While driving to meet some people at a research firm about a new job opportunity, Brian McGough called one of his trusted friends to hear his thoughts. McGough may have been expecting some insight, and maybe a pre-interview pep talk, but the advice he received turned out to be far more valuable.
“I need you to turn your car around and come over to my house,” Keith McCullough said on that call 15 years ago. “We’ve got to talk.”
“So, I took the next exit, went right around and went to his house,” McGough said.
“Keith (Hedgeye CEO), Michael Blum (Hedgeye President) and I sat there for 12 hours with a whiteboard, and we just started whiteboarding Hedgeye. We did that for a couple weeks. Not long after, Hedgeye was formed.”
In addition to co-founding Hedgeye, McGough has led its Retail sector since 2008. In this episode of Sector Head Spotlight, McGough explains to Robert McGroarty why the investment research and financial media company he helped launch is the best he’s seen in nearly 30 years in the industry.
“Here, I can go anywhere I want to go,” McGough says. “I look at these ‘Old Wall’ notes that come out and I see ‘super-duper strong buy: 12% upside to our price target,’ and I smack myself in the head. If I was speaking with an institutional client or a Retail Pro subscriber and said, ‘Hey, here’s a great idea. It’s going to go up by 12%,’ I would expect to be fired about five minutes later.”
Hedgeye’s goals are much more ambitious: longs with the potential to double (then double again); shorts that can cut in half (then cut in half again). Hedgeye subscribers are now well aware of the Quad framework helping identify risks and opportunities. What many may not realize is the Quads are a combination of McCullough’s quadratic views and McGough’s SIGMA Model (Sales Inventory Gross Margin Analysis).
These structures help McGough separate his personal preferences from his stock picks, which is important for someone with personal and professional interests in retail.
“I’m wearing a Lululemon vest, I’m wearing Lululemon pants,” he said. “I love the stuff, but it doesn’t mean I like the stock. I completely divorce the fundamentals versus how I ‘feel’ about a stock. Feelings are dangerous. If Keith’s taught me one thing – he’s taught me many things – it’s to fade my feelings.”
That bit of wisdom inspired him to pull off the highway 15 years ago and has continued to pay dividends ever since.
“This has been just an amazing ride at the best company I’ve ever worked at and plan on working at for a very, very long time,” McGough said.
In the coming weeks, Hedgeye.com will feature several other analysts on Sector Head Spotlight. Stay tuned.
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Interested in hearing more of Brian McGough's analysis on Retail? Click here for information on Retail Pro. |
