PODCAST: "In The Arena" Episode 4 - Todd Jordan
In this installment of "In The Arena," host Daryl Jones is joined by Hedgeye CFO and Gaming, Lodging, and Leisure analyst Todd Jordan. Todd has experience producing research on both the buy side and the sell side as well as managing his own fund.
In this episode, Todd talks about his career prior to joining Hedgeye, his passion for proprietary research and being able to write about whatever he wants, and why he thinks his team has the best cruise pricing survey in the industry.
ABOUT "HEDGEYE: IN THE ARENA"
Our Director of Sales Daryl Jones will be your personal tour guide into the world of Hedgeye and the investing world beyond. This podcast offers an inside glimpse into our "locker room," our failures, our wins, and most importantly, our investment processes.
Below is a look at why Todd decided to stop running his own fund and join Hedgeye.
Daryl - "What did you like, and then also what did you dislike about the buy-side?"
Todd -"That's a good question. And that kind of leads into why I came to Hedgeye. So what I really liked was the analysis, I like doing the work. I like picking stocks. On the sell side you don't have as much flexibility, with ratings and price targets and you know, levels of compliance, your writing has to be very formulaic and they don't really want you to show too much personality. So that was frustrating to me and so when I went to the buy side, it was great. I can pick which stocks I want to look at. But now I'm beholden to a portfolio manager and there's nothing more frustrating when you have a great idea and the pm doesn't put it in the portfolio and it does well. It's extremely frustrating because you're not going to get paid on it. If that happens enough and the fund doesn't do well, then there's no bonus money. It's so hit or miss. So that was the most frustrating thing. And then I thought, oh, well what if I run my own fund? So I went to Jefferies Asset Management and they had a nice platform business where I could start up my own fund, it was the Hyde Park Fund and that was great. And then I realized I was spending so much time as I should running the portfolio that I couldn't do as much of the independent research that I really wanted to do, the proprietary research, where I get the edge and I found I was watching the screen so much."
"I was doing that for a couple years and you know, I'd kept in touch with Keith McCullough, our CEO. I'd known him since the late nineties. Keith pitched me on this idea of Hedgeye and I already knew there was a dearth of good research out there. There just wasn't a lot of research, I knew that from being on the buy side. And what I liked about Hedgeye was - ok now I got all this flexibility. I'm not wed to the ratings and price targets. I can write about whatever I want, in any style I want. I thought there was a real opportunity."
And here is a sneak peak into Todd's research process and his team's "edge".
Daryl - "Kind of digging into your area of coverage and I guess a little bit of the edge, what makes your guys' coverage of your sectors differentiated or unique versus what you see other people doing?"
Todd - "I think we have a couple things. We certainly have, I would say contacts and context in the sense that I've been covering the group for a long time and over that time that gives me a perspective in up and down markets and also I've accumulated a lot of contacts within the industry. I'll never use insider information. I never asked for anything like that, but getting people's perspective, from a lot of people that maybe investors don't talk to is really beneficial. So I meld that with a real data heavy approach. And that's one thing that we've done I think really well here as a firm and GLL gaming, lodging, leisure individually is used data and I try to look if it's current data then you know it has to apply to things that are not known."
"So you know, gaming, we don't know what Macau is doing intra month. We get a number at the end of the month. So if I'm using data, I'm trying to track, we call these trackers, what's going on currently. But we also have a lot of predictive models that have really high R-squared. So I've got a statistics background from University of Chicago and I really utilize that pretty aggressively in trying to forecast what I think is going to happen. And I don't think there's a lot of that going on. I don't think there's a lot of forecasting that is done, certainly not in my space. I mean, everybody puts out an estimate, but it looks to me like it's just putting your finger up in the air and trying to figure out which way the wind's blowing rather than actually running regressions. So I'm always looking for relationships, correlations between data and what I'm looking at it, whether it's the hotels and forward looking rev par model as a really high R-squared or on the cruise pricing, this is more concurrent, but you don't know what's going on and cruise pricing until the end of the quarter when the companies report. So we're looking at pricing every single week. We do it on a rolling basis. We know what the sell side does and we're doing ours differently and better. So somebody might say well everybody does a cruise pricing survey, but not like the one we do. I'm not going to get into details, but I think ours is a lot better. So we're always trying to figure out what the street's doing, how we can do it better."
Keep your eyes (and ears) open as we release a new "In the Arena" podcast every other Tuesday morning.