(This is an excerpt from an article written on Substack by Mark Bunting. You can read Mark's full bio below).
By hooked, I mean enjoying something very much, as the Oxford Dictionary describes the word in an informal sense. That something is Hedgeye Risk Management, and the innovative investment process created by its founder and Chief Executive Officer Keith McCullough.
I don’t need or want an intervention, not because I’m delusional or stubborn. Hedgeye’s risk management process has been a revelation for me in better understanding how the markets (the Flows of the Machine) work and in discovering a new way to invest, that is:
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Global macro,
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Data-driven,
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Rules-based,
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Focused on a full investing cycle,
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Narrative and conflict-free,
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Emotionless.
Hedgeye’s mantra is preserve, protect and compound your capital.
The Greatest Productivity Hack
David Salem describes the Hedgeye process succinctly, calling it:
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“The greatest productivity hack he’s encountered as an investment pro.” |
Salem’s words carry weight. Prior to joining Hedgeye as Managing Director of Capital Allocation, he was a client of Hedgeye. Before that, Salem served as founding President and Chief Investment Officer of The Investment Fund for Foundations (TIFF), and was a partner at global investment advisory firm GMO, where he worked with Jeremy Grantham on the design and execution of investment solutions for large institutional funds.
Salem was so impressed by the Hedgeye process he joined the company. (A variation of the late Victor Kiam, who was so impressed by the Remington electric shaver his wife had given him, he bought the company.)
If someone as experienced as Salem holds the Hedgeye process in such high regard, then I know I’m on the right track.
Hedgeye’s numbers and rules-based system is helping me replace uncertainty, indecisiveness and emotion with clarity, action and to feel nothing when buying or selling a stock.
The Hedgeye process, among many other features, hand picks long-term investing ideas for me based on rates of change in global economic data, fundamental research focused on rates of change in revenue, EBITDA, and free cash flow combined with McCullough’s proprietary quantitative method, which determines whether the stock has positive or negative signal strength.
The process also gives me a formula to follow when trading around a position - when to add, when to take some profit, when to reduce exposure and when to sell. Again, all based on numbers and not narratives and emotion.
This is after years of being exposed to traditional buy-and-hold, 60/40 investment strategies and working in mainstream financial media, which is filled with smart and well-meaning people, but often fraught with faulty speculative narratives, groupthink and pundits opinions not backed by data.
I’ve been guilty of perpetuating those speculative narratives when, for example, during a market report I would say something like, “Technology stocks were higher today because of ... (fill in the blank) ...” I was often just regurgitating a narrative that several media platforms were saying in unison.
It was not possible to attribute the actions of millions of people trading trillions of dollars in assets to just one thing. I knew there was something happening under the hood of the market and Hedgeye has helped me better understand what those things are such as the impact programmed, multi-trillion dollar volatility control funds have on the direction of the S&P 500.
Hedgeye’s Edge
McCullough founded Hedgeye in 2008 during the depths of the financial crisis after getting fired the previous year as a hedge fund manager for being too bearish. Today, Hedgeye has grown to over 100 employees, including over 40 analysts, seven of them focused on global macroeconomics.
Hedgeye is unbiased in its research because it has no investment banking arm and does not accept advertising dollars. The company generates revenue from institutional clients with more than 10 trillion dollars in assets under management, and from do-it-yourself (DIY) investors like myself, who subscribe to their various research products. (McCullough recently said the company has started Hedgeye Asset Management “behind the scenes.”
As a Macro Pro subscriber, in effect, I have a team of analysts working for me providing high-quality, fundamental hedge fund research and investment ideas.
Then, McCullough puts those ideas through his fractal math-based system to determine positive or negative signal strength based on the price, volume and volatility of the stocks over time periods of three weeks or fewer (trade), three months or more (trend) and three years or fewer (tail).
(For a full explanation of the Hedgeye process, check out Hedgeye University, where McCullough gives a video masterclass. It’s free.)
Before I continue, I want to emphasize three main points about what you’ll be reading in this series:
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ABOUT MARK BUNTING This is a Hedgeye guest contributor piece written by Mark Bunting and reposted from his Substack publication. Mark is a seasoned financial journalist with 25 years of experience in the industry. His career includes 15 years as an anchor and reporter for Business News Network (BNN Bloomberg), where he also served as London Bureau Chief for three years. He currently is the host of RCTV for Red Cloud Financial Services, focusing on interviews with CEOs and leaders in the metals and mining sector. Mark also plays a significant role at Red Cloud’s conferences, where he conducts keynote interviews and moderates panels. Additionally, he is an on-air host of sponsored content for BNN Bloomberg Brand Studio and has previously been the publisher and host of Uncommon Sense Investor and Capital Ideas Media. Mark started his career with The Sports Network (TSN). He has been a Hedgeye subscriber for three years.. View all posts by Bunting on his Substack. X (Twitter) handle: @MarkBunting_ LinkedIn: Mark Bunting |
