Editor's Note: Below is a brief excerpt from today's Early Look written by Retail analyst Brian McGough. Click here to learn more about the Early Look.
Every sector head at Hedgeye has his/her own processes…some similar…some not…but most are very effective. My own process is to live in the TAIL – which we define as 3-years of less. My little interpretation as a fundamental analyst is this…
- TRADE (duration of 3 weeks or less): As a CEO doing one-on-ones at conferences…they pretty much know their number for the quarter – unless they have horrible forecast accuracy like HBI does. This is not my shtick.
- TREND (duration of 3 months or more): That CEO probably knows his 2-3 quarter out number with 80-90% certainty. Tough for me to compete with that. My team will…and they are great at it where I am simply not (i.e. hire people that are better than you in areas where you’re deficient).
- TAIL (duration of 3 years or less): This is where I live. That CEO – 95% of them, I’d argue – lack the investment and planning processes to see how the competitive cross currents of vendors, competitors and consumers will affect one another, and ultimately allow the CEO to appropriately plan around it. If I think I know more than a CEO about how the cross currents will hit their respective business in a way that they don’t – I’ll make a big call there any day. In fact, If I don’t have that edge, with numbers to match – then I will not make a call. (Check out my current Idea List above.)
