What I Learned From David Tepper
"In the outside world, I’m that easygoing person. But if I’m on the field, I wanna win. And we win a lot.”
This the addendum to my first piece on David Tepper.
I hope you enjoyed my write-up of David Tepper’s story. This is a follow-up, a paywalled addendum containing more quotes, my takeaways, and a list of sources if you want to read more about him.
I’ve been thinking a lot about how to best structure this substack. I love following my curiosity about people and ideas and I want to share the stories and insights with as many people as possible. Which is why the “story” of David Tepper is available to everyone. Putting it behind the paywall felt out of alignment with my mission.
For those of you who want to dive deeper, there will be paywalled content such as this addendum. It’s not a perfect solution - I wish I had the scale to share it all for free. But it seems like the best compromise at this point.
What can we really learn from great investors?
This question is always on my mind because a lesson’s relevance depends on the reader. Knowing who you are, and what works for you, might be one of the most important questions to figure out in investing (and life). As John Goodman (‘Adam Smith’) wrote in The Money Game: “if you don't know who you are, this is an expensive place to find out.”
And yet, you have to keep learning and experimenting. If I had a to pick a motto for the substack, it would be Bruce Lee’s: “absorb what is useful, discard what is useless and add what is specifically your own.” Integrate whatever you find useful and make it your own.
And keep in mind that the more you learn about these outliers, the more you will see their humanity, their mistakes and flaws. Strive to take a nuanced view and be selective about what to learn from them.
As my friend Tom Morgan said: “Relatively new investors typically uncritically adopt heroes and gurus … As they gain more experience, their list of idols grows ever-shorter as imperfections appear. They have increasingly long lists of who they dislike. But pointing out faults is trivially easy. … Instead, the most impressive people I’ve asked usually have very long lists of influences. But they can usually precisely articulate what they have integrated and discarded from that person.”
In The Reading Obsession I pointed out that our tendency to look for easy answers, “x is successful because of y,” can lead us to deceptive narratives - Buffett as the bookworm. Not only is reality more complex it often seems paradoxical. For example, Tepper is a hybrid of a trader and investor and seems to embody contradictions.
He balances stubbornness with nimbleness. He can simultaneously make a thematic bet on a sector or the overall market while also being involved in a complex and lengthy restructuring based on the detailed work of his analysts.
His jokes and bold bets could lead us to believe that he owes his success to a few lucky gambles. Yet he is highly risk aware and recognizes that survival is more important than homerun returns. His massive bets occurred when markets were washed out and inflecting, not simply because an asset had traded down.
These headline bets also obscure that much of his success is owed to the “grind” of finding value in event-driven situations and exposure to other macro themes and equities. He has a team of analysts that support him and are particularly important in complex situations such as restructurings.
His portfolio is a mix of assets across markets, much of which is invisible to the outsider observer. Therefore, any lessons we find in his story are necessarily severely limited (until I get to interview him😌).
For an illustration of how he rotates through sectors, check out his US equities portfolio through a site like whalewisdom.
Big bet on financials in 2009:
Bets on energy when there was distress:
Big bets on technology and communications - in the dotcom distress cycle but also recently as a thematic bet:
Tepper is neither clairvoyant nor, as I think will come across in the addendum, recklessly shooting from the hip.
“Does being a risk-taker mean not being afraid of losing money sometimes? Then I’m a big risk-taker. Does it mean putting the firm in jeopardy? Then in that case I am not a big risk-taker.”
Things I learned from David Tepper:
Don’t do it for money alone.
Be smart enough to get lucky.
Find your own style.
Ahead of the herd.
But don't bet the firm.
Bouncing back in life and markets.
Unemotional under pressure.
Optimists win in the long run.
Keep having fun.