The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

4.14. CASE STUDY ON COMMUNICATING EFFECTIVELY

I had an opportunity to talk to a major hedge fund manager about how he and his team of analysts prepared for company meetings.

Kiev:

How do you strategize before meeting with management?

Pruitt:

We look at it, and we see these datapoints. We put them together, and then we go company by company. We ask ourselves, "How much is this company doing well or poorly?" When the industry conditions return back to normal without these inventory drawdowns or merger destructions or other kind of transitory effects, what will the numbers look like then? So that's going to help us create a variant perception versus what the Street thinks. This is quite different from what the Street does, which is generally to take the last two datapoints and extrapolate, and if it's growth it's going to grow that way.

Then we are having the conversation with management to try to figure out whether we see this business resuming in a nine-to-twelve-month period. Is that consistent with your framework? Why do you think that? Fine; well, you say that your business is down because of these destructions. Let's try to add up how much that has really been. Maybe your business is down in front of the reasons. Maybe you are losing shares and you have bad products, maybe bad capital allocations. So, we are using those hour-long meetings to try to confirm whether we believe management understands and is confirmatory or there are other things going on.

K:

You really have to ...