Research at L/S Funds

How are the funds structured in regards to research and analysis? Take Greenlight, for example. Allied Capital wasn't something that could be screened for. Or JOE and the real value of its land holdings. How does a firm like that generate ideas, and how does it go about figuring out if they are good or bad? I'm just used to screening for certain characteristics, and then weeding out from there. But a lot of these ideas that great managers have aren't the products of running screens.

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Some funds will start with a big picture idea and search for companies that can be used in a trade. For example, in the case of St. Joe it could have been: Florida real estate is still in the shit hole>RE firms/land developers have a lot of loop holes to hide asset impairment>let's look for Florida land developers>Short St. Joe.

A lot of ideas come just from following trends and news. At my fund we're all encouraged to set up google alerts and follow a lot of blogs/news sources. One guy is following the new iPhone release very closely, for example, not because of Apple, Verizon, or AT&T but because of a few specialty telecom-related tech companies/suppliers who have a lot at stake in how this plays out.

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