Good Hygiene

#investors

This note covers items any long/short investor might want to consider (remember?) when starting a new year. Sometimes, a check-in on the most rudimentary things creates an opportunity to get better.

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Do you brush twice a day and floss? An investor equivalent.

Sometimes, we forget about the basics. We get carried away in our deep thoughts about new theses. We want to be a step ahead of the crowd. We want to uncover something we have not considered, or we want to look at something old in a new light. We want to position for success over the long haul, but we really want to make money in the first quarter to start the year out well. Yep, big mo – better to play with a lead.

So, we go the extra distance with new research. We investigate channels we have not spent much time pursuing. We set time on our calendars for new meetings with new people and new vendors, or we go to new conferences, or read new things or start new models or look at new data. Being a step ahead will surely deliver the wining prize…yes, discovering can be invigorating for our curiosity, but it does not necessarily yield clear, identifiable ideas for the book.

Here it is. A far more boring, but meaningfully more productive idea to consider: get your ‘101-level’ stuff together first.

Is your coverage group optimized?

The group of names you follow day-in, day-out is critical to success. Over the course of a year, nearly all of your ideas and therefore the primary driver of your statistical outcomes at this time next year will be sourced from the usual suspects. It can range in size, but an accomplished analyst covering a liquid space with healthy portfolio turnover typically follows somewhere upwards of 40 names. This is your world, and though it may seem small, there’s a large number of things to discover/re-discover here all the time. Minimally, you will get 4 shots on goal around the prints, but if you’re creative/inventive/thoughtful/diligent, you find ways to play out of cycle and accumulate alpha, both long and short. Let’s start by asking an easy question: