Stock picking for short term oriented funds

You are conflating a few things here so I am just going to share a few things that might help. Also you mentioned you understand long term stock picking across strategies but I would spend a bit more time learning about various investment processes first. 

Every investment product from different hedge funds, mutual funds, long only, etc. operate with different processes, time horizons, and strategies, and are delivering a different product with different risk+return expectations. I think you are trying to understand the differences between longer term oriented investors (which tend to be LO mutual funds, and some SM HFs) with the shorter term style of the pod shops /market neutral funds. It is unfair to generalize because there is tons of overlap all over the place, but I am going to compare a typical tiger cub and typical pod shop for convenience. 

Pod shops run market neutral and hedge all of their positions so that the returns they can deliver are (ideally) only from idiosyncratic moves in stocks; so the intent is to deliver pure alpha. They also need to employ leverage to enhance these returns since with everything hedged, the absolute return may be lower. With that leverage they need to keep volatility down as well, so the hedging is important here. The best investment style that works within this tight risk model revolves around understanding everything fundamental that is going to move the stock (as the hedges will keep the macro market moves in check). So investment theses need to revolve around fundamental catalysts that will move the stock- as a result you need to be aware of everything fundamental in the short term as you aim to keep that vol. low. How do you do that?, well they are aiming to identify the handful of KPIs that truly matter to a stock in the short term and timing the catalysts or changes in those KPIs vs. market expectations. A good thesis could revolve around doing channel checks and finding underappreciated data sources that would indicate the market doesn't fully understand what KPI #1 will look like at next earnings, and making a bet on that gap of expectations. Note that these KPIs reinforce the LT view of the stock still, but the execution is over multiple short term time horizons. Here, the risk neutral pairs are very important so only those fundamental divergences drive your returns. With this model, pod shops are not looking for +50% moves in their stocks for obvious reasons and net exposure here remains very low throughout the process. 

A "longer term" tiger cub (they still care about quarters and those KPIs as well, and tend to be shorter term oriented than expected) is not offering a market neutral strategy, but instead some level of positive net exposure. They are not offsetting their longs fully with shorts, and their product is intended to deliver enhanced upside returns in a strong market (usually specializing in a handful of sectors as well), but with some level of protection on the downside, or at least they are supposed to... Also more of their shorts tend to be alpha positions than hedges. Within that model, you will see them looking for larger idiosyncratic moves in stocks on a slightly longer time horizon. As a result they also operate with lower leverage as they anticipate greater vol. A common thesis for these guys will be: we foresee some disruptive change in xyz industry and this business is the secular winner - not only that, but the market has misunderstood what the TAM is, and underappreciated the margin potential, and we will make money over a 12-18 month time frame as the market comes to understand those points. Often times these KPIs are the same across pods and tigers, and they both pay attention over the LT and ST, but the implementation and execution off these expectation gaps is different. Pod shops for example can still have a LT view, but will trade the position up and down throughout multiple quarters to execute that view.

A common LO mutual fund is usually tracking an index and needs to be much more closely aligned to the index's exposure- these guys are more collectors of the "best" of their index/strategy vs. hunting for specific idiosyncratic moves, and so when they see a business they like at a discount to fair value that they believe will outperform their coverage, they will increase their exposure there by a few bps. - but I am very broadly generalizing again here. 

To your question, people navigate short term investment horizons by having tight pair hedges to reduce the impacts of general market moves, and by understanding what are the key fundamental drivers for a stock, and then trying to develop an edge on those drivers. 

At the end of the day, it might be helpful to frame things from the perspective of the LPs/investors and what they are looking for in an investment product