Appaloosa's David Tepper Hoarding Cash; Has Cautious Outlook

According to an Institutional Investor article from today, even hyper-successful, swashbuckling hedge fund manager David Tepper is a little freaked out by the recent gyrations in financial markets. Tepper, who usually has an over-sized appetite for risky bets, has been raising cash and trimming stock positions. His hedge fund, Appaloosa Management, has around a 40% cash allocation, suggesting that he is looking for bigger declines ahead when he can scoop up assets on the cheap. Tepper is known for one of the all-time great trades when he began scooping up financial stocks such as Citigroup C and Bank of America BAC near the 2009 lows, making billions when markets rebounded. Those financial bets, however, have gone sour this year and he spent the first and second quarter aggressively paring positions in Wells Fargo WFC along with his sizable stakes in Citi and Bank of America. Sources close to Appaloosa indicate that Tepper is not looking to go bargain hunting just yet with his cash pile, but was rather adding to stocks his fund already owns on dips. The billionaire hedge fund manager is famous for coining the term the "Bernanke Put." In an appearance on CNBC last fall, Tepper said that stocks would do well heading into 2011, because the economy would either get better or the government would provide more stimulus. His thinking proved to be accurate, as the market staged a massive rally in the 6 months following his statement. Despite the fund's exposure to financial stocks, Appaloosa has held up relatively well in 2011 and is flat to down a couple of percentage points according to investors. Tepper remains cautious with regard to the possible ramifications of the European debt crisis. What could be interpreted as worrisome by investors is the fact that Tepper is remaining in a risk averse stance despite the recent sell-off and the fact that he is known for being a guy willing to step in and buy when no one else will. The obviously inference is that he thinks he will be able to buy cheaper down the road.