David Tepper’s Sell Calls Haven’t Worked, History Says

This is the hedge fund manager—the billionaire who just scared Wall Street.

Right after the S&P 500 crashed from a three-month high to a six-week low, from Dec 13, 2022-Dec 21, 2022, Appaloosa Management’s David Tepper gave CNBC a warning-filled interview.

Sure, Tepper gave himself an out by saying everyone should invest for the long term, but get it straight, he was bearish.

He highlighted these points:

• don’t fight the fed and global central banks

• the Fed’s not happy with asset inflation

• market conditions including mortgage rates, junk spreads & stock returns have eased

• easier market conditions hurt the Fed’s inflation fight

Tepper warned, “It’s gonna be just difficult, just difficult, for things to go up right now”. He also slipped in a crazy crash prediction- “The Fed put isn’t long dead and buried, it just may be 1,000 S&P points lower, or 1,500 S&P points lower.”

Tepper ended the segment with “I would probably say I’m leaning short on the equity markets right now.”

These comments lit up financial newswires. Jim Cramer backed Tepper the next day “What he’s basically saying is, it's nothing like it was in 2010 when I told you to buy everything. So you gotta kind of go with Dave. But Tepper’s right.”

But here’s the funny thing. History shows that Tepper’s bearish calls tend to be way off.

I researched David Tepper’s CNBC interviews, and spots where CNBC hosts relayed emailed statements.

Between 2010 and June 2022, the fund manager issued 34 directional market calls on CNBC.

• 20 “buys” or bullish comments

• 14 “sells” or bearish comments

I looked at what the S&P 500 did one, three, and six months later. Here’s the data:

Teppers Buys

Tepper Sells

• “Buys” did great: After Tepper said buy or talked positively about stocks, the SPX rose 8 out of 10 times.

• “Sells” were awful: After Tepper warned about owning stocks or said things like “I’m leaning short”, the SPX fell only 2 out of 10 times.

And check out how much better stocks did after the Sell bucket. One, three and six months out, the SPX jumped a median 2.4%, 5.9% and 9.8%- much more than the median returns for buys.

David Tepper is super successful. He manages a massive hedge fund. He’s active and can switch views the second he goes off the air. But history shows that wealth managers and investors shouldn’t get negative after David Tepper issues bearish comments.

The financial media loves to promote and hype market calls from superstar investors. But news outlets don’t care about facts. They don’t:

• supply simple information l like what their guests have said.

• track their guest’s prior predictions.

• or give viewers a complete snapshot.

Your relative performance vs the broader market will suffer if you let the media misinform you.

I’ve spent years listening to these people, and they do have value, but not if you take them at face value. You have to listen in a certain way; then you can think ahead of strategists, and position ahead of other portfolio managers.

I don’t want you to make uninformed decisions or let viral news stories subconsciously affect your investing process.

This Tepper “leaning short” story was everywhere. If your clients ask you about it, share these facts; give them some useful information.

Best,

Jim