Insight
Tepper: Global Liquidity Indicators Lead Stock Prices by Six to Twelve Months
“And those are very, very useful because they tend to lead the economic leading indicators themselves by about six months, and they tend to lead asset prices too. So we have a lot of our liquidity indicators will lead commodity prices. They'll lead even stock p…”
Insight
Tepper: Guru-driven macro forecasting is not repeatable or transferable
“I don't want to denigrate some of the gurus who I still admire, but I thought that that's not repeatable. They might be able to hire someone and train them and teach them, but it's probably like a one-off. And I thought surely the best thing to do is to create…”
Assertion Supported
Tepper: Most US states have a health insurance duopoly or triopoly
“The McCarran-Ferguson Act essentially Devolved regulation down to the state level, which meant that the state insurance commissioners are the ones who decide things, so you essentially have a duopoly or three players in almost all states when it comes to healt…”
Assertion Supported
Valeant Exploited Regulation to Charge $300,000 for a Cheap Disease Drug
“There was Wilson's disease was the classic with Valiant, where absent regulation, they would not be able to charge 300 grand a year for a life threatening drug that really should cost pennies, right?”
Assertion Supported
Tepper: Mergers Leaving Fewer Than Six Competitors Drive Up Prices
“There's extensive evidence that mergers, particularly under six players, lead to higher prices.”
Assertion Not checkable as stated
Tepper: Sherman and Clayton Acts Were Political, Not Purely Economic
“But ultimately, the Sherman Act and the Clayton Act were much more political than purely economic, meaning that there was a decision that we don't want to live in a society where one or two people control entire industries.”
Assertion Supported
Peter Thiel's Monopoly Thesis Only Addresses Network-Effect Natural Monopolies
“Thiel praised monopolies, but interestingly, if you read his book, The only examples he gives the monopolies are essentially ones that have very strong network effects, you know, and feedback loops where you do end up with a winner-take-all dynamic.”
Opinion
Tepper: Gold works only as a negative real rates bet, gold mines are terrible
“Gold essentially could be a useful investment given that it's the inverse of the real rate. So to the extent that real rates are negative, it might be good investment, but gold mines themselves are terrible. And gold has a limited function in terms of a bet on…”
Opinion
Tepper: Academic economics is overly theoretical and detached from reality
“I felt economics was in a way too mathematical and theoretical and not really tied to the real world in many ways.”
Assertion Not checkable as stated
Tepper: There are only 500 to 600 natural monopolies globally
“Broadly, globally, I think there's between 500 to 600 companies, and some markets are obviously a little harder to invest in than others internationally.”
Insight
Tepper: Financial models matter less than executive capital allocation discipline
“And so you can write the best write up you want, make the most amazing model that's accurate down to the penny. But if management goes out and blows all their cash on a terrible acquisition, they just destroyed a tremendous amount of value. So getting to know …”
Disclosure
Tepper: Financial exchange spent $500M on crypto platform, writing it down instantly
“Sometimes we've misjudged management, so we did own a financial exchange, and then they went out and spent half a billion dollars on a crypto exchange, and they surprisingly wrote down the acquisition the same quarter that they made it. To me, that was spectac…”
Disclosure
Tepper: Prevatt Capital averages 16 stocks across its portfolio
“So 10 to 20 stocks, but we've really averaged sort of 16 over the life of the fund.”
Disclosure
Tepper: Prevatt Capital will only double down on a position once
“We will only double down once. If you start doing more than that, you're essentially following the Martingale strategy, which is also known as gambler's ruin, and it's always the house that wins, not the gambler.”
Assertion Supported
Tepper: Academic research shows family-run businesses tend to outperform
“If you look at academic research, family run owner operator businesses tend to outperform.”
Disclosure
Tepper plans to close Prevatt Capital to prioritize capital-weighted returns
“But as a business, what I'd love to do is to Close the fund to outside investors. Focus on long-term capital-weighted returns, not just time-weighted returns.”
Assertion Supported
Nine in Ten Economists Missed the Four Recessions Prior to 2008
“Nine out of 10 economists had missed the last four recessions where we had the blue chip consensus estimates”
Insight
Tepper: Markets price directional economic change and surprise, not absolute quality
“It doesn't matter whether the economy is good or bad. What matters is the change in the direction. So markets are all about surprise.”
Insight
Tepper: Economic growth indicators only provide reliable visibility up to 12 months
“So on the leading economic side, there are certain things that tell you where the economy is going to be in three, six, nine, or 12 months, and it's generally difficult to look out past that, particularly on the growth side.”
Insight
Tepper: Cement and aggregate quarries operate as local monopolies
“Aggregates and cement tend to be local monopolies. You just don't ship these things hundreds of miles. And so if you have the quarry, you'll have that local monopoly.”
Disclosure
Tepper: Prevatt bought Booking Holdings at launch at ~10% normalized FCF yield
“When the fund launched in May, 2020, the bottom in the market was in March, but people were still very fearful of COVID and no one was traveling. And so we felt that we were able to buy booking Close to a 10% normalized free cash flow yield with a terrific CEO…”
Disclosure
Tepper: Prevatt owns Knorr-Bremse, part of global rail brake duopoly
“We own Norbremse, which is a German rail brakes company. And globally, it's basically, for the last century, been a duopoly between Wabtec in the US and Norbremse in Germany producing rail brakes.”
Insight
Tepper: Inflation lags the economic cycle due to delayed corporate pricing and wage cycles
“On the inflation side, because inflation is so lagging, so if you think of supermarkets don't immediately start raising prices until they're sure the demand is there, they don't start cutting prices until they're sure that it's dropping off, and then wage cycl…”
Assertion Supported
Tepper: US Insurance Industry Is Exempt From Federal Antitrust Laws
“Believe it or not, the insurance industry is exempt from antitrust supervision under McCarran Ferguson, right?”
