News & Press
I often see interviews with the well-known value investors out there. Usually they get asked the same old questions, including “What do you look for in an investment?” Can any of you really remember, recite and have implemented what they said? Sure, their views are interesting, but for me, value investing is a philosophy (the fundamental nature of knowledge), not a science.
This is exactly my point: we all know what the criteria is, but the special sauce is the ability to recognize when the stars align, spot something different, and only then execute with conviction. I’m sure many of you have read books by Graham and Buffet and tried to copy their process, and then wondered why you’ve executed everything that they have said and it doesn’t work. Right?
Machines are here and live. Don’t kid yourself. Did you know that soda vending machines are being price manipulated now per the temperature outside? When it’s hot, these machines price the item higher. Well, it stands to reason that the hotter it is, the thirstier you become, the more likely you need to replace the lost fluid and let’s face it, we’ve all bought that $5 (normal price $1) bottle of water in desperation, right?
We are all aware that prices are manipulated these days. The supermarket food shelves, where there are more deals on a Tuesday and Wednesday (so my wife says), seasonal items and of course air fares, where each one of the 350+ passengers could all be paying a different price. The one that still gets me are haircuts. I know it’s not tech, but I don’t know many industries (apart from the airlines) where you are getting the same exact product and the price is so vastly different.
I was in London last week for the first time since I moved the firm over from London 18 months ago, and I saw 37 funds. In between meetings, I met with a few old colleagues. Nothing generally surprises me these days, but it really did surprise me the amount of people that I knew that were in the industry and now are in completely different areas or even doing nothing at all. How times change, and at a fast pace too.
The new big change on the horizon is MiFID II. It will really highlight what the funds are paying for and where they perceive the value. This is significant. It’s certainly a nail in the big banks coffin, but it will really separate the wheat from the chaff as they say.
I live in the suburbs in the state of NJ and my neighbors are bears, deer and raccoons. It’s the way I like it. One of our close friends lives in an even more remote part and he is having a mouse issue. We were discussing mouse traps. Did you know there are at least 5 types on offer?
We see and meet a lot of interesting people here at The Edge, but very occasionally, I do stand back in amazement at some of the interactions. We had one potential client call in this week and asked straight off the bat: “What can I get for free?” “There ain’t no such thing as a free lunch” expresses the idea that even if something seems like it is free, there is always a cost, no matter how indirect or hidden.
It’s an old trick, I know, but how many emails claiming free stuff inside do you open? Hopefully you’re not offended, and here is something for free indeed!
This week’s newsletter is a bit different, and contains the killer findings of two recent studies that we have produced at The Edge.
- 15-Year Spinoff Performance Study with Deloitte
“The whole is greater than the sum of its parts.” – Aristotle
In direct contravention of this timeless quote, we find that the sum of parts is greater than the whole. We find that a Spinoff of a division or subsidiary turns out to be a great strategy for unlocking value.
- 16-Year M&A Performance Study
M&A is a big business; it has big fees! The banks want to push companies to merge – of course they do! Now we provide the findings of our 16-year study that will challenge the perception of value creation via M&A.
So, what’s it all about? There is a huge change in Europe coming. Are you ready? Ready for what? The murky area of accountability in our industry is about to become a whole lot clearer. Amongst other things, it will have a huge impact on investment research. It will not only have an impact on Europe, but globally too. Very few firms are talking about it right now but if you are an investment manager anywhere in the world, you should be thinking about positioning yourself.
MiFID II, an upcoming piece of legislation from EU regulators that takes effect from January 2018, changes the relationship between trading commissions and investment research. You may say, “why do you care if you are not in Europe?” Well, apart from forcing the pricing of external research, this change will have a global impact as money managers are required to justify what they are paying for. Whilst US-based asset managers may not have to comply with MiFID II, from what we have seen, more and more funds are having to justify their expenses to investors.
Let’s face it: the machines have arrived. Are you sitting there wondering when you are going to be replaced by one? A 2013 study by Oxford economists Carl Benedikt Frey and Michael Osborne concluded (using a sophisticated algorithm, of course) that some 47 percent of US jobs were at high risk from automation in the next 20 years.
I’m 43 and lived through the 70s and 80s, where films about robots and machines were something way out there and would only really happen in the future. Let’s be honest, the “future” was a long way off, if it ever even happened. It was just scary to even think about automated machines walking and talking. Stuff like Westworld (1973) where a robot malfunctions, The Stepford Wives (1975) where the wives are in fact robots or even The Terminator (1984) and Robocop (1987) foretold the story of machines dictating our lives, so why are we so surprised when it’s happening now?
I hear you thinking before we start: “Jim is going to tell me a story about how The Edge is so great and that you need to use them to have success.” Well, I’m not. I want to give you the benefit of my 25 years in the industry for you to be a more comprehensive investor. Sound better? Good. Let’s go.
Part of being good at anything relies on you understanding on what you’re not good at. Let’s start with what you are good at. Make a list. Am I good at interpreting the numbers? Good at reading company documents? Good with recognizing strong management? Do I just know a good investment when I see it? Make no mistake, the latter is a real skill too.
Now let’s go with what you are not good at. Finding ideas? Having a process? Choosing what to execute from a bank, or even pulling the trigger? These are all problems I regularly confront with small and big investors. Here are three simple tips to help you find and execute ideas, and ultimately make a return.
How has your broker performed recently? Do they add any value other than pull the trigger on names that you tell them too? Perhaps you have a good relationship? Great, how does this translate into money for you? Or is it a case of making you feel good when you speak to them?
Quite frankly, does everything they do generate a significant return on value from what you pay them? Ultimately, do your investors benefit from that relationship? Are they getting the greatest return from the management of their money?
Now Hiring – Sales Executive
The Edge Consulting Group was established for the benefit of clients and investors seeking out value opportunities within public equity markets in the under-covered investment class of both credit and equity special situations. The Edge is the global leader in the research and intelligence space for international money managers.
The fast paced growth of the company has led to a need for additional support for a Sales Executive in the Morristown office, NJ.