By Alan Dessoff
Born: Pittsburgh, Pa., in 1957
Affiliations: Appaloosa Management
Most Famous for: David Alan Tepper bets big and wins big on big banks and stocks. Appaloosa Management, the Chatham, N.J. fund he founded and manages, held more than $1.2 billion combined in the four biggest U.S. banks, according to a filing with the Securities and Exchange Commission, after he raised his bets on them during the fourth quarter of 2010.
Tepper, who specializes in debt-distressed investing, manages about $16 billion. He reportedly made between $2 billion and $3 billion personally in 2010 after he correctly anticipated the Federal Reserve’s efforts to boost the economy, and beat many rival hedge funds in turning optimistic about U.S. stocks.
He also is known for his philanthropy, making his largest gift—$55 million—to Carnegie Mellon University in Pittsburgh, which named its graduate business school after him.
Personal Profile
Tepper was raised in East Pittsburgh. His mother was a homemaker and his father an accountant. Young David attended Peabody High School, where he was good at math. He also tried intramural football but developed a greater interest in acting. As a senior, he won the school’s award for best actor for his role as the father in “Bye Bye Birdie.” He was an avid baseball fan, especially of the Pittsburgh Pirates.
Tepper paid his way through the University of Pittsburgh by working in its Frick Fine Arts Library and earned a bachelor of arts with honors in economics in 1978. He dabbled in the financial markets during college, and after graduation, he entered the finance industry as a credit and securities analyst in Equibank’s treasury department in Pittsburgh.
He left to enroll in Carnegie Mellon’s business school in 1980. With his newly earned MBA in 1982, he accepted a position in the treasury department of Republic Steel in Ohio.
In 1984, Keystone Mutual Funds in Boston, now part of Evergreen Funds, recruited him. Goldman Sachs did the same a year later as it was forming its high-yield group. Tepper joined Goldman in New York as a credit analyst and within six months, became the head trader on the high-yield desk, working there for eight years with a primary focus on bankruptcies and special situations.
He left Goldman in December 1992 and started Appaloosa Management early in 1993 with Jack Walton, a former senior portfolio manager for Goldman Sachs Asset Management.
Tepper and his wife, Marlene, are the parents of three children and live in Livingston, N.J. He also owns a 6,200-square-foot home in Sagaponack, N.Y. that had been on the market for $50 million when he bought it in 2010. Tepper’s personal interests include coaching his children’s baseball, softball and soccer teams.
He is a member of the Business Board of Advisors for the Tepper School of Business at Carnegie Mellon and the Board of Trustees for Carnegie Mellon University. He serves on various other boards and committees for charitable and community organizations in New York and New Jersey.
In 2009, he made a new investment in his original home town when he bought into the Pittsburgh Steelers. He flies to Pittsburgh for every home game.
In 2011, he took the lead in his current home state in a capital campaign to raise $15 million for the Community Food Bank of New Jersey to help renovate its facilities.
Investment Style
In 2001, Tepper generated a 61% return by focusing on distressed bonds, and in the fourth quarter of 2005, he started pursuing what he saw as better opportunities in Standard & Poor’s stocks.
In 2009, Appaloosa Management earned about $7 billion by buying distressed financial stocks. Early in the year, it bought Bank of America common stock at less than $3 per share and Citigroup at less than $1 per share. About $4 billion of the profits went to Tepper personally. The New York Times named him the top-earning hedge fund manager in the world for 2009. Forbes estimated him to be worth $3.5 billion in 2010.
In a rare interview with CNBC on September 24, 2010, Tepper said that over 17 years, he had compounded 40% for himself and 30% for his investors. Notwithstanding his decision to increase his equities allocation, he cautioned that he was not going “balls to the walls.” But he keeps a pair of brass testicles on his desk and rubs them for good luck during the day.
By the end of 2010, Tepper had established 13 new equity positions, including Micron Technology, Dean Foods and General Motors. Appaloosa Management became the second largest holder of Dean Foods with more than 10.7 million shares. In the first two months of 2011, shares of Dean Foods increased more than 19 percent while Micron jumped about 39 percent.
Meanwhile, Tepper maintained his bets on big banks, with Citigroup, Bank of America and Wells Fargo comprising his three largest equity holdings.
In July 2010, Appaloosa Management agreed to pay $1.3 million to settle short-selling violations with the SEC. The agency said the case involved the firm’s participation in a follow-on offering by Wells Fargo after the hedge fund had sold short more than one million Wells Fargo shares.
Quotes
“I loved baseball. I lived and died for Roberto Clemente. I knew every player in the major league. You could pull a player’s card and I could tell you the statistics.”
“It is important to complete this capital campaign to ensure that the Community FoodBank of New Jersey has the necessary facilities and resources to wage the fight against hunger in the state of New Jersey,”