An Interview with Sean Hannon

Nov.16.09 | About: Texas Industries (TXI)


Sean Hannon
, Epic Advisor. No, I'm not giving him the epic title because I think he's the next Warren Buffett. Though clearly talented and noteworthy, he is currently an independent investment advisor for his firm called Epic Advisors, LLC. Furthermore, he is actively involved in the investment communities including Seeking Alpha and Covestor.

I don't think I need a shiny introduction to catch your attention on this one. He's an Ex-Goldman. Need I say more? I introduce you to Sean Hannon, CFA, CFP.

So Sean, what is your background? I can clearly see you have all the right certifications, but how did it get all started?

I started my investment career when I headed to Wall Street immediately after graduating college. I spent six months auditing hedge funds for a Big 5 accounting firm and then moved to Goldman Sachs. My first year at Goldman was spent analyzing mortgage-backed securities. During that period I gained a great appreciation for how small events can lead to large value changes.

After about a year, I moved to the trading desk where I analyzed new securitizations for four years. From there I became more interested in the markets, pursued my CFA, and ultimately left the trading desk to join JPMorgan’s mortgage group.

Five years later, I decided to make the move to work for myself and opened EPIC Advisors, an investment-management firm which runs separate accounts for a variety of clients ranging from high–net-worth individuals to young families who are just starting to invest.

Have you always been in the financial industry? Or did your interests lie somewhere else before?

From a young age I’ve been fascinated with business. In the 7th grade I would go to Costco to buy candy and then resell it on the playground at school for a higher price. I was fascinated with how a few cents in profit could compound when the transaction was repeated often. When I was studying for my business degree, I gravitated toward the markets because at the most basic level they seemed like another way of trading objects for profits like I had practiced as a child, just using a more sophisticated process. I headed straight to Wall Street and have been in the industry ever since.

Can you tell me a bit about your firm, EPIC Advisors? Do you do it full-time?

EPIC is a registered investment advisor. We manage accounts for clients across a wide range of income levels. Because of recent episodes of circumspect business practices, many consumers have become mistrustful of the financial world. EPIC offers an alternative—reliable financial services based on ethical business practices. Through solid research and disciplined risk management, we aim to stay ahead of unforeseen events and profit regardless of the market’s general direction.

It's interesting that you've worked at many of the biggest financial firms out there. Can you tell me a bit about the experience there and how it is different now that you have ventured out on your own? Why the move?

My experiences at two of the most prominent financial firms have helped shape my views of the industry. Goldman (NYSE:GS) is a terrific, demanding place to work where teamwork is valued and no stone is left uncovered. While there I learned that you should always look at what can go wrong with a transaction and be mindful of the smallest details. By thoroughly examining a situation, you help prevent the unforeseen from jeopardizing your performance.

JPMorgan (NYSE:JPM) offered many lessons in corporate management, structure, and leadership. There, I gained an appreciation of the need to explain complex problems in terms that a broad cross section of people can understand.

However, the corporate finance world also taught me how complexity and lack of clarity can destroy the best ideas. I felt a large void existed in the industry and wanted to provide individual investors the opportunity to seize control of their own destiny while receiving professional assistance in an opaque market. So in 2008 I left the corporate world to form a company based on the ideals of sound market research and transparent investor-client relationships. I strive to utilize the positive lessons I learned on Wall Street while avoiding the mistakes that plague large organizations.

What is your investment style and why do you prefer it over the others?

I consider my approach a blend of deep value investing for long-term capital allocation and technical trading for short-term profits. By blending the two, I can smooth my performance over various cycles while also allowing time to work to my benefit.

What are the best and worst trade experiences you've had?

When I enter trades, I have a predetermined profit target. When that level is achieved, I exit and move on to the next idea. Some of my best trades happen when I see a stock undervalued, buy the shares believing the market will agree with my view, and then receive the predetermined price in a matter of weeks.

A recent example would be Texas Industries (NYSE:TXI). I bought the shares in early March below $16 with a price target of $25. I sold the shares above $25 in less than a month and made a 60% profit. My worst trades occurred during the bear market meltdown. I have always believed that a company will eventually sell for its “fair value” and that when I buy below that level profit will come my way.

As the market crashed between September and March, I bought many companies at levels I thought were too cheap only to see them continue lower. Ultimately, most have recovered and turned profitable, but this experience offered an excellent example of how markets can remain irrational for long periods of time.

Lastly, what investment advice would you give to the investors out there who are trying to learn this complex 'game'?

Investing is a complex process that rewards hard work and patience. If you want to become an excellent investor you need to have strong intellectual curiosity, be prepared to put in the work needed to learn, and always look for unique ideas that others do not share. If you are smart, brave, and different, success will come your way.