of America.
His excellent decisions allowed his fund to generate more than $7 billion in profits during the 2008 crisis. Some analysts rate Tepper's trades during the 2008 crisis as some of the best in history. Teper manages to take full advantage of crisis situations and selects high-value companies. In these difficult times, the Apalusa Management Fund takes the risk of investing in debt from companies with financial difficulties in order to later achieve high returns.
For example, he made successful investments in bonds of companies in financial trouble such as Enron, Worldcom and Marconi. It can be considered that to some extent his strategy is based on being opportunistic in certain circumstances. For example, in 2023, Tepper bought bonds and preferred stock from the bankrupt parent company of Silicon Valley Bank.
The third principle is to make high-conviction purchases. When Teper decides that a stock is an investment, he makes bets in large volumes, as evidenced, for example, in the purchases of Alibaba. But the strategy is not only about making the decision to invest with strong positions, but also about having the willpower to maintain the investments despite fear, doubt, and uncertainty.
As has also been evidenced with his positions in China, Tepper has the guts to stick with his bets even for years, even when the short-term results are not as expected. TER coincides with Buffett's strategy, where he invests heavily in the strongest ideas. This is reflected in their portfolio, where each of the top five positions has a high weighting.
Its main holding is Alibaba, with more than 15% of its portfolio. The fourth principle is to adapt to the market. While Tepper manages to sustain his investments for even a few years, he is a dynamic investor who adjusts his preferences depending on market conditions. For example, in 2009, a large part of their portfolios were in companies in the financial and commercial sectors.
And at that time, the only technology company was Microsoft. While in 2021, the top five holdings of the Apalosa fund were technology companies that had precisely had some excellent years of results in the market. Many of the funds that achieved excellent results in the late 1990s and early 2000s have lost influence, as they were unable to adapt to the market and have had returns even lower than the S and P500 index.
The fifth principle is the importance of education and knowledge. Teper believes that academia and training are important, as they allow for an understanding of underlying elements of the stock markets. Furthermore, knowledge allows for the proper calculation of the prices of assets or shares in which one plans to invest.
The training also allows one to understand the moments of change in monetary policies with the increase in interest rates, when there are periods of quantitative expansion or quantitative easing, and to try to understand financial crises and their consequences. Another key element is understanding how a company's accounting works , how its finances work, as well as understanding how options work.
The sixth principle is to invest in things that can be understood. Teper, for example, acknowledges that he is not an expert in blockchain or cryptocurrencies. He accepts that it's for him. It is difficult to analyze the movements in the price of Bitcoin, as it is not clear why the price goes up or why it falls.
The movements are possibly due to supply and demand reasons, among others, but for him these assets do not have fundamental value above the value of mining. However, it is possible to trade by carefully analyzing the information that drives this market, but Tepper admits that he does not like Bitcoin trading.
His largest investment was about $50 in this asset, which may reflect the lack of confidence he has in this type of investment. And contrary to expectations, he admits that he doesn't like gold, but he does consider having some in his portfolio. The seventh principle is that of resilience in investments and in life in general.
Teper explains that when you experience disappointments and failures, it's important to recover and move on. We must not stop, because we will all have problems, things will go wrong. But what will define a person is how they manage to recover and move on. He believes that one must continually try to learn in order to move forward.
Teper believes that when you have a good idea and you have the knowledge of what you are doing, you should persevere in the initiative. He also considers ethics to be important. Teper believes it is fundamental in investments and in life not to do things that are not right. He also believes that one must be very cautious when hiring people, as this ability is an undervalued asset.
Finally, while Tepper has increased its exposure in China, it still retains a significant portion of its portfolio in North American companies, especially technology companies such as Amazon, Microsoft, Alphabet, and Meta. AMD, Micron, Nvidia and Uber, among the main ones. Remember that in the video description you can find the link to the best course to learn technical and fundamental analysis for investing in stocks.
You will also find a link to the best platform for buying shares on the regulated stock exchange in the United States. If you liked the video, give us a like, subscribe to the channel and share the content.
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