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Tepper Crushes China Trade: Here's Why he's Still Bullish
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Who is David Tepper?
David Tepper is a hedge fund manager and the portfolio manager of Appaloosa Management – an investment firm recognized for its specialization in distressed debt and stock investments. Tepper is renowned for his uncanny market sense, daring investment strategies, and high-conviction trades (which often proven correct). Over the past few decades, Tepper has emerged as a power player in the finance arena. In addition to his many accomplishments, he holds ownership of the Carolina Panthers NFL team and Charlotte FC in Major League Soccer (MLS). Tepper is also famous for his charitable deeds and is ranked among the wealthiest hedge fund managers globally.
You don’t become a multi-billionaire by doing the same thing as the crowd. David Tepper’s greatest trade, and one of the greatest trades of all-time, was his buying of distressed assets after the Great Recession of 2008. Tepper finds success by:
· Buy blood is in the streets: Unlike most investors, Tepper finds opportunity in crisis. As panic was hitting Wall Street in 2009 and Lehman Brothers and Bear Stearns had collapsed, David Tepper bought massive positions in hypothetically risky banks like American International Group ((AIG - Free Report) ) and Bank of America ((BAC - Free Report) ).
· Leverage government intervention/ fiscal stimulus to your advantage: Tepper’s reasoning for buying banking stocks was simple: The U.S. government promised to “shore up” the banking sector and provide liquidity.
· Buy companies with large cash piles and low valuations: Rather than chasing momentum, Tepper prefers to buy stocks poised to revert to the mean.
· High conviction: Because Tepper waits patiently for asymmetric opportunities, he is able to cash in, unlike most investors. As Jesse Livermore once said, “Those who can both be right and sit tight are uncommon.”
Tepper Nails the China Trade
Last quarter, David Tepper’s 13F disclosure showed that he was heavily bullish on China with positions in JD.com ((JD - Free Report) ),Baidu ((BIDU - Free Report) ), the iShares China LC ETF ((FXI - Free Report) ), and the Krane CSI China Internet ETF ((KWEB - Free Report) ). Tepper’s largest position was Alibaba ((BABA - Free Report) ), which accounted for ~$750 million or 12.24% of his portfolio.
Analyzing Tepper’s BABA Trade
With the stock beaten down, Tepper increased his BABA stake dramatically in Q1.
Image Source: TradingView
The trading legend was likely pricing in China stimulus (correctly). Early this week, the Chinese government announced a massive, larger-than-expected stimulus package to boost the ailing Chinese economy. In a CNBC interview Thursday, Tepper touted that Chinese stocks have single-digit P/E multiples and double-digit growth.
Image Source: Zacks Investment Research
Tepper Chinese Outlook
Finally, in addition to bargain basement valuations and strong growth expectations, the billionaire investor says he continues to pile into Chinese stocks because they enjoy massive cash hoards.
Image Source: Zacks Investment Research
Bottom Line
David Tepper is among the sharpest minds on Wall Street. The success of his recent bets on Chinese stocks is further evidence that investors should learn from his investing blueprint and listen closely when he speaks.
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Tepper Crushes China Trade: Here's Why he's Still Bullish
Who is David Tepper?
David Tepper is a hedge fund manager and the portfolio manager of Appaloosa Management – an investment firm recognized for its specialization in distressed debt and stock investments. Tepper is renowned for his uncanny market sense, daring investment strategies, and high-conviction trades (which often proven correct). Over the past few decades, Tepper has emerged as a power player in the finance arena. In addition to his many accomplishments, he holds ownership of the Carolina Panthers NFL team and Charlotte FC in Major League Soccer (MLS). Tepper is also famous for his charitable deeds and is ranked among the wealthiest hedge fund managers globally.
Crisis = Opportunity. Tepper’s $7 Billion Windfall
You don’t become a multi-billionaire by doing the same thing as the crowd. David Tepper’s greatest trade, and one of the greatest trades of all-time, was his buying of distressed assets after the Great Recession of 2008. Tepper finds success by:
· Buy blood is in the streets: Unlike most investors, Tepper finds opportunity in crisis. As panic was hitting Wall Street in 2009 and Lehman Brothers and Bear Stearns had collapsed, David Tepper bought massive positions in hypothetically risky banks like American International Group ((AIG - Free Report) ) and Bank of America ((BAC - Free Report) ).
· Leverage government intervention/ fiscal stimulus to your advantage: Tepper’s reasoning for buying banking stocks was simple: The U.S. government promised to “shore up” the banking sector and provide liquidity.
· Buy companies with large cash piles and low valuations: Rather than chasing momentum, Tepper prefers to buy stocks poised to revert to the mean.
· High conviction: Because Tepper waits patiently for asymmetric opportunities, he is able to cash in, unlike most investors. As Jesse Livermore once said, “Those who can both be right and sit tight are uncommon.”
Tepper Nails the China Trade
Last quarter, David Tepper’s 13F disclosure showed that he was heavily bullish on China with positions in JD.com ((JD - Free Report) ), Baidu ((BIDU - Free Report) ), the iShares China LC ETF ((FXI - Free Report) ), and the Krane CSI China Internet ETF ((KWEB - Free Report) ). Tepper’s largest position was Alibaba ((BABA - Free Report) ), which accounted for ~$750 million or 12.24% of his portfolio.
Analyzing Tepper’s BABA Trade
With the stock beaten down, Tepper increased his BABA stake dramatically in Q1.
Image Source: TradingView
The trading legend was likely pricing in China stimulus (correctly). Early this week, the Chinese government announced a massive, larger-than-expected stimulus package to boost the ailing Chinese economy. In a CNBC interview Thursday, Tepper touted that Chinese stocks have single-digit P/E multiples and double-digit growth.
Image Source: Zacks Investment Research
Tepper Chinese Outlook
Finally, in addition to bargain basement valuations and strong growth expectations, the billionaire investor says he continues to pile into Chinese stocks because they enjoy massive cash hoards.
Image Source: Zacks Investment Research
Bottom Line
David Tepper is among the sharpest minds on Wall Street. The success of his recent bets on Chinese stocks is further evidence that investors should learn from his investing blueprint and listen closely when he speaks.