“Our job is to find stocks that are either going up or going down and going long or short. We’re in the business of making people money. Fifteen years later, we’re still in business. We love what we do. It’s just fun picking stocks.” -Veteran Hedgeye analyst Howard Penney
If you’ve ever tuned into The Call @ Hedgeye on weekday mornings, you’ve seen Keith McCullough behind the wheel of his car driving into Hedgeye HQ, sharing screen time with a team of 40+ analysts reporting on actionable developments in their respective sectors. There’s so much ground to cover, the conversation often extends beyond its scheduled 45 minutes.
While it’s hard to picture now, there was a time when The Call consisted of just four people gathered in a single room: two Hedgeye co-founders and the first two analysts they hired.
“Brian McGough, Todd Jordan, Keith and I used to sit in Keith’s office on Whitney Road in New Haven in four chairs,” Howard Penney recalls. “Keith sat behind his desk, and that’s how The Call started. Literally, the four of us sitting around and every morning telling what we’re seeing in the markets. Just like we do today.”
McCullough introduced a similar setup for the first institutional client that joined Hedgeye. He sat down with the firm’s analysts every week for “Macro Mondays” and encouraged them to look at the big picture together, rather than researching every sector independently.
One member of that original institutional client team? Future Hedgeye analyst Daniel Biolsi.
A major reason why Biolsi embraced McCullough’s framework is because he saw the clear disadvantages of working without it.
“When we lived through the financial crisis, that’s really when funds who didn’t have a macro process – and we didn’t at my fund – we all had to,” Biolsi says. “Anyone who survived had to integrate that.”
Fifteen years after meeting McCullough, Biolsi still observes “Macro Mondays,” but now does so as a Hedgeye analyst. Penney and Biolsi – Hedgeye’s first hire and one of its first clients – make up the Consumables team along with their teammate Nick Balch. Penney’s focus is on Restaurants while Biolsi focuses on Consumer Staples.
“I have some themes, and the themes change over time, but where those themes fit with Keith’s macro process and his quads, that’s when I’ll get louder and make the positions larger,” Biolsi says.
“At the very top of my list is Pepsi and General Mills, companies Keith would probably point to if we had no consumer staples analyst.”
Consumables generally isn’t the place to find “10-baggers,” Penney says. So, when searching for growth opportunities, he aims to “buy into the controversy.” Take Chilis for example, a casual dining name that’s been mismanaged for years. The company has a new CEO, which could be a catalyst for necessary changes.
“Margins are way below industry average, and there’s no reason it should be,” Penney says. “It should be industry average at least, maybe better, and if that happens, you’ve got 50%+ upside.”
Penney is first to report his research on The Call every morning, followed immediately by Biolsi. The number of analysts in this once-small group has multiplied since Penney first started, but the objective remains the same.
“Our job is to find stocks that are either going up or going down and going long or short,” he says. “We’re in the business to make people money. Fifteen years later, we’re still in business and we love what we do. It’s just fun picking stocks.”
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