5 ‘Special Situation’ Stocks to Buy With up to 31% Upside: Jim Osman
- Jim Osman founded The Edge Group, which provides investing recommendations to money managers.
- In a market where everything is on sale, Osman is helping clients find price moving catalysts.
- He shares 5 top stock picks with upside of 18% or more.
For the past two years, amid a raging
, it’s been a smooth ride for stock pickers like Jim Osman.
“You just throw a dart at the wall when something goes up and you go, ‘look at me. I’m the greatest’,” said Osman, the founder of The Edge Group, a firm that provides investing recommendations to top money managers and individual investors.
It’s a trickier environment this year with the S&P 500 down around 13% year-to-date and some individual names taking an even bigger hit. Popular stocks from the last two years like Netflix (NFLX) and Zoom (ZM) are down 66% and 37% respectively.
Osman admits he’s “one of the losers” who likes this type of environment.
“In a falling market, you’re going to see real stock pickers and real people who are going to be smart about making returns on the way down,” Osman said. “There’s a real opportunity to make substantial gains,” he added.
It’s exactly what Osman’s been doing this year.
Osman’s Edge Group focuses on recommendations that go beyond the numbers with a focus on “special situation” investing.
These are situations where investors will take stakes in companies based on particular catalysts, such as spinoffs in the hope it will result in a significant increase in future value.
The spinoff market was red-hot last year with 2021 bringing the most spinoffs since 2011, according to data from Bloomberg. The momentum is continuing this year with around 30 spinoffs on the calendar, Osman said.
“Our model portfolio return is up 7% this year on the basis of our recommendations of spinoffs and their parents,” Osman said.
Focusing on spinoffs is perfect in this environment, when it’s difficult to know which way the market will go on any given day.
“What we’re trying to concentrate on really is that little bit in the middle, on either side, that people don’t know they should be looking at to get returns in a market like this,” Osman said. “And this is where spinoffs and breakups come in.”
Osman describes the current market as having “everything on sale.” He explains that it’s tempting to look at pockets of the market that have done well previously and just snap up stocks that are cheap but technology, one of the most popular sectors of the market, tends to overshoot itself based on history.
“Investors should avoid getting into [these stocks] because there’s reason to believe that some of these stocks will never recover,” Osman said.
Instead they should look to quality stocks that are being suppressed in the current environment.
“If people can disconnect from the market and macro views and look towards individual stocks, and also refrain from using leverage and keep a bit of cash on the side for these really ugly days then I think you’ve got a great opportunity for the next few years in really get some good companies at some cheap prices,” Osman said.
Here he shares some of the stocks he sees as opportunities in the spinoffs sector.