Editor's Note: If you've ever wondered about the inception of Hedgeye and how this whole thing started, Keith McCullough's memoir Diary Of A Hedge Fund Manager is a great place to begin.
It chronicles the life and investing insights Hedgeye's Founder and CEO learned along the way in his journey "from the top, to the bottom, and back again." Below is a free excerpt.
As a young portfolio manager, I began to constantly try to reconcile my inclination to make bold concentrated bets with the other part of me that wanted to break free from my sector vacuum to find a way to own a collection of uncorrelated assets that put me in the position of having a winner somewhere in the portfolio; a scenario plan that would better allow me to run the fund day to day without being perpetually petrified of losing money.
My attitude, shared by my colleagues, was to do so much more intensive, hands on, outside conventional thinking research, such exhaustive homework that there could be no second guessing ourselves, so steeped we’d be in our convictions. We were getting really good at what we did and were always pushing ourselves harder. To better spot deception during research meetings Tom Tobin and I read books on Kinesic interview techniques.
Something happened in the first quarter of 2005 that convinced me that perhaps I was not in over my head, that likely I was as good as any hedge fund manager out there.
Wal-mart was hosting an investor gathering in China for PMs and analysts from all over the world to come and get a first hand overview of the big picture as it related to the future of the Bentonville, Arkansas-based retail monstrosity and its symbiosis with China where most of the cheap goods it sold were being made.
I boarded a Cathay Pacific flight to Hong Kong, the first leg of the journey, and happened to notice that a few rows ahead of me in first class was one of the biggest, best-known hedge fund managers in the world. I’ll call him “The Giant.”
I watched him on and off for pretty much the whole 14-hour flight. While I devoured the contents of multiple canvas bags overstuffed with reading material, there’s “The Giant”, sprawled out like he’s in his home theatre, shirt open, shoes off, stuffing his face with all the free caviar the stewardess could feed him (and free caviar wasn’t all you got when you flew with Cathay Pacific to Asia; there was also wine, shrimp, cheese, and sweets). This guy, “The Giant”, he watched movies, he racked out.
Meanwhile, I read, researched, worked.
I came away that night-day convinced “The Giant” was weak, and that if this was how the biggest and best hedge fund managers rolled, well, I needed not worry again about how I measured up.
I wasn’t just as good.
I was better.