Billionaire hedge fund manager David Tepper said he is not as optimistic about the stock market as he could be. In an interview with CNBC on Thursday September 10th, the founder of Appaloosa Management expressed his concerns about the conditions in the stock market. However, despite the concerns, Tepper did see a company that looked like a bargain. (Source: CNBC, September 10, 2015.)
There are mainly two things in the U.S. stock market that worry Tepper—earnings and multiples. “I have problems with earnings growth [and] problems with multiples, so I can’t really call myself a bull [near term].” He thought that earnings expectations for next year might be too high.
The billionaire investor told CNBC that his fund had some longs and shorts that were hedged, but didn’t have a huge equity portfolio. Tepper also revealed that he had lots of cash, and thought it might be a good time “to take money off the table.”
Tepper wasn’t too bearish about the U.S. stock market, however. He said that he’s “not loving it,” but would become a buyer if stocks were to fall 20% or so. In the long term, Tepper believed that the market would move higher.
Despite his concerns about the market, Tepper still saw value in certain companies. One of them is Apple Inc. (NASDAQ:AAPL), which currently trades at $112.85 a share and has a price-to-earnings ratio (P/E) of 13.04.
Tepper told CNBC that he thought Apple stock was cheap at its current price and his hedge fund maintained a position in the company. The position is not huge, “about 0.75% of our book.”
Tepper mentioned that Apple’s future would depend a lot on China, which might be problematic. But he believed that at such a low multiple, “I can deal with it.”
According to Bloomberg, Tepper’s fund Appaloosa Management performed quite well so far into the year compared to the overall market which has been struggling. The fund is said to have gained 12% this year. The S&P 500, on the other hand, is down 4.66%. (Source: Bloomberg, September 10, 2015.)