3rd Year HF Analyst Q&A
Prior reading: Hedge Fund: The Investment Life Cycle. Quick background: Penn undergrad - 2 years at AM firm - 2 years at large HF - currently in 1st year at 2-3b long/short HF with heavy emphasis on value.
I still had some questions floating around my inbox that I may have missed and some questions from the comments from my last thread, so I figured if anyone still has questions from the last post, or new questions, I'd be happy to answer them here.
I can field questions related to breaking in, recruiting, the investing process itself, lifestyle, etc. I've just recently been getting a bit more involved in the non-investing related aspects of the fund such as employment and plans for future fundraising, so I can get into a bit about that too if anyone has specific questions.
Post questions in the comments, or if you prefer them anonymously, send me a PM. As always, I'm also open to answering personal questions via PM if you prefer them held out of the thread, but doing this for everyone's benefit first and foremost. Fire away.
I wish I had the opportunity to answer this question before David Einhorn wrote his "Jelly Donut" piece for the Huffington Post. I have to echo what he said now, even though it's been a somewhat agreed-upon hypothesis for a lot of guys I've talked to lately. Rising interest rates, which technically are inevitable since we have nowhere to go but up from here, are actually a good thing. We have a lot of the public, particularly the retiring public, out there right now with no choice but to be involved in the stock market - they can't afford not to be, given how low rates are. As the most risk-averse piece of these investors exits the stock market once interest rates turn back up, we'll see a decline in the stock market. Most of the companies we're seeing with these disgustingly high P/Es are going to see runs on their stock prices, and those who choose to stay in the stock market are going to be piling back into the "steady Eddie" stocks. This is part of the hypothesis of going after the most growthy-y of the growth stocks right now and shorting them while we have the chance. The same strategy can be said for those companies that we think are more "boring" but are defensive positions that are likely below their intrinsic values. Essentially, once these rates start to climb (though I have no idea when that will be), we'll see a reversion where people are giving more respect to the safe, blue-chip stocks and less love to these Sodastream/Green Mountain type companies that had sky-high valuations given their low earnings.
Given that our fund is small in terms of headcount, my days fluctuate pretty significantly, but I'll try and give you a run-down of what a typical day is like when things aren't too out of the ordinary:
6:00am - Wake up, hit snooze 6:30am - Time to get up. I never shower before going into work, which sounds odd now, but... 6:45am - Throw on workout clothes, walk to work. I meet my boss every morning to play squash. I'm still learning but he seems to really want me to get good so he has a decent squash partner. I'm athletic enough to beat his ass already despite my inexperience, but for now I'll let him beat me so he can keep giving me tips. I'll start shitting on him once it's time for him to write me a bonus check. He'll think he's the reason I got so good. (Wow I hope he doesn't read WSO) 8:00am - Back at the office. Shower, change into business casual. Start looking through market news and reading any emails I've gotten. Hopefully a late-night discovery by a fellow analyst or a sell-side analyst giving me a quick tip on something we had been trying to figure out the day before. I'll follow up on all this stuff after breakfast. 8:30am - Breakfast with a few co-workers. Sometimes my assistant will surprise us with a platter or danishes or something so we don't have to make an effort to get food ourselves. 9:00am - Start checking over the pre-market earnings announcements and how my positions are looking coming into the open. If anything weird is going on I'll run to my boss like a little girl screaming at him to see what we should do about it. 9:30am - The bulk of my day. I'll continue following the market while doing my general research on whatever position I'm looking at. My previous thread would explain what most of this entails. Calling analysts, reading 10-Ks, etc. You know the drill. 3:00pm - What can I say, I eat a late lunch compared to most. Unless I'm meeting with other analysts or we have investors in town that want to meet some of the team, I'll almost always eat at my desk. I actually prefer it, given my intense hatred for eating. It's a doubled-edged sword. 4:00pm - Finally the market's closed. I'll listen in on any earnings calls of major comp companies to my own positions, or obviously the calls of my own companies if they're reporting that day. Sometimes I can get in touch with a sell-side guy I know to ask a question for me if I'm lucky or desperate.
5:30pm - Work out at the gym a few floors below us.
6:30pm - Come back up, screw around on WSO for a bit and see who's still around. If I still have work or feel like waiting an extra hour I can get a free dinner out of it. I'll do that considering it's a Tuesday and none of my buddies are doing anything tonight anyway. Plus my girlfriend hasn't started texting me yet so life is still peaceful and good. I'll keep reading those recent 10-Qs for one of my new potential short candidates. 8:00pm - Eat dinner, wish the other guy still in the office luck (his picks have consistently been at the top of our "top 10 losers" print-out that goes up on the wall every week), and head out.
8:30pm - Meet up with friends, maybe the girlfriend, do whatever. Since it's Tuesday I'm not going out. I'll be asleep by midnight hopefully.