David Tepper will be raking-in mega this year. His hedge fund, Appaloosa Management, a fund he created in 1993 specializing in buying up stakes in distressed companies, made $7 billion in 2009, of which Mr. Tepper will keep about $2.5 billion for himself. The funds’ secret was to bet against America falling into a second Great Depression.
Through February and March, Mr. Tepper, who may have scored one of the biggest paydays of all, bought all the beaten-down shares of Bank of America (BAC) and Citigroup (C) he could get his hands on then trading below $3 and $1, respectively.
WSJ: “One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks.
“I felt like I was alone,” Mr. Tepper recalls. On some days, he says, “no one was even bidding.”
But he stuck to his guns and thanks to a resurgent market Mr. Tepper’s firm has been able to gain about 120% after the fund’s fees, through early December.
“Thanks to those gains, Mr. Tepper… manages about $12 billion, a sum that makes Appaloosa one of the largest hedge funds in the world.”
In 2008 Tepper had a track record of annual gains averaging about 30% and a net worth estimated at about $2 billion.