David Tepper’s Appaloosa Management extended its strong rebound this year, posting a 2.6 percent gain in its Palomino fund in May. As a result, the hedge fund is up 14 percent for the first five months of 2014.
Since November, when Tepper started his current rally, Palomino is up nearly 19 percent.
Last year, Palomino posted a disappointing 2.2 percent gain, causing Tepper to relinquish the top spot on the Institutional Investor’s Alpha Rich List for the first time in three years. Even so, he tied for No. 11 with $400 million in earnings.
Tepper has long played quantitative easing policies of central banks throughout the world, going long stocks and bonds and going short individual currencies of countries undergoing QE.
In late October, Tepper told the audience at the annual Robin Hood Investors Conference in New York that his best idea was to short the euro. The currency quickly plummeted after that. Although the euro rallied from late April to late May, it quickly sank again.
It is also safe to assume Tepper has been cashing in on the U.S. dollar’s continuing climb against the Japanese yen.
Meanwhile, in the first quarter, Tepper made big bets on call options of two broad-market exchange-traded funds in the U.S. — one that tracks the movement of the Standard & Poor’s 500 and one that tracks the stocks in the Nasdaq-100 Index. The options likely made more than the low- to mid-single-digit gains generated by the two ETFs themselves.
It is not known, however, how Tepper responded Wednesday to Federal Reserve statements indicating that the central bank is likely to raise interest rates before the end of the year.
And although Tepper has fared well in recent years from soaring airline stocks, in the first quarter he shrewdly switched strategies in the group. He cut his holding in United Continental Holdings by 19 percent and liquidated altogether his large position in American Airlines Group.
Instead, he established a new position in JetBlue Airways.
Good moves. Shares of both American and United are down nearly 25 percent in the first five months of the year, while JetBlue has surged 27 percent this year through the end of May.
Meanwhile, in the first quarter Tepper boosted Palomino’s stake in General Motors Co., which already was his largest individual stock holding. The stock, which has been volatile this year, is still up slightly for the first five months.
However, HCA Holdings, Tepper’s second-largest single stock holding for the past few quarters, is up 11 percent for the year, through the end of May.
The Priceline Group, Tepper’s third-largest holding in recent quarters, is up nearly 3 percent for the year.
Tepper, of course, has a history of posting very strong results in a year following a disappointing performance.
In fact, Tepper has posted losses of more than 25 percent on three different occasions. In each of the three ensuing years, he followed with enormous gains, including triple-digit returns in two of those three years.
