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PHOTOGRAPHS by Firstname Surname why he who dares wins

38 HEDGE now the key to making money for clients. now the key to making money for clients. businessman tells The South London-born SIOBHAN MCFADYEN For Jim Osman, CEO of The Edge,For Jim Osman, seeing beyond traditional practices is Investing of of Value The Death The Death FUNDAMENTALS 39 HEDGE

THE EDGE INVESTMENT

▶ I love to see our client “I always have my goals in mind with in mind with goals my have “I always see our client to partners win. “I love Osman started in the back out his career a career first in investment Following “I grew up in South London, in the up in South London, in “I grew I was when in to get “I had the door key where great and that’s “Her intuition was pragmatic approach Osman has a very partners My sole focus win. is providing a return on their I am determined investment. to deliver that. Nothing makes me happier school. I can’t live without my hand-written without my live school. I can’t cell phone. diary and my on the go I am constantly timeframes, the ideas to keep collecting intelligence we my team, with Together flowing. which around 60 ideas per year provide are designed to be actionable and give us stand out. information that makes a return on their My sole focus is providing that. I am determined to deliver investment. win.” they me happier when Nothing makes office but his determination to “win” landed as CEO of boardroom, him in his own talking to some of regularly Edge the The hedgies in the business. biggest banking at the multi-national Société he funds, and later to hedge Générale, actionable to provide created the company not normally in public markets, the mainstream. seen by the table, he says he owes everything he owes he says the table, unashamed to admit it. to her and he’s Mum. She was and my just me 1980s; it was didn’t we When an amazing inspiration. out and worked she went money, any have to put food on the table. a note on She used to leave old. years seven I learnt a lot from dinner. to cook my how so hard and she would Mum worked her. less. If accept anything her skills never be a bestseller. could be in a book, it would greatest.” the it from. She was I got clear from the outset but it’s to business, an that his approach is unique and he’s open book. “I’m a simple guy and quite old

; because caught up with in 1963, legendary in 1963, legendary Wolf of Wall Street ofWolf Wall HEDGE e Th Osman is one of those straight arrows Mr Getty admitted he was a big fan ofMr Getty admitted he was to 2019, and Jim Osman of forward Fast raison d’être is to make Osman’s lifestyle the rock’n’roll But forget his commitment and drive, Rather In fact, when Mr Getty added that he was not that he was Mr Getty added to everybody listened Getty said if he’d as he Instead, the solitary billionaire, “incredible” Glaswegian mother, Patricia, Patricia, mother, “incredible” Glaswegian on put bread fought hard to literally who including a 4am start every day to train for day including a 4am start every and to hit the ground his Ironman Triathlon, running is his modus operandi. his company members’ club Home him in the private the staunch Square, in Portman House, content with a cup of tea and teetotaler was – a treat he admitted a caramel shortcake as some old-fashioned as well a vice, was he insists the which British fish and chips mastered yet. Americans haven’t of meet, with an accent right out rarely you up with a tough yet Growing Bermondsey. The Edge Consulting Group, a New Jersey- a New Consulting Group, Edge The Englishman cogent by the based firm set up the same view. has exactly ago, ten years his client though his partners money subscription-based business that holds fund regular conferences hedge attracting their unique views. stars to give rendered by is just alcohol, art, high-rolling and yachting style. not this Londoner’s obliterated the New York Exchange York obliterated the New and led to the failure of 9,000 US banks, during the . sitting pretty with his was portrayed, was and his vast at $300 a share, investments of made up from his array fortune, wise netting him $34,000 a day. investments, personality on to discuss the went types and be two it can only secret to success; adding difference the traits out of 37 that can make a great success and a moderate one. between IN AN INTERVIEW asked Alan Whicker BBC documentarian Getty, Paul J world, the richest man in the His answer? was. to his success the key what an independent view. Having else says. everybody what by influenced during , in the In fact, investing his greatest lesson. was the 1930s, sold his at $6 have he would else, the crash of almost following 1929, which

PHOTOGRAPHSPHOTOGRAPHS by Ciaran McCrickard by Firstname Photography Surname FUNDAMENTALS

▶ He made a bigger leap at the height of the “The market has a remarkable way of big believer in trends and cycles, he has fully economic downturn to pursue the American keeping stocks high or low to tempt you into bought into the idea that “value investing dream and to work with some of the a trap”, adds Osman, savouring his tea, the is dead”. While that very statement would biggest players in the industry. His mantra? only way a Brit living in the USA can know have had left scratching Providing fundamental numbers and target how. “The market was set up to fool you. his head, in today’s market Osman may have pricing to a captive audience determined to Valuation alone is obsolete as a sole measure a point. Though not one that’s likely to get see value from the lucrative, yet niche, area of evaluating stocks, there needs to be an Graham’s former student or of special situations and spinoffs. identifiable catalyst to move price to value. to give up the ghost entirely. “What we do at The Edge is evaluate Buffett once famously avoided tech catalysts and predictions, using our stocks because he said that he didn’t experience to quantify if it could happen. understand them. But At The Edge we evaluate Sometimes that catalyst is obvious like a eventually got with the program in 2017 and catalysts and predictions, spinoff or other times it needs evaluation took a stake in Apple at around $129 and in the case of something like change of over time increased its appetite to around using our experience to management or a restructuring plan. 21% of its total portfolio. quantify if it could happen. “Either way, we help the end Since late last year, Berkshire has lost spot something which the market hasn’t and a sizeable chunk of its investment in the Sometimes it’s obvious, other that could be particularly valuable.” California-based tech firm, but Buffet is times it needs evaluation Osman has seen a lot in the 20 years he’s holding tight as he’s in for the haul. worked in financial services; and while he’s a Osman added: “Value investing has long

40 HEDGE INVESTMENT THE EDGE

“Last year, the fact that 93% of the I’m a big contrarian, strategies were down across the board JIM’S PICKS means that no one benefitted. not just in investing, but in “Historically, you would have funds everything else. I tend not say they made money but in 2018 no one FERRARI (RACE) really made money. It’s a big problem and “Mention Fiat and you may think of to go with the mainstream. one that needs a rethink.” inferior cars. What most people don’t I gravitated towards Elon Osman is very much inspired by ideas. know is they have many named brands He is unapologetic about his admiration for under their umbrella and the stock is an Musk as he is different investment in itself. Elon Musk despite the Tesla boss’s bizarre Alfa Romeo, Chrysler, Dodge, Jeep, antics that ended up with a SEC probe and RAM and Maserati are all owned by Fiat. the removal of his chairmanship, as well One of the jewels that was spun off on been a solid way of analysis. I believe it just as the 2018 fourth-quarter earnings falling 3 January 2016 was Ferrari (RACE). Just doesn’t work on its own anymore. short of analysts’ expectations. having the spinoff alone would have returned more than 145%. With the “Nowadays, technology and machines “I’m a big contrarian,” adds Osman. “Not recent pullback in the market, we look do so much work and they do it faster. The not just in investing, but in everything else”, for these types of spinoffs to purchase. numbers game, based on cheap valuation, in a nod to Getty who would never let his Ferrari is a luxury brand with a is a thing of the past. What we have been emotion drive him. “I tend not to go with number of electric vehicles in its pipeline, some solid directors buying trying to do at The Edge is recognise the the mainstream. I sort of gravitated to Musk their own shares, and a brand that value beyond the numbers. Nowadays that as he is different and a man of our times. continues to gain. must come in the form of a catalyst. The How many other people talk about creating Brand Finance Global 500 2019 point being, cheap or expensive names a hyperloop? He has a different vision to report, launched at the World Economic without a catalyst are value traps. Seeing everyone else, but it comes with drive and Forum in Davos, showed that the Italian firm – which also sells teddy bears, beyond the numbers and down the line of ambition. He really cares. and occasionally supercars – overtook the catalyst is where hidden value lies, and it “You see this trait in all the great McDonald’s, Coca-Cola, Lego, and takes a lot of work to figure it out.” entrepreneurs from the past. They have Disney, with its Brand Strength Index For example, on 26 December 2018, a reason for why they are doing things. (BSI) score increasing by three points markets surged after the worst Christmas He pushes the boundaries of the world. from 91.5 to 94.8 out of 100 in the last 12 months. It is one of just 14 brands Eve trading session in Wall Street history. This is extremely unique, and people rarely in the report to be given the top AAA+ Despite there being no obvious reason to lose long term. I’ve been a Tesla holder rating. It’s a name that will rise.” spark the sharp turn of events, the S&P for a while. It’s strictly not an investment 500 was up 5%, the Dow Jones Industrial by fundamentals. Tesla has got profit, its AT&T Average was up the same amount and the revenue was higher than predicted, if you AT&T Inc, the American multinational Composite gained 5.2%. look at Amazon in 2000, it’s the same and conglomerate, is on his list – and Osman uses this to back up his claim even Netflix now. According to analysts, they’re heading for a break-up of big proportions, if Osman is on the money. that value investing is dead. “Computers Elon is not going to win, but he’s proving The firm could go the way of General were following the algorithms and were them wrong; his vision is second to none Electric, if they’re not careful. Osman buying things up, so you had stocks like and you can tell from that he’s all in.” says AT&T is “overburdened with huge Apple overvalued, as far back as October, While Osman is not driven by any sort of debt” owing to the acquisition of Time and Christmas Eve happened because emotion, in terms of how he looks at stocks Warner Inc. in June 2018. This acquisition stressed the balance sheet of AT&T they all got out at once. The ETFs got out and business in general, like Mr Getty, he is further, with an increase in the total because computers recognise when things a huge fan of personality type theory and to debt levels from $163bn prior to the are overvalued and consequently that illustrate asked me to take the test. acquisition to $183bn. old-style market investing of real analysts, I discovered I was an ENFP, which This resulted in a rating downgrade recognising companies, is no longer. belongs to the diplomat type group by Moody’s, and could result in a higher borrowing cost for the company “If you look from 26 December and to unveiling my extraverted, intuitive, over the years. Currently, AT&T has a the start of 2019, things bounced about 10% feeling and prospecting personality. leverage which is higher than most of its and that’s crazy because the computers Osman went on: “You’ve probably met large peers, Osman says: “I believe that are getting back in again; that’s beating people that you like and dislike because a potential divestment of businesses traditional analysts. But what was different maybe something just doesn’t click. It’s either through a spinoff or a sale would help the company to deleverage. They this time was more like 2008. Although probably their personality type. Their could in essence split into three but if we had different dynamics, there was mass values and ideals just don’t quite fit with nothing changes it could go the way selling and things rushed down very quickly yours. The world is made up of people with of Sears, GE or Deutsche Bank.” then came back. So there’s no real human diverse personalities, 16 types to be precise. See more of Osman’s stock picks overleaf. logic to it and, in my opinion, you can tell. This means there are lots of different▶

41 HEDGE PHOTOGRAPHS by Ciaran McCrickard Photography THE EDGE INVESTMENT was enough for it Consequently, Although Aurora won’t be the biggest won’t Aurora Although but it is not only dollar cheap, Now, Technologies (REZI) is a great name to Technologies the with Honeywell (HON), But own. spinoff has unleashed a debt-free high will concentrate cashflow company that warehouse automation systems on the where it caters to clients like (robots) market leadership in HON’s Amazon. will unlock the next growth this segment phase at the company in coming years.” L BRANDS (LB) Secret and Victoria’s owns “L Brands Works. Bath & Body US brand another we recently had at one of An activist our conferences presented the case Barington Capital after taking a . is Mitarotonda A. Group led by James pushing for a split of the two brands. has underperformed in total L Brands shareholder return against its peers and five-year three, over the last one, Capital holds the Barington’s periods. VS brand view that the underperforming and the strong performing BBW brand value as can essentially realise more If Barington can get standalone entities. value there is some real want, what they but don’t expect it creation on the cards, to happen overnight. HONEYWELL “Honeywell is one of the big were going after we that conglomerates Third Activist After the a few years ago. entered the led by Dan Loeb, Point, stock and didn’t get the breakup they they dumped their holding. wanted, the company to go ahead and break It ended up way instead. up another The other names are ways. splitting three a different investment story – Resideo JIM’S PICKS (CONT’D) (AUSA) AUSTRALIS CAPITAL small cap is a little known “Australis the ones I like in the but one of name, isn’t cannabis space that everyone Aurora from was spun off It all over. subject of Cannabis – recently the by Coca-Cola. will invest in lots it producer of the drug, of companies that do. the kicker from investing in other names with will come from its strong ties of the Amazon as the known Aurora, I like it and personally world. Cannabis I’m expecting great things after hold it. with the management.” speaking H “Placing large bets and ‘hoping’ for “Placing large “I come in everyday thinking my ass is thinking my “I come in everyday or anything else for that matter, you need you else for that matter, or anything hard on outcomes. Doing your to work learning as well and continually homework as making continued small educated bets will result in success in the long run. the outcome will result in failure. Staying means making small wins and positive are wrong.” you losses when cutting your them quarterly at The Penn Club in NYC. Club in NYC. Penn them quarterly at The a donation to charity and Attendees make to the Alzheimer’s all the proceeds go Association.” As the conferences gather to educate pace and he continues ofwith a few he’s fund friends, his hedge determined to pick up pace. days from the early on the line. It stemmed mum. I saw and my just me it was when sure I had the food to eat to make her work investing at win back. To and clothes on my

“It was horrible, but the idea of horrible, the “It was Being in tune with his personality is just “People think they may have a good a good have may think they “People 42 HEDGE types of thinking, which in the case types of which thinking, following the full term of Osmanfollowing ten years, something back”. inspired to “give was hold We her. inspired by conferences was morning. But giving back is also something giving But morning. the following ago, he does with pride. A year disease, death of his mother from Alzheimer’s gives me insight into how I really perceive perceive I really me insight into how gives recommend it to anyone.” I’d the world. up in the one thing that helps Osman get opportunity, because knowing you have have you because knowing opportunity, helped It’s is key. strengths and weaknesses decisions and making investment me when investment strategy, but their personality strategy, investment it from executing type can hamper them your personality Understanding effectively. the right type can help with spotting ▶ a market. makes of investing FUNDAMENTALS