Tepper Tipped To Win Billions On Growth Bet

David Tepper’s hedge fund firm, Appaloosa Management, has made about $7 billion in profits this year, with Tepper slated to take home $2.5 billion himself. He’s preparing to collect on a bet that America wouldn’t face a repeat of the Great Depression.

In early 2009, Tepper picked up chunks of beaten-down bank shares that investors were rushing to get away from. He bought Bank of America (NYSE: BAC) shares when they were below $3 and Citigroup (NYSE: C) shares when they were below a dollar. Predictably, his moves were not popular amid speculations that these banks would be nationalized. Thanks to a resurgent market, Tepper now manages a fund of $12 billion, which is among the biggest in the world. His latest target is about $2 billion worth of depressed commercial mortgage-backed securities.

Hedge funds were thrashed by 19% in 2008, forcing nearly 1,500 of them to close down in the last year. According to Hedge Fund Research, gains of 19% in November have put hedge funds back on track for their best annual gains in a decade.

Tepper started out by trading junk bonds at Goldman Sachs (NYSE: GS) and left in 1993 to form Appaloosa and specialize in out-of-favor stocks. By 2008, his annual gains averaged 30% and his net worth stood at nearly $2 billion.

Tepper’s big wagers make him prone to sudden and abrupt losses, and a 2006 bet on Delphi (OTC: DPHIQ) lost Appaloosa $200 million. There are concerns about Tepper’s real estate holdings but he remains confident that all will be well if the economy is okay.