Life of David Tepper
From class clown to one of the most profitable hedge fund managers of all time, David Tepper has had an incredible life growing his net worth. Tepper never got an A grade in high School but it hasn’t stopped him from climbing up the corporate ladder and excelling off the end to become one of the wealthiest billionaires in America.
Since starting his fund, Appaloosa Management, in 1993, Tepper has had phenomenal success: as an example, in 2009 the Appaloosa fund gained more than 130 percent after Tepper bet that the government wouldn’t let the big banks fail and loaded up on preferred shares and bonds of the banks. He made millions of dollars in profit, more than recovering from the losses from the stock market crash in 2008.
And in 2012 he did it again: he made the most money out of any hedge fund manager with his fund. Appaloosa took home some $2.2 billion at the end of the year 2012 and his flagship fund finished up an incredible 30% for the year.
Yet in his high school at Peapody in Pittsburgh, he was known as the class clown and didn’t even have the motivation to achieve an A grade in school. But through a lifetime of hard work, Tepper has grown from the son of a lower middle class family to building a portfolio most of us can only dream of.
His wealth is known by many, and he has been since dancing on stage with Ellen DeGeneres at his 50th birthday. As a show of his wealth, he famously bought a property for $43.5M in 2010 and immediately knocked it down. He did it to build one twice the size, obviously.
But how did David Tepper become so successful? His backstory is full of surprises and we learn that perhaps we, too, have the potential to build a fortune as big as Tepper’s:
5-year-old whizz-kid
Tepper grew up as the middle child in a lower middle class neighborhood in Pittsburgh, Pennsylvania. His father was an accountant (although not CPA qualified) and his mother was a public school teacher. Perhaps having a father as an accountant gave rise to one of David Tepper’s most astonishing childhood facts: he was so good at math from the age of 4 that his sister decided to take him as the subject of her show and tell class at school! The little boy was only 5 years old but was brought in to show off his whizz-kid multiplication and complex addition skills.
High School Class Clown
For High School, Tepper attended Peabody High School. Starting off as a shy kid, by the time he graduated in 1975 he was a much more confident young man and became known as the class clown. He always joked around and frequently found himself in the Principal’s Office. In fact, he never earned an A grade while at High School! On one occasion, Tepper found himself and his classmate in front of the Vice Principal after playing around with some stolen bottles from his chemistry class. While the Principal decided what their fate would be (either 10 days of suspension or 10 whacks from a wooden panel, yikes!), luckily for the boys the fire alarm went off and they managed to escape.
Disastrous First Stock Pick
It was Tepper’s father who first introduced him to the world of investing in stocks. After some thought, Tepper decided to make his first investment in a company called Career Academies. He bought 100 shares at $2 a pop but the investment soon turned sour as the company ended up going bankrupt. He certainly didn’t give up investing, though.
Tepper School of Business
After paying his way through the University of Pittsburgh with a job at the university’s fine arts library, David went on to work as a credit and securities analyst at Equibank. Two years later in 1980, Tepper went to Carnegie Mellow to get his MBA. Incredibly, the school he went to is now named after him after Tepper donated an incredible $55M to the school in 2003. If you ever find yourself at Carnegie Mellow, make sure to make a stop to the Tepper School of Business.
Love in Boston and Life at Goldman
After grad school, he went to Boston to work at Keystone Mutual Funds. It was also in Boston that he met his wife, Marlene, at a singles dance and they got married in 1986.
The year he got married, Tepper also took a new job and was hired by Goldman Sachs as a credit analyst. He worked his way up the company and soon became head of the high-yield desk, and was very successful within the cmpany. But after being passed up for partner at the firm, Tepper decided he’d had enough. He left and that’s when he decided to start his hedge fund.
Origins of Appaloosa Tepper’s flagship fund was started in 1993. Today it has grown to a whopping $12B in Assets Under Management. But where did the name come from? Interestingly, Tepper wanted to call the fund Pegasus Fund, but after filing the name discovered it was already taken. He wondered about Unicorn Fund… but didn’t like the sound of it. So what did Tepper do? He pulled out a horse book. He flipped through the pages and on the second page was the Appaloosa horse and so that’s the name he chose. Certainly one way to choose a name!! To this day, Tepper still has the horse book!
In terms of his investing technique, Tepper’s has been described as a mix of deep analysis and common sense. A word of advice from the billionaire is, “Those who keep their heads while others are panicking usually do well.”
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