Why “Ball Control” And Temperament Drive Long-Term Hedge Fund Performance

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0:54J. Dennis Jean-Jacques: Omaha. You know that word when you hear it, right? The great state Warren Buffett lives there, the man who made it popular. Malcolm X was born there. NFL legend Peyton Manning, he used the word while playing quarterback and post-NFL career in his business, Omaha Productions. But it's also a word that one particular stock investor uses as part of his strategy. And in a minute, we'll introduce you to J. Dennis Jean-Jacques. You're in the Enterprise Zone at the NASDAQ.

1:28J. Dennis Jean-Jacques: Hello, everyone. It's Jabari Young, senior writer at Forbes, and you're in the Enterprise Zone at the NASDAQ. Thanks for coming. And I have a special guest. His name is J. Dennis John Jacques, and he is the CEO as well as CIO, chief investment officer, at investment platform Ocean Park Investments. Now, this is an investment platform that was founded in 2007 based in Connecticut. And he's also the author of Five Keys to Value Investing. Definitely made me want to get this book. J. Dennis, thanks a lot for the time, man. I appreciate it. I appreciate you inviting me here. Yeah, yeah. You're a behind-the-scenes man, man.

1:59J. Dennis Jean-Jacques: You know, not too many people can get a hold of you, you know what I mean, to get some investment advice from you. Well, some of us still have to work. Yeah. It's not your first time at the NASDAQ, right? No, I've been here a couple times, but it's the first time being interviewed, so I really appreciate it. Hey, listen, man, I appreciate you coming down here, and again, welcome back. And before we talk business and all that good stuff and stocks and something that's right up here, Ollie, man, How's the family? How's your wife? How's the kids? The kids are great. We've been very fortunate to raise three young adults right now.

2:32So the family's good. They can't complain. I know you follow the stock market. I know this for a fact because you are running your investment firm, and this is part of your world in the hedge fund and stock picking. But what type of investor is Jay Dennis? You have to give yourself. Are you passive? You're aggressive? Long-term thinker, I know you are. What type of investor is Jay Dennis? I think for us it's really a combination. I think the true worth of a professional investor is really to be able to manage risk, being defensive, but also being opportunistic, being enterprise as well. And to be able to balance those two.

3:07You know, you could always be passive only. You could kind of stick the money under the mattress, so to speak, and that's not going to help a whole lot of people. but at the same time you could be aggressive all the time that's like a casino and that's not going to help a lot of people and I think that having a combination and having the right temperament to have the right combination where you can control risk by the same time genuine returns is a number one goal so that's what I would you know describe myself yeah I love that you know something that you reminded me of right when we were on Martha's Vineyard and we talked about this and you said you know temperament is the most important thing in investing most people don't have the right temperament right to be a true good investor right you really believe temperament is the key oh absolutely you know it's interesting because you know Warren Buffett talks about temper all the time and and it for me personally it goes way back you know my parents being from the Caribbean when my father was very much into history particularly United States history my brother my older brother his name is Nell he was named after Neil Armstrong and that my name you mentioned jay dennis that j stands for jackie that's right is named after jackie robinson that's right and although i'm not much i'm an athlete but not much of an athlete to his level but one of the things about jackie robinson that the reason why we read about him in in the history books is really because of his temperament um there you know as you know there's a lot of there was a lot of great players a lot of great baseball players back then but the reason why we still talk about him was because he's temperament that's right and i think that's one thing that's always been instilled in me is having the right temperament no matter what you do but particularly in the part of the stock markets where things are being thrown at you all the time to have an even kill good or bad days to be able to manage those are by far one of the most important skills having the right time but I love it it also takes me back to your very first stock digital equipment corporation that's the very first stock that you bought when you were in college at Boston University but get into all that fun stuff man in a minute you walk I TALKED TO A CLASS OF THIRD GRADERS, J.

5:08DENIS, AND THEY SAY, WHAT IS IT THAT YOU DO, MR. DENIS? WHAT DO YOU TELL THESE GROUP OF THIRD GRADERS ABOUT WHAT YOU DO FOR A LIVING? A LOT OF PEOPLE MAY NOT KNOW WHAT A HEDGE FUND IS, THEY MAY NOT KNOW WHAT A STOCK PICKER IS, AND THESE THIRD GRADERS CERTAINLY MAY NOT. HOW WOULD YOU EXPLAIN YOUR ROLE TO A GROUP OF THIRD GRADERS? I THINK FOR A GROUP OF third graders you know FIFA World Cup was in the United States I think a lot of people have kind of a lot of rediscovered soccer but a lot of third graders you know they play soccer all the time and if you watch the professional soccer teams there's a there's a number that they watch very closely which is called time of possession for third grade that's mean ball control and the best teams the way they score is they try to control the ball longer than the opponent.

6:05And if you control the ball longer you have more opportunities for wait for certain things to happen where the probabilities are on your side so you can score. So if you watch soccer sometimes they'll even kick it back to the goalie just to make sure that they have ball control. In the stock market If you run a long, short portfolio, meaning that you go long, meaning you buy stocks, and short stocks, meaning that you're selling stocks, if you do it equally, that's called market neutral. In other words, you don't have any exposure to the market. So if the market will up and down, up and down, you're basically neutral.

6:45That's ball control. So our job is to really have ball control. Whether the market will up or down, we have ball control. But when the opportunity presents themselves, we have to be able to strike. And if you don't have ball control and the opportunity presents themselves, you may not have the ball. So for us, what we do as a hedge fund, our number one goal is to protect and compound your capital. Control the ball. Control the ball. But sometimes there are opportunities where you could really take advantage of it. Now, I'm going to go on a limb here. Remember, you're talking to third graders. I'm talking to third graders.

7:31And so I would tell them that Warren Buffett, which is one of the most successful investors, has used this to basically create his wealth. And I would tell them as they get older, they should read Warren Buffett's annual letters. But there's one particular letter that they should focus on. He says something in this particular letter that he has not said in any other of the 70 years he's been writing. And I believe that he kind of gave everyone a little secret. Our firm is based out of these words. Buffett, in his 2016 annual letter, he basically tells the readership, he basically says that Charlie and I, Charlie is Warren Buffett's partner, recently passed away not too long ago.

8:27He said that Charlie and I, we don't have any magic plans except to be prepared mentally and financially and to act fast when opportunities present themselves. Then he says something very interesting. He says that every so often, I'm paraphrasing here, but he says every so often, dark clouds will fill the economic skies and briefly rain gold. When downpours of that sort occurs, it is imperative that Charlie and I rush outdoors carrying wash tubs, not teaspoons.

9:11Now, for a third grader, they may not know what a wash tub is.

9:14J. Dennis Jean-Jacques: I think they do, they wash up? Well, you know, a wash tub, you know, you put a little baby in it, you know, and I'm sure they know what a teaspoon is. In other words, when this opportunity starts raining gold, briefly, it is not a time for you to be coward. You have to be prepared. You have to do your work. You have to do research. You need to rush outdoors carrying wash tubs. T-SPOLE. Yeah, and that's where the ball control comes in. So if you could control the ball when opportunities present themselves, you go out rushing with Washington. Perfect segue for you to again take me deeper into the 5.6 trillion hedge fund industry.

9:55You know this is an industry again that's based off of picking stock. You pick the right ones, you make money, you've been there for a very long time. If you pick the wrong ones, people will not trust you and you'll probably be out of business. Take me inside of Ocean Park Investments. Again, a hedge fund is based up in Connecticut, right? Almost$100 million in assets under management. And focusing on industrial-related companies, right?

10:14J. Dennis Jean-Jacques: Hard assets, cash flows. You don't worry about software nor retail. That is your philosophy, man. What's going on at Ocean Park? Yeah, I think for us, I think, you know, obviously private credit and private equity has really, has been really a great run. I think for us, we really look at liquidity as more a strategic opportunity. And so if you think about what's going on right now in the markets, right, so we have a lot of spend in AI infrastructure, whether it's AI infrastructure, whether it's the digital infrastructure, the emerging orbital infrastructure that we're seeing right now, aerospace and defense.

10:54So we have trillions and trillions of dollars are going to be spent in these areas. Yeah. 1.5 trillion defense budget next year. Absolutely. And you know what? There's going to be a lot of winners and losers. So there's two different forces that are converging. You have a lot of money being put into new companies, existing companies, where they're building this infrastructure that's so much needed, not only here in the U.S., but globally. And then you have another force, which is the public markets. What people don't fully appreciate is that the public markets, it's an auction-driven market. And in auction, you have all kinds of players.

11:34You have some knowledgeable players. You have some players that are not so knowledgeable. You know, you have some players that basically invest or trade on emotion. You know, the late Michael Price, who's one of the most legendary value investors, I had an opportunity to work with him. He told me a long time ago, there are three things that will never change in the investments. There's fear, greed, and speculation. Those things will never change. The question is, can you capitalize on fear? Can you capitalize on greed? And can you capitalize on speculation? We call that capturing a return on behavior.

12:19So if you are well prepared, if you know that these are the companies that are home run hitters, they're going to be around for a long time, they're generating a lot of cash flow, these are great businesses, you just wait for the opportune time to take advantage of it. Do you remember the analogy we talked about, the soccer analogy? Wait for the opportune time to strike. We call that capturing a return on behavior. So for us, because you have these two converging forces coming together, having liquidity allows us to take advantage of those and to create the kind of returns that our investors need.

12:56Well, listen, again, 5.6 trillion industry and you have your own strategy. You kind of probably just laid it out with the Omaha strategy where you have the right ball control. But when you see these dark economic clouds, you strike. Right. And that's what you're. STRACK. YOU TOLD ME THAT SOMETIMES IN THE MIDDLE OF YOUR INVESTMENT ROOM, IF YOU SEE THE RIGHT THING, YOU WILL STOP AND YELL AN AUDIBLE, AND THAT AUDIBLE IS OMAHA, RIGHT? TAKE ME INSIDE OF THAT STRATEGY, RIGHT? BECAUSE, AGAIN, THIS IS WHERE YOU SEE A DOWN IN THE MARKET. IF YOU SEE SOMETHING, YOU KNOW, EQUITY IS STARTING TO TURN DOWN, YOU 'LL TAKE A LOT OF YOUR CAPITAL, 10%, 20%, AND PUT IT INTO ONE STOCK, RIGHT?

13:30TAKE ME INSIDE OF THAT STRATEGY. HOW IT'S BEEN WORKING FOR YOU? IT'S BEEN WORKING GREAT. been working great so I'll just let me take you back for a minute so when we started Ocean Park we had two different strategies so we had the absolute return strategy and we had the Omaha strategy which is basically we will call capital down from investors hey this is time for us a contrary capital but as you would imagine when the markets down 10 15 20 percent we'd call our investors hey can you wire some money so we could take advantage of these great opportunities Do they say no? They say, well, I don't know.

14:06Wait until things settle down. You know, we're getting our head handed to us by this other long-only manager. We want to make sure things. So, obviously, that doesn't work very well for them. Because they're pressured to manage risk and things of that sort from other clients. So what we did was that we basically merged those two strategies into one. Absolute return, ball control, and Omaha, the ability to strike. So basically we are doing what they're basically hiring us to do something that they're unlikely to do when the right time for us, for them to do it. So, for example, in last year during Liberation Day, April 2nd, I remember that day very quickly, the markets were down quite a bit.

14:56They were down even further. we were able to take money out of our absolute return strategy because we're controlling the ball. And there were companies that were falling so far down that we could capture asymmetric returns. In other words, where our downside is lower and our upside is higher. One of the reasons why we focus on industrial-related companies, basic companies' hard assets and cash flows, is because we could at least assess what the downside might be. For example, if a company has plants, we could figure out, okay, what is the land worth? If we melt the plant down and turn the plant to the golf clubs, how much do we sell to golf clubs?

15:37So if the stock's at 17, we think the downside of what Ben Graham would call margin safety. If the stock's at 17, we think margin safety's around$8 or$9, and during a market dislocation, stocks trading around$10, we may put 10 % of the capital in that one name. So for us, we only focus on companies with critical parts and services that has a tailwind. Companies that have monopolistic, oligopolistic, or duopolistic tendencies. Companies with great management teams. Companies that are financially independent. Yeah, name some of them. So we like, one company that we like right now is Mueller Companies.

16:14Mueller is basically a company here in the U.S. They focus on a lot of the copper that goes into not only the housing, but also data centers as well. And the thing about Mueller is that if you look at what's going on in the markets right now or in the economy, what people don't realize is that there are a lot of bottlenecks in data centers, in the orbital infrastructure, but those bottlenecks, they don't disappear. They just migrate to a different area. Our job is to figure out where is the next bottleneck. We think that the copper distribution, particularly here in the U.S., where there are only a few, and Mueller is one of the bigger ones, this company has no debt, it's financially independent, great management.

17:03What's happening is that if you look at the housing construction, which is definitely needed in this country, if you look at data centers, if you look at airspace and defense, if you look at the emerging orbital infrastructure, all of these need copper at some area. That's right. One of the things that people don't forget about data centers is that they talk about the mechanical heat transferring systems. They talk about the electrical systems. They forgot about the plumbing systems. That's water. You've got to get the water out.

17:33J. Dennis Jean-Jacques: Yeah. So if you think about what's happening, think about a five-lane highway, and they have to converge into this one-lane bridge, which is the copper, which is the Mueller Industries. That is what's happening. That's going to be the next bottleneck. And we think that Mueller should work out very, very well. Corning is another one where they make the fiber. As we talk about the orbital infrastructure, I think that's another company. So these are the kind of companies where they're monopolistic, oligopolistic, duopolistic, where they have great management team, financially independent. And could you imagine if the markets were to be down 10%, 15 % and these companies are down 60 % because people have to get out?

18:13We'd be buying these companies all day long. Yeah, because you're going to need them, right? I mean, especially copper. You're going to need it. Exactly. And when we talk about the power and electrical grid, which needs to be upgraded, you're going to need copper. I go differently. I'm in the transportation, so I do rail lines and trucks because you've got to have the delivery. Someone has to build those trucks. 100%. Right? 100%. And so there was an interesting article in Bloomberg on October the 9th. And it was on hedge funds. And it said, it's a tough time to launch a hedge fund right now. And the meaning was smaller firms are being squeezed out because even the star, you know, stock traders, you know, are reluctant to leave where they are and go start their own company because, you know, people are just going with the bigger ones, right?

18:55They're going to the big hedge fund companies. You still consider yourself an emerging manager? I mean, because, again, you're still looking to that. You're not at a billion yet, you know, still in that 100 million range. Are you still considering yourself a emerging manager because of your assets under management right now or do you not? I do not consider myself an emerging manager. Prior to Ocean Park, I've been running money for 20, 25 years. And so one of the things that I belong to an organization called the NAIC run by Bob Green. He's done a phenomenal job. One of the things he mentioned is that emerging managers sometimes have more experience than people that, you know, start with a billion with, you know, three, four years on the experience.

19:34But for us is that it's really about what value are we adding to the marketplace? So if you look at what we do at Ocean Park, so one of the, I guess, issues with us in terms of the large allocators is where do we put Ocean Park? Because we're not traditional. Family offices, they love us. They totally get what we do. They know where we fit in. But we're not a firm like a Citadel, Millennium, or Point72 where they run a low-net multi-strategy platform. I'm thinking about ball control all the time. At the same time, we're not 10 stocks only, high conviction, and we're high conviction all the time.

20:18We just don't believe that if the market's up, you know, 100-fold and going straight up, we just don't believe you need to be high conviction all the time. At the same time, if the market's down 15%, 20%, you don't have to be long short all the time. It's almost biblical. There's a time, there's a season for everything. And for us, is that we decided that it is best to protect and compound capital, do better than cash, do better than other safer investments, which we have been doing. But when the opportune time comes for us to strike, for us to concentrate capital. Because while we're waiting to strike, we're preparing.

20:59Yeah. You do a lot of research. I know you do. Or on one or two stocks sometimes, you go all in and just research it, and then obviously that's where your ball control comes in and then you'll strike. Yeah, absolutely, absolutely. You know, the hedge fund world is very interesting. You know, it really is. And I guess for the person who maybe not understand it, it's maybe a little bit intimidating. I walked into Hedge Fund Week, you know, Hedge Week, and you were there as well. You just don't see too much diversity in these rooms. And so, you know, I ask you this because, again, it's still so many unfamiliarities when it comes down to what hedge funds are, what they do, and how to get into it.

21:34But what's it like for you being, you know, one of the few black men that's in this world that's in that hedge fund in this country and that seems to be thriving?

21:41J. Dennis Jean-Jacques: And you certainly have the history and dive into that in a minute. But what's it like for you as a black man running a hedge fund, your own hedge fund now? Well, I think, you know, it's one of those things I try not to think too much about that, but it's hard not to. It's in your face, literally. Yeah, so I think for me it's because when I started my career at Fidelity, you know, I was the first, you know, African-American analyst there. And I don't like saying that because I don't like saying I'm the first anything because I don't want to feel like I'm throwing shade on other diverse black people that were probably smarter than I was.

22:21They just didn't get the opportunity. So it's not as if I was this special person and they kind of picked me out. But, you know, I was there at the right time and took advantage of it. But, yeah, it was interesting. But, you know, I learned a lot there. And one of the things that helped me was reaching out to people that have done that. So one of the things I did was I wrote a letter. Back then there were no e-mails. This is like the early 1990s. I wrote a letter to John Rogers, who's running aerial management, aerial investments. It used to be called aerial capital, but not aerial investments.

23:00And he wrote me back. He wrote me back. Were you surprised? I was surprised because there was, I would say, two other people, roughly, I wrote. He was the only one that wrote me back. Not only did he write me back, his partner back then, Eric McKissick, of the famed McKissick kind of family, he would visit me when they would visit Boston. I would visit John. John would invite me to Chicago to meet. I remember meeting his current co-CEO, Melody. I think it was their second year at Ariel. So he really took it upon himself to say, look, I understand what you're going through and things of that sort.

23:40But to be able to talk to him every once in a while and things of that nature, he totally has changed my outlook. And I've kind of tried to adopt some of his behavior, like working on Saturdays. I remember he'd say, you know, call me on Saturdays. I said, what do you mean he's working on Saturdays? Yeah, we have that in common, working on Saturdays.

23:58J. Dennis Jean-Jacques: Yeah, yeah, yeah. So since then, I've always worked on Saturdays. Except for that Saturday that I hit you and say, are you in the office? You said, no, I'm not. I was shocked. Well, that's because I had a church service. A church outing, so I had to attend that. But, yeah, so that's one of the things that, so I'm still grateful till this day for what John did for me. Yeah, in a conversation that you had before, you know, you said how when you're sometimes out raising money, you'll get people who look right through you, and they don't respond or anything. And I was maybe a little shocked at that, you know, reaction because of so much of your history.

24:30Again, you know, a protege of Michael Price, the Oleon family. Like, you've done a lot in your career, and that is showing your own. Are you still finding those issues of people looking through you, one of the more intelligent individuals in this, you know, hedge fund world? You know, I'm not surprised because I think I'm sure everyone has gone through those kind of trials and tribulations. And I think having a strong family background in terms of what they taught me growing up has really helped me to withstand those situations. But also I would say that I'm very well prepared to build Ocean Park.

25:09So I have a lot of friends who have built firms before, and also I have strong backings as well. What's been the biggest positive surprise of running your own firm? I think the biggest positive is that I never had to work. I thought you were going to say never take a vacation. I'm like, oh. Well, it's not work. I always joke about how what do professional golfers do when they retire? They play golf.

25:37J. Dennis Jean-Jacques: They're not working. It's during their career. So when I retire, I'm probably going to look at companies and analyze companies and invest. So for me, it's not really work. So on Saturday afternoon, Sunday afternoon, whatever it is, I'm always looking at. So since I was a child, I've always been very, very curious. That's why I say Black Warren Buffett, because if you look at his history, he did the same thing. He was married. He came home. His wife has friends over the house. He goes right upstairs to read annual reports, right? He was diving into that world, even when he was younger, around your age, coming up in the business.

26:10Yes, and I would also say that for me particularly, it was basic curiosity, because my parents did not raise us picking stocks or looking at the markets. In fact, when I, you know, you mentioned I was an engineering student at Boston University, And the reason why I was in engineering is because, you know, as parents of Caribbean, you know, Caribbean, they had to be engineer, doctor, lawyer, and I picked the engineers. I was pretty good with numbers. Well, what are you like as a leader? Like, how do you lead your firm? Are you hands-on, micromanager, hands-off? Like, how do you lead? I think for us, it's really about...

26:40Well, for us, for you, you're the leader. Yeah, yeah. Well, yes. So it's really about the culture we're building at Ocean Park. And for us, it's really about having a very transparent culture, a culture based on humility, a culture based on having expectations. You know, it's interesting because we just say, you know, we want a culture of excellence. You know, everything to be excellent. And we do want a culture of excellence. But one thing I've learned as a leader is that if you bring on someone new, they may not be excellent on day one. They may not be excellent on day two or three. So for us, it's really about expectations.

27:18So we have set expectations for everyone. We know that you're not at a certain level today, but let's make sure that the second week you're at that level, month two you're at that level, second year you're at that level. So for us having the right expectations. And lastly, curiosity. Things change. And for us to be able to understand where the ball is moving, where the next bottlenecks is being shifted to, where the constraints are in the system. because if you could control the constraints, you could control the economics of the entire chain, where is that? And the only way we're going to get ahead of that is we're a little bit more curious.

27:59If we read a little bit more on Saturday afternoons, if we read a little bit more on Thursday evenings, if we go to that, take that extra trip to visit that company. And not because we have to, it's because we're so curious about it. And I think that's what separates.

28:14J. Dennis Jean-Jacques: And you're controlling the ball at the same time. And you're controlling the ball at the same time. But I think for us in terms of what I would, the legacy is really developing and helping train the next generation. Look, I just listed out a lot of people, and there's a lot more people that really helped me throughout my career. So we have a great internship program where we bring in eight or nine interns. We really, really care about them, so we follow them, the career path. We try some of them. We help them with their resumes to make sure, look, this is how you would present. So it's not about, for us, it's really what makes us so proud is if someone works at Osher Park and we see them do extremely well going forward to develop the next person.

28:59And that's one of the things I would say that's not very much appreciated by others that's outside the hedge fund industry. The hedge fund industry, I would say, has done a phenomenal job training the next generation. People talk about the Tiger Cubs. right? Junior Robinson, he hired a lot of people. They went off to grow multi-billion dollar fund. Michael Price, who hired me, also trained Seth Klarman, which is one of the premier hedge fund managers in the world. Merrill Whitmer, who currently sits on Berkshire Hathaway's board of directors, all worked under Michael Price. So Michael Price has his own tree.

29:41And you're part of it. And I'm part of it. But the thing about it is that I think that a lot of people don't fully appreciate what the hedge fund, the teaching that the hedge fund, how they allow people to learn and then to able to grow on their own. Yeah. Well, speaking of family trees, man, let's get back into yours, right? I mean, you go take a step back. You grew up in the Boston area, right? Down in Massachusetts. You know, people always say Boston has that race issue going on, right? where it's a lot of that, but what was that like for you growing up in the Boston area? Yeah, I think that my parents did a phenomenal job.

30:16We were basically shield. To be honest, we didn't really knew that a lot of those things were going on. We went to Catholic schools, St. Kevin's school right in Boston. So my parents kind of shielded us and also the nuns that were there. You know, sometimes people say, you know, I always wear a dark navy blue to tie to my nature. That's from the St. Kevin's school days, you know, where we're at to wear this color tie. So that has been something that's been extremely important in terms of the development of me as a person. But also I would say that I think that people don't fully embrace the history of what Boston has done for African-Americans historically.

31:05You know, you mentioned Malcolm X being born in Omaha. He also did a lot of time in Boston. You know, his early years. Martin Luther King went to Boston. It's interesting, my parents being immigrants, one of the reasons why they wanted to settle in Boston. He thought it was the Athens of America, right? Exactly. He thought that if he lived in, you know, think about it now. It's like, okay, that's not really the case. But if he lived in Boston, his kids could go to Harvard. Yes, right. He could go to Boston University, could go to MIT, could go to Boston College. So he said if he could live there, that were the chances.

31:45But what Boston has done, not only for, if you think about sports, if you think about the history that Boston has done in the sports, it's phenomenal. I think, I don't want to go too much, this is not a flip for Boston, but I think people really, you know, short change Boston. You know, again, you go off to Boston University, Dennis, and, you know, get your degree in engineering. You know, intern for the Stevens family, right? The famous Stevens family out in Arkansas. Again, you mentioned first black analyst at Fidelity, Harvard Business School, working for Michael Price at Mutual Series. The Oleon family, fruition fund management, right?

32:23Rich history. But, you know, when you have to sit back and you have to think about, you know, where you've come from, right? Think about those days in Boston. Think about when you were the head altar boy in the seventh grade, right? And, you know, thinking about when your mom said you were going to be a Yoder to someone and then looking at how far you've come. Working at those firms, a protege of Michael Price, who showed you some tough love, right, while you were working at his firm, right? When you had your lasagna and your Coke in one hand and he threw the papers at you and you, you know, did not like your analysis on a particular company, but you got through it, right?

32:58And you learn to have your own temperament, and here you are running your own firm. If you had to describe your career thus far in one word, what word would that be? Preparation. Preparation. Why preparation?

33:15Because oftentimes dark economic lives will fill the skies. And when that happens, it will briefly rain gold. And it's imperative for me, when that happens, to rush outdoors, carrying wash tubs, not teaspoons, to take advantage of these opportunities. So for me is we look at opportunities, you know, we know that there are hardships either in front of opportunities or behind those opportunities. And the question is how do I look at those situations? So I think for a place really about preparation, I think my parents have done a phenomenal job preparing me. The challenge is how do I measure up to them with my own adult kids?

34:13And, you know, so far so good. And so I try to instill with them the same lesson that they instill with me in terms of giving back to the community, in terms of, you know, going through the hard stuff to get what you want. And hopefully they'll get there as well. Yeah. Again, you have your book, you know, Five Keys to Value Investing, and I definitely looked at it and gave it a read. Some very informative information in there. But, you know, one of the things that you say is that those five keys is business, price, value assessment, catalyst, identification, margin of safety. Elaborate on why those are the five keys for you.

34:54Yeah, that's a great question. And let me step back a little bit on the book. So my second year at Harvard Business School, this is a year where you could basically select what classes you want to take. You have a little bit more freedom. And I wanted to take a value investing class. You know, other schools have value investing. But at Harvard, it's a general MBA. So there were no, like, value investing classes. There's accounting. And so I petitioned a couple professors to say, can I create my own course? Can I create my own, what they call, faculty-sponsored research, where I would get a course credit, but it would be my own course.

35:41You know, a couple professors said, I don't know, you know, this. And one professor, Professor Jay Lorsch, he's a board of directors specialist. That was his expertise. He was very familiar with value investors, particularly when they would be activists on some of his boards he was on, things of that sort. So he basically took me on. So basically what I did was that I looked at the value investors and investors that I highly respected and other people highly respected, John Rogers, Carl Icahn, Warren Buffett of course, Peter Lynch who I had an opportunity to work with before business school at Fidelity.

36:19and basically what I did, I re-engineered a lot of the investments that were in paper and tried to figure out what were they thinking, what were they asking, what was the environment like? And I had a lot of help from Professor Lorch to try to figure out, you know, in terms of what the environment was like. What were the kind of questions? Those questions, they came out to be maybe 240, 250 questions, and they fell in five different buckets. And those buckets were, what is quality of the business? Another bucket was, why is this market offering me the stock price? Was the market down a lot? Why is the price up or down?

36:59What's the situation there? Another question was, what do you think this company is worth? In terms of if I did my analysis and say, this stock is cheap, but I think it's great, What are the questions I would ask should I figure out what the true value is? Another question would be, well, if the stock is worth, let's say,$10, but I think, well, it's trading at$10, but I think it's worth$30, what's going to get it there? What's going to catalyze the stock from$10 to$30? Are they going to break up the company? Are they buying back stock? Are they launching a new product? Are they going to be, you know, are they doing a merger where they could get?

37:39So what are the things that they're doing to catalyze the stock price from$10 to$30? And the last question is, if I buy a$10, how about if I'm wrong? Right? How about if it just doesn't work out? Will the stock go to$2? Yeah. Or will it go to$8? What's your downside? What's your margin safety? What would Ben Graham say? What would your margin safety? So can we assess that, the margin safety? And so if you look at the business, the price, the catalyst, the worth, the margin safety, those are the five keys and what we learned was that most investors focus on one or two of those keys in the value investing community, most of them.

38:19So a lot of them, for example, the late Marty Whitman talks about, you know, buying things cheaply, downside protection was very important to them. Other investors, catalysts, you know, event driven, they think catalysts is very important to them. Warren Buffett, more like in the business, he's kind of evolved from kind of the cigar butt kind of vesting, which is kind of like these kind of broken companies, to business quality. So that's what we noticed. And so those are the five keys. And at that time, there were no real framework as such structured as the five keys. Until this day, 25 plus years later, aware he was probably the high school of altaf Thanos войn started price andaudible.

39:17very big one. very big one. look like Denzel Washington, but, you know, give a brother a break.

39:37J. Dennis Jean-Jacques: Well, your wife might think that. You might think like Denzel, you know what I mean? But, you know, on a 2022 podcast, you know, and I want you to elaborate on something before I get you out of here on some fun stuff, but I love this quote that you had, and you know, it said, you know, having good habits always beats having good goals, because if you have the right habits, the goals will come. Elaborate on that a little bit. Why is that your philosophy? Because it's really about the process, and so for us, For us, for example, everyone makes mistakes when they invest in companies or invest in stocks.

40:11For us, we've defined what a mistake is. So if we follow the process that we have in terms of analyzing a company, making sure that certain things fit, there are certain things that we look for for companies, whether it's monopolistic, we're great managing, financial dependent, we want to make sure the price is right, things are soared. If we follow those things, it doesn't work out. It was not a mistake. You know, my son played soccer when he was in boarding school, and oftentimes the coach would just say, unlucky. And when the coach would tell the soccer player, oh, that was just unlucky, that meant that he did everything, the soccer player did everything right.

40:55He cut through. The passing was right. You know, the angle was perfect. The touch was perfect, scored, hit the goalpost, didn't go in, unlucky. So at Ocean Park, we often say that was unlucky. What we don't want is mistakes where we miss something. Oh, we thought this company was financially independent. Oh, well, they have off-balance liability that's going to creep up on them, and now the markets find out. We cannot have that. But it's okay to be unlucky as long as you follow the process. And the thing about it is that when you follow the process, sometimes you become smart or become lucky because you just follow the process.

41:39And some good things happen because, you know, you look like a genius and other times. So we take it. As long as we follow the process, that's what I meant by that. Hey, man, get you out of here on some fun stuff. And I appreciate the time, man. Always good diving into this new world and the hedge fund world. I mean, it's so complex, right? IT'S COMPLEX BUT IT'S ALSO SIMPLE. IT ALL DEPENDS ON HOW YOU KIND OF ANALYZE IT. I DEFINITELY APPRECIATE THE TIME WITH THAT, DENNIS. I GIVE YOU 10 GRAND RIGHT NOW. IT WILL BE A LOAN THAT I GIVE YOU. WHAT'S THE FIRST THING YOU INVEST IN RIGHT NOW? WE WOULD BASICALLY PROTECT IT BECAUSE WE THINK A STORM IS COMING.

42:19OKAY. SO YOU WOULDN'T DO ANYTHING. YOU WOULD PROTECT IT. WE WOULD PROTECT IT AND COMPOUND IT BECAUSE WE THINK THAT THAT'S FINE. I TOLD YOU IT WOULD BE A LOAN SORT OF SITTING THERE COLLECTING interest until you go to the it's going to be a good time yeah absolutely I love that I love it Jay Dennis's superpower what is it curiosity curiosity cool you look at the hedge fund business again as a whole and you know BlackRock came out with their report their hedge fund outlook and they expect it to be a six trillion dollar industry about 2030 when Jay Dennis looks at the hedge fund world right now from an eagle eye view what do you see I see so much opportunities is that unfortunately people are not really grasping.

43:01There are always going to be fear. There's always going to be greed. And there's always going to be speculation. If you have a strategy and a process to capitalize on that, you have a perpetual strategy that will go on and on and on and you can teach your kids and grandkids. as long as there's liquid markets in the world. And so for us, we spend a lot of time trying to understand and try to prepare for when greed happens, for when, you know, fear happens, and understand when people are speculating. And so it's only upside for us because you cannot fight human nature. when, you know, one of the key things about being a great investor is learn to live with FOMO.

43:55Fear of missing out, yeah. Learn to live with fear of missing out. If you're, you know, someone says that nothing is as painful as seeing your neighbor get rich. That's very true, yeah. You know, but can you withstand that knowing that your day is coming? We study history. We know that every 12 to 24 months the market's going to be down at 10 to 50%. Can you wait? do you have the stomach to wait? Can you protect and compound client capital waiting for the opportunity? Because you know when the opportunity comes, you've been waiting for two years studying these companies. That's not the time you need courage to take adventure of that.

44:35And I think that's what we bring to the table, and I think that's why we're so excited about the years ahead. Yeah, I love it, man. Well, I'll get you out of here on this, right? You know, Jim Collins, Good the Great, You Know This, my favorite business book. So what's the difference between a good stock picker and a great one? I think for us, a good stock picker basically has a process to really protect capital or has a great process to really do extremely well because sometimes the hedge fund industry could be a little bit bifurcated. You have managers where they're great at protecting capital.

45:23And they've done that very, very well. And then you have another group, which is their returns are episodic. It's like they're up 70 % one year. Next year, they may be down quite a bit. So they're up and down. But some investors, they like that. up 7 % and next year maybe down, but over time. I think the great investors will be able to be defensive and enterprising, to put those two together. And a category of your own, right? That's what you do, put you in a category of your own, man. Hey, man, Dennis, thank you so much for the time, man. I really appreciate it, the breakdown. Always insightful talking to you, man.

46:02I learn a lot, and hopefully the viewer does as well. So I won't call you the Black Warren Buffett tomorrow. I'll just call you Yoda. How about that? Ah, there you go. So be Yoda here at the Enterprise Zone. Dennis, thank you so much. J. Dennis John Jock. Jackie, I'm going to just call you Jackie. How about that? Jackie Dennis John Jock here at the NASDAQ on the Enterprise Zone. Yoda, that's what I call him. Thank you for watching. Thank you for listening.

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