Appaloosa Management Profits 2009

Appaloosa Management Nets $6.5 Billion Profits in 2009 

Earlier we mentioned how David Tepper, head of Appaloosa Management, reportedly made almost $7 billion in 2009.  He did so by betting that the recession would not last as long as many analysts and public officials predicted and taking big stakes in struggling firms like Bank of America and CitiGroup.  Tepper understood that the government would not nationalize these banks and when many were unsure of the two banks' futures his fund was buying up shares which he believed were significantly underpriced.  By purchasing these shares and stakes in other smaller banks and financial lending institutions, Appaloosa Management LP was able to turn a $6.5 billion profit in 2009. 

“It was crazy,” says Tepper, a Pittsburgh native. “In February and early March, people were in a panic.”

Appaloosa began scooping up bank-related securities, including common and preferred shares and junior subordinated debt. The Short Hills, New Jersey-based hedge fund firm bought into Bank of America, Citigroup, Fifth Third Bancorp and SunTrust Banks Inc. Tepper also bought the bonds of New York- based American International Group Inc., Frankfurt-based Commerzbank AG and London-based Lloyds Banking Group Plc, paying as little as a nickel on the dollar.

As the stocks and bonds rose later in the year -- Bank of America and Citigroup shares surged 330 percent and 223 percent from Feb. 28 through September -- Appaloosa made more than $1 billion.

The bank investments helped Tepper’s flagship fund, Appaloosa Investment LP I, achieve a 117.3 percent return for the nine months ended on Sept. 30, making it the best-performing hedge fund with assets over $1 billion, according to data compiled by Bloomberg. Estimated profits for the $3.03 billion fund were headed toward $195 million, after taking into account the fund’s 26.7 percent drop in 2008, Bloomberg Markets magazine reported in its February 2010 issue.

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