The recent market turmoil made lots of investors lose their ways. Some experienced investors chose a defensive investment strategy. David Tepper, founder of Appaloosa Management, is one of them.
In the beginning of 2009, Tepper held 30% in cash. But in February and March of that year, he insisted in purchasing many bank stocks, such as BofA, Citi, which were dropping at that time and were avoided by most investors. In 2009, Tepper’s fund returned 120%.
In the beginning of this year, the biggest positions in Tepper’s portfolio were Wells Fargo, Citi bank, and Bank of America. However, in Q1, Tepper started to sell large amounts of these stocks. By the end of June, Tepper only held a small portion of the Citi bank position he held in the beginning of the year. His positions in BofA reduced by 60% (check out Tepper’s stock picks). Through the end of August, Tepper’s fund lost about 1 to 2 percentage points, which is quite good in such market turmoil.
According to “Institutional Investor”, Tepper’s fund now holds 30% to 40% in cash, which is very high for him. He invested part of the cash in US treasuries, which have risen in value in recent weeks. Although Tepper usually holds about 25% cash, he is not eager to invest the cash in hand this time. He will remain cautious before the European bank crisis is improved, but he will definitely be aggressive if the market tanks, according to II.