An All-Pro Market Wizard

Every Wednesday, here at HX Daily, we share the stories and wisdom of some of the greatest past and present investors.

Many of those are investors from the past who have timeless wisdom that still holds up today. Some are not very well known and operate quietly, but still have great insights.

There is another group that we talk about seldom—the market titans of TODAY.

These are the Market Wizards who have created billion-dollar fortunes by operating investment funds in the past few decades. Today (a day after his 67^th birthday), we discuss one of the most successful of all time: hedge fund manager David Tepper of Appaloosa Management.

Tepper was born in a middle-class family outside of Pittsburgh in 1957. He attended my alma mater – the University of Pennsylvania – before getting an MBA from Carnegie Mellon University in 1982.

Tepper began his career in the corporate world working for Republic Steel in Ohio but switched to investing early on. Soon, brokerage giant Goldman Sachs recruited him to work as a bond analyst, with a special focus on bankruptcies and complex situations.

He is said to have played a key role in helping Goldman navigate the stock market crash of 1987. After being passed over as a partner at Goldman twice in two years, he decided to set up his own investment firm, Appaloosa Management, which he launched in 1993.

Tepper continued focusing on the bond markets and understanding complexity, putting together one of the best track records of any hedge fund manager. 

Today, Appaloosa manages nearly $15 billion, and Tepper is reportedly worth over $21 billion. He also happens to be the principal owner of the NFL’s Carolina Panthers.

Many of his modern colleagues are not very vocal about their investing, but Tepper has some great quotes. We share those with you here…

1. “There is a time to make money and a time to not lose money.”

We often talk about how important it is to understand what type of market you are currently operating in.

While there are elements of every strategy that work in every type of market environment, your plan needs to be refined to the kind of market RIGHT NOW.

What works in a BULL market is not necessarily what works in a BEAR market.

Getting it wrong can cost you a lot of money. Remember that one key is to stay in the game.

2. “This company looks cheap, that company looks cheap, but the overall company could completely screw it up. The key is to wait. Sometimes the hardest thing to do is nothing.”

We talk about this often: Doing absolutely nothing is the most valuable tool you have as a trader and an investor.

99.9% of trading and investing opportunities are ones you should not be doing. Selectivity is the key to your eventual success.

Being patient is indeed one of the hardest things for any investor to do but also one of the most important.

3. “Those who keep their heads while others are panicking do well.”

This fits our favorite motto – "Trade the Plan, Plan the Trade."

One key to keeping your head when the market goes against you is having a plan that prepares you for any contingency.

If you are prepared, you have a much better chance of surviving—and thriving—in a tough market.

Just remember, you also need to execute the plan to succeed.

4. “I can’t worry about backward; I’ve got to look to the future.”

This outlook is one of the key elements of optimism.

People who are able to move on, learn from their mistakes, and not dwell on them are in a much better position to succeed.

Psychological “baggage” can weigh you – and your investment – returns down.

5. “Success is not built on secrets, it’s built on hard work, determination and the ability to learn from your mistakes.”

This just sounds like a lot of common sense. Something that very often is lacking in the markets.

There are no shortcuts to success. Another one of our mottos at HX Research is "Do the Work," and that is what Tepper is saying here.

Anyone can become a successful trader and investor if they are willing to put in the time and exhibit the discipline.

Here at HX Research, we are here to help!