Tag Archives: David Tepper

Business, Finance, Occupation & Industry

Highest Hedge Fund Managers Paid Well, as They Should Be

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By 24/7 Wall St.

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Hedge fund managers are more vilified for their pay packages, by the media and the public, than public company CEOs are. To some extent, the attacks are understandable, at least on the surface. Hedge fund managers can make hundreds of millions of dollars a year, while the highest paid CEOs make only tens of millions. The difference is that hedge fund managers are generally paid by very specific performance measures.

Hedge fund managers may be well paid, but the effects of poor performance can be extreme. It is not unusual for funds that have done poorly to lose a large portion of money that they manage, even to the extent that funds can be forced to close. That is the ultimate “pay for performance” penalty.

The latest version of a study done by Institutional Investor was released recently. Authors of the “Rich List” reported that several managers returned 20% to 30% improvements in the value of their funds. These included David Tepper of Appaloosa Management, Leon Cooperman of Omega Advisers and David Loeb of Third Point. Managers who have had longer term success also made the list. These include Ray Dailo of Bridgewater Associates and Steven Cohen of embattled SAC Capital. None are strangers to lists of top hedge fund managers.

Extraordinary high pay nearly always brings out the historical comparisons with the compensation of teachers, fireman, police and blue-collar workers. In these professions, at least, workers are part of a huge infrastructure of support, paid for by the public or shareholders. While that does not lower the value of their contributions to society or private enterprise, it does partially explain why employees supported by massive investment in the systems in which they operate are paid modestly.

The pay level of teachers has to be measured in part by the fact that school buildings and books are paid for by the public, and that many of those investments have been in place for years. For blue-collar workers at large manufacturing companies, the facilities in which they work are usually the product of billions of dollars in factories and production line investments made by their employers, often long before these people take their jobs. In all cases, the level of risk to the job security of public and large corporation workers is fairly small.

In the debate over the pay of investment managers, a single factor explains some of what is considered “obscene” pay. Underperformers get put out of business.

Filed under: 24/7 Wall St. Wire, Compensation

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From: http://www.dailyfinance.com/2013/04/15/highest-hedge-fund-managers-paid-well-as-they-should-be/

Business, Finance, Occupation & Industry

Here's What This 1,335%-Gainer Has Been Buying and Selling

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By Selena Maranjian, The Motley Fool

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Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let’s look at Appaloosa Management, founded by investing giant David Tepper, and known for investing in the debt of companies in distress. Tepper’s investing history includes debt and stock in companies such as Enron and Worldcom. He made billions on bank stocks in 2009, after they had imploded and before they recovered. More recently, he invested in many housing-related companies.

Why should you look at Appaloosa Management‘s moves? Well, according to the folks at GuruFocus.com, Appaloosa gained a whopping 1,335% in the first decade of this century, compared with just 16% for the S&P 500.

The company’s reportable stock portfolio totaled $4.6 billion in value as of December 31, 2012.

Interesting developments
So what does Appaloosa’s latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are HCA Holdings and MetLife. Other new holdings of interest include Weatherford International , which is down some 27% over the past year. The company has been plagued with accounting-related problems, as well, and remains challenged  by low gas prices and low margins related to an Iraqi contract. In a recent presentation, though, management pointed out that its land-based operations, which represent the bulk of its work, have been growing by an annual average of about 16% over the past decade. Its “unconventional” operations, including shale and oil sands, have been growing even more briskly. Still, despite robust revenue growth and plenty of fans, its bottom line is in the red, and it’s free cash flow is, as well, while debt has been growing.

Among holdings in which Appaloosa Management increased its stake was EMC . EMC is a $53 billion storage giant, poised to profit from the rapidly growing cloud-computing and “Big Data” arenas. It also holds an 80% ownership stake in virtualization specialist VMware. EMC has been held back some by softness in technology spending due to a weak global economy, but that won’t last forever. Its recent earnings report was solid, with strong operating income growth, and many were excited to hear about the company’s plans, with VMware, to launch a joint venture called Pivotal, combining the companies’ cloud and data analytics services. Pivotal is likely to be spun off as a separate company in the future.

Appaloosa Management reduced its stake in lots of companies, including Chimera Investment and Fusion-io . Mortgage REIT Chimera Investment yields 11.6%, profiting by taking on more risk than many of its brethren. My colleague John Maxfield has expressed doubts about the company, and it has not filed required reports on time, either, which is a concern. It did file its 10-K (from 2011) recently, but after the market closed on a Friday, suggesting that it wanted minimal attention. Sure enough, a read through it raises more concerns, such as its hefty management …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is the Dow Approaching Bubble Territory?

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By John Maxfield, The Motley Fool

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If the market finishes the day where it is now, it will mark the eighth straight session in which blue-chip stocks have climbed. With roughly an hour left in the trading session, the Dow Jones Industrial Average is clinging to a one-point gain.

Given this run into record territory, many analysts are now beginning to ask the inevitable question: Are stock prices approaching bubble territory? Leaving little to the imagination, a headline on Yahoo! Finance reads, “The Stock Market Is a Debt-Fueled Bubble.” According to an economist interviewed therein: “Nothing can accelerate forever. At some point the acceleration stops, and when it does the market breaks.”

Not surprisingly, however, there’s another side to this story. David Tepper, the founder of hedge fund Appaloosa Management, has purportedly predicted that the S&P 500  could rise an additional 20% or more through the end of this year. Citing a person “familiar with his thinking,” Kate Kelly of CNBC said Tepper is confident in the U.S. economy and is expecting gross domestic product to grow by 2.25% for the first three months of the year.

Either way, today’s rally is based in large part on the fundamentals.

This morning, the Department of Commerce released data showing that retail sales in the United States jumped last month — “a sign that consumers are gaining confidence and spending more despite higher taxes and gasoline prices,” according to The Wall Street Journal. More specifically, seasonally adjusted sales of retail and food services rose by 1.1% over January and 4.6% on a year-over-year basis. This was more than double the 0.5% advance that economists surveyed by Bloomberg had predicted.

The results were great news for both McDonald’s and Wal-Mart , both of which are up in afternoon trading. While these companies have seen their stocks gain this year — McDonald’s by nearly 10% and Wal-Mart by 6.3% — it hasn’t been a smooth ride for either. Among other things, same-store sales at the fast-food giant fell by 1.5% last month, as the prior-year period included an extra day for the leap year. And Wal-Mart has been working to stem the tide leak of emails about severely lagging sales at the nation’s largest retailer.

Meanwhile, shares of Bank of America are trading higher in anticipation of tomorrow, when the nation’s largest banks learn whether or not they’ll be allowed to increase their dividend payouts and/or repurchase more shares. As I discussed, I believe the chances are good — and it seems the market does, too. The same can be said for JPMorgan Chase , the nation’s largest bank by assets.

The question is largely a function of capital — Tier 1 common capital, that is. Banks with excess capital beyond regulatory minimums will presumably be given the green light to return more of that capital to shareholders, while those not similarly situated will be denied the opportunity.

In B of A’s case, at the end of …read more
Source: FULL ARTICLE at DailyFinance