Looking for Value in 2023? Use Boyar’s Forgotten Forty as Your Roadmap

 

Forgotten Forty 2023

 

Most investors would just as soon forget 2022. With many global indices set to end the year deeply in in the red, “safe” fixed-income investments proving not to be so safe after all, and many former pandemic highflyers decreasing by 70% or more, investors have endured a year of carnage. Except for energy shares (advancing 74%) and consumer staples shares (advancing 0.6%) , there has been no place to hide, with all other S&P 500 sectors  declining -2.4% to -37.0%  YTD as of November 22nd.

Midterm Outlook

Contrarians that we are, this negative performance, in view of the historical record of market performance following mid-term elections, increases our excitement about the prospects for a select number of equities in 2023. After all, based on data from Carson Investment, we’ve entered the most traditionally bullish period of the 16-quarter U.S. presidential cycle: since 1950, the fourth quarter of midterm years and the following two quarters have been the strongest, with the S&P 500 delivering average gains of 6.6%, 7.4%, and 4.8%, respectively.

FTX Collapse and Equity Implications

The collapse of cryptocurrency exchange platform FTX wiped out a staggering amount of wealth, and few can predict what impact, if any, the crypto meltdown will have on equities going forward. Regardless, recent events reinforce the importance of conducting deep fundamental research.

2023 : The Year of the Stock Picker?

As famed value investor Shelby Davis once said, “you make most of your money in a bear market; you just don’t realize it at the time.” Last year, strategists at major Wall Street brokerage houses were optimistic about equities prospects for 2022, but this year they are much less hopeful, with many calling for little to no stock gains in 2023. Perhaps the major indices will flounder in 2023, but we believe that good stock pickers are facing a golden opportunity, as we detail in our annual Forgotten Forty issue, now available for preorder.

Forty stocks, forty one-page reports—each focusing not only on what we believe the stock is worth but also, more important, on the stock’s catalyst: the reason we expect it to go up in the coming year, and the reason we believe that investors should consider owning it.

Not all members of the Forgotten Forty are traditional value stocks, but all are companies we’ve previously featured in our full-length research reports. Each is a name we believe in, a name whose “value” we know inside and out—giving us specific reasons to believe it will outperform in 2023.

Free Sample Reports and Our Special Preorder Offer

For more insight into the thinking behind our Forgotten Forty picks, we invite you to read five sample reports featured in last year’s Forgotten Forty issue.

After you’ve done so, we encourage you to check out our special preorder bonus offer and gain immediate access to our October and November 2022 subscriber research reports before we present you with this December’s Forgotten Forty.

 

 

 

 

 

 

 

 

 

 

The information provided herein (a) is for general, informational purposes only; (b) is not tailored to the specific investment needs of any specific person or entity; and (c) should not be construed as investment advice.  Boyar Research does not offer investment advisory services and is not an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) or any other regulatory body.  Boyar Value Group offers investment advisory services through Boyar Asset Management, Inc. (the “Adviser”), which is an affiliate of Boyar Research and is an investment adviser registered with the SEC.  Registration with the SEC should not be construed as an endorsement of the  Adviser by the SEC nor does it indicate that the adviser has attained a particular level of investment skill or acumen. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information, and Boyar Research assume no obligation to update or revise such information. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Past performance does not guarantee future results. Investing in equities and fixed income involves risk, including the possible loss of principal. Certain information has been provided by and/ or is based on third party sources and, although believed to be reliable, has not been independently verified and Boyar Research is not responsible for third-party errors. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein

Share to:

The Boyar Value Group’s 3rd Quarter Client Letter

The Boyar Value Group just released our latest quarterly letter to clients.

Please find an excerpt of the letter below:

Do Higher Interest Rates Mean That Stocks Need to Decline?

Pundits see higher bond yields as a sign that equity valuations need to further compress (after all, higher bond yields are competition for stocks), but a look at the historical record contradicts that notion. According to Bespoke Investment Group, the yield on the investment-grade bond index is ~5.6%, right around the 35-year median yield, and at the same time the P/E of the S&P 500 is close to its historical average, which Michael Santoli sees as a sign that “‘average’ equity valuations are not far out of whack.” Approximately 7 months ago, investors were willing to accept that same 5.6% yield they are currently receiving for investment-grade fixed income for lower-rated junk bonds. Times sure have changed! As Santoli also points out, “the most extreme overvaluation of large-cap stocks and wildest speculation in no-profit upstarts occurred at a time when Treasuries yielded 5-6% in the late-’90s. Appetites and crowd psychology drive markets in the shorter-term, not math.”

Are We in the Run-up to a Small Cap Rally?

Small cap companies are particularly attractive, in our opinion, and have been hit hard during the selloff, with the S&P 600 (an index consisting of smaller capitalization companies) declining 17% YTD through October 25. Not only are they historically cheap, trading at just 11.5x expected earnings (below their 20-year average of 15.4x and the S&P 500’s 16.5x), but they are significantly more insulated from the negative effects of a strong U.S. dollar than multinational companies that sell more of their goods/services overseas. According to the Wall Street Journal, components of the S&P 600 generate just 20% of their sales abroad versus 40% for the larger-cap S&P 500.

Please click here to read the letter

 

 

 

 

 

 

 

 

This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by Boyar Value Group (“Boyar”) or its affiliates. Past performance does not guarantee future results. This material is as of the date indicated, is not complete, and is subject to change.  Additional information is available upon request.  No representation is made with respect to the accuracy, completeness or timeliness of information and Boyar assumes no obligation to update or revise such information. Boyar Asset Management Inc. is an investment adviser registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A copy of current Form ADV Part 2A is available upon request or at www.advisorinfo.sec.gov. Please contact Boyar Asset Management Inc. at (212) 995-8300 with any questions

Share to:

John Rogers, Co-CEO of Ariel Investments on founding Ariel at the age of 24, the techniques he employs when investing on behalf of clients and more…

 

Share it on:  Share on twitter  Share on linkedin  

The Interview Discusses: 

  • Founding Ariel (which now manages more than $16 billion) at the age of 24.
  • Surviving the stock market crash of 1987 and how he turned this setback into an opportunity to grow both his firm as well as his reputation.
  • Why sitting on corporate boards such as McDonalds and Nike have made him a better investor.
  • How his investment process has evolved overtime.
  • How he constructs portfolios in terms of both diversification of industries and individual stocks. He also discusses how he thinks about the liquidity of a stock when making an investment.
  • Why he believes studying behavior finance is important.
  • His thoughts on position sizing and when he decides to sell a stock.
  • His investment thesis on both Madison Square Garden Entertainment and Madison Square Garden Sports.

And much more….

 

About John W. Rogers, Jr. 

John’s passion for investing began at age 12 when his father began buying him stocks as Christmas and birthday gifts. His interest in equities grew at Princeton University, where he majored in economics, and over the two-plus years he worked as a stockbroker for William Blair & Company, LLC. In 1983, John founded Ariel to focus on patient, value investing within small- and medium-sized companies. While our research capabilities have expanded across the globe, patience is still the disciplined approach that drives the firm today. Early in his career, John’s investment acumen brought him to the forefront of media attention and culminated in him being selected as Co-Mutual Fund Manager of the Year by Sylvia Porter’s Personal Finance magazine as well as an All-Star Mutual Fund Manager by USA TODAY. Furthermore, John has been highlighted alongside legendary investors Warren Buffett, Sir John Templeton and Ben Graham in the distinguished book: The World’s 99 Greatest Investors by Magnus Angenfelt. His professional accomplishments extend to the boardroom where he is a member of the board of directors of McDonald’s, NIKE, The New York Times Company and Ryan Specialty Group Holdings.
John also serves as vice chair of the board of trustees of the University of Chicago. In 2008, John was awarded Princeton University’s highest honor, the Woodrow Wilson Award, presented each year to the alumnus or alumna whose career embodies a commitment to national service. Following the election of President Barack Obama, John served as co-chair for the Presidential Inaugural Committee 2009, and more recently, he joined the Barack Obama Foundation’s Board of Directors. John received an AB in economics from Princeton University, where he was also captain of the varsity basketball team.

 

 

Click Here to Read the Interview Transcript

Transcript of the Interview With John Rogers:

[00:00:00] [music

Jonathan Boyar: Welcome to the world. According to Boyar, where we bring top investors, bestselling authors and business leaders, to show you the smartest ways to uncover value in the stock market. I’m your host Jonathan Boyar. I’m really excited today as our special guest is legendary investor John Rogers, who is co CEO of Ariel investments, a value oriented investment firm that he founded at the age of 24 Ariel, which has roughly $16 billion in assets under management specializes in investing in small and mid-sized companies and is among the most respected institutions in the industry. John’s professional accomplishments extend to the boardroom where he sits on the board of McDonald’s Nike, the New York times company, John, welcome to the show.

John Rogers, Jr. Great to be here.

Jonathan Boyar We have a lot to discuss, and I, I realize your time is valuable. You know, in the introduction I just gave does not really begin to cover all your accomplishments, but, you know, as I was researching you for this interview, one of your achievements really stuck with me, you know, while in, in Silicon valley and maybe commonplace to have a 24 year old founder, it’s really unheard of in the investment management business. Can you take us through how you did it?

John Rogers, Jr. Oh, well thank you for bringing up those days. You know, it was amazing. Now Ariel is the 39 years old, almost 40 years old. And you know, I think the reason I was ready to start the company at a young age was a couple things. One was that my father had started buying stocks for me every birthday and every Christmas after I was 12 years old, instead of toys. And I fell in love with the markets. I had a broker in Chicago and then I had a broker across the street from campus at Princeton. And I spent as much time as I could with those role models and mentors learning about the markets. And I thought, if you loved the stock market, you became a stock broker. And I went to work for William Blair and company when I graduated,  from Princeton. And it was a great place to train a great place to learn.

John Rogers, Jr. Cause as you know, Blair is our, you know, largest regional brokerage firm and you had all aspects of the investment bank there, the money managers, the brokers, the institutional sales people, et cetera. And I pretty quickly realized I was in the wrong business. I shouldn’t have been in the brokerage business. I really was meant to be an investment manager where I could develop a long term approach to investing. As I learned about that, I said, you know, if I can’t do this here at Blair, I’ll go off and start Ariel. And that experience again, was very helpful and giving me the confidence to start my early stocks worked out well. And that gave me confidence. And I also have to say that, you know, there was several African American entrepreneurs in Chicago who had done really well and started their companies at young ages. John Johnson had created Ebony and Jet magazine at an early age.

John Rogers, Jr. And George Johnson had created Afro Sheen a hair care product company at a very early age. So I think those African American role models gave me confidence that I could start Ariel  investments at an early age. And then finally I have to say that, you know, I was lucky. I had friends and family who believed in me and they were willing to help me raise the first couple of hundred thousand dollars to open up the doors and be able to pay the salary of a high school buddy of mine and give us the time to develop a track record and get some interest going around our small company.

Jonathan Boyar Yeah, building that track record, obviously by definition it takes time. Was it hard to convince people, even if you had a good couple of years to give a 24 25, 26 year old, you know, some money to invest?

John Rogers, Jr. Well, I think we did a couple things that helped give people confidence in those, in those early years.  One was, we started this newsletter called the patient investor and every issue I would talk about my views of the market. Talk about my favorite stocks, why I like the stock. And then I kept track of how the stocks performed on the back page. So people could see my thinking about the markets and see whether I was, you know, thinking creatively and had some logical thoughts around the markets. And we made the good decision to have the logo of the patient investor be a tortoise to remind people that old Aesop’s Fable that slow and steady wins the race. So I think that gave prospective investors some kind of confidence that we were gonna be prudent patient investors and not risky investors. And then the final thing was we went to friends and family also and raised about $500,000 and we put it what we called aerial fund. It was run just like a partnership, but it had a, a normal fee structure to it. And so we had a real live track record along with the, uh, paper track record that we had in our newsletter, uh, the patient investor.

Jonathan Boyar And you’d mentioned that in Chicago, there was a lot of very successful, you know, African American entrepreneurs. Did you gain access to any of them? Were any of them particularly helpful?

John Rogers, Jr. Yes, that was another really, you know, helpful part of our story, you know, growing up in the south side of Chicago and my parents had met at the university of Chicago law school and they knew some of these outstanding entrepreneurs and I had a chance to grow up with their children, go to grade school and high school with John Johnson’s daughter and son and George Johnson’s son, et cetera. So I did have great exposure to them whenever I had key questions or concerns as I was starting the business, I would go and see, you know, John Johnson go and see George Johnson. I still go and see George Johnson. Now he’s,, 95, 96 years old and still is sharp as a tack and still full of wisdom. And so, so helpful. So having those legends to lean on was critically important in those early years and giving me confidence to, to keep going.

Jonathan Boyar You probably needed a lot of confidence in, you know, you started in 84, 3 years later, you have the crash of 87 you’re 27, 28 years old. However you were at that time, you know, did you think you were going to fail then? Like that was a day that I can’t even imagine losing 20% or whatever it was in one day.

John Rogers, Jr. Yes. You’re too young to remember that it was a brutal day to lose over 20% in one day. I can actually remember I was at the wedding planner and I was having to keep stepping out of the meeting to get on the phone and see what was latest on the markets. It was a scary time, but in some ways it was a really, uh, defining time for us that Ariel, cause  we kept telling people we’re value investors. We told people, we believed in Warren Buffett fit’s mantra that you want to be greedy when others are fearful or what the legendary John Templeton always talked about buying when there’s maximum pessimism. So this gave us a chance to prove to ourselves that we were true contrarian, that we were gonna be willing to buy when there was an extreme stress. And at the same time, I think it gave our customers confidence when they saw us buying more.

John Rogers, Jr. They heard me on the phone, I’d call up clients and say, send us more money. This is a once in a lifetime opportunity to buy bargains. And the fact that we bought bargains during that crisis of 87, set us up for really good performance coming out of that year and into 1988. And I think our fund was in the top five in the country in 1988 and we got to be co mutual fund manager of the year in a strange way. It really set us up and helped to create our brand that and show people that we really truly work in Tris and really were true value. Investors

Jonathan Boyar Just wanted to shift gears for a second and you sit on numerous corporate boards, Nike McDonald’s, New York times company, your co CEO, Melody Hobson, a former World, According to Boyar guests sits on the Starbucks and JP Morgan board. And, and I want to be very careful on how I phrase this question as I’m not implying in any way, you’re acting on any material non-public information as your reputation is pristine. And I’m sure you don’t own those stocks for clients anyway, but by sitting on these boards, you gain access to so many data points and are able to really have an unbelievable insight into the economy and the US consumer and somewhat in the same way Warren Buffett does by owning a railroad and, and other businesses. Does your board service make you a better investor?

John Rogers, Jr. I think for sure it does. You know, I tell people, you know, I used to be on the bank one board for a number of years and I think I’m a better banking analyst now because of that experience, I was on the Aon board for 18 years and work closely with pat Ryan and watched him build that great business. I think I’m a better professional services analyst, financial services analyst, because of that experience. I chaired the audit committee there. I learned an awful lot about how that works. I was on the McDonald’s board when, uh, stock was like $14 a share and Jim can Lupo came back as CEO and created the plan to win. They got the stock back on track and learning how, how important it is for a management team to have a plan to win during difficult times and executing that plan consistently lessons that are just so important.

John Rogers, Jr. And I’m looking for that plan to win and the research that I do on all the companies that we follow today. The other thing about being on boards is you build great relationships with the other board members who are in many different industries and it’s great to get their insights of what they’re seeing in the economy and what have you. But I would say there’s no particular advantage here at air. I’d love to say that we have some kind of a secret sauce and, and  you know, real competitive advantage in this way. But if you think about it, you touched on Warren Buffett. Of course, he served on many, many boards over the years where you had great insights being on the board of Coca-Cola, et cetera, et cetera. You think of all the private equity firms, the KKRs of the world and the Blackstones and the Carlyles, all those executives serve on all the different boards, the companies that they invest in and get to see all aspects of the economy.

John Rogers, Jr. That’s very, very helpful. And then finally, I would say it’s the same if you’re on the board of a nonprofit, if you’re on the board of a university, like I and vice chairman of the university of Chicago, I learn a lot about how a major hospital is run and what’s happening with healthcare in this country, healthcare reimbursements and all the challenges that major hospitals and major universities face. And then finally, you’re also on the board with other key leaders like currently David Rubenstein’s, the chairman of the board of the university of Chicago to sit and talk with him and get his insights. It’s amazing, but that’s what he does. You know, he serves on literally dozens of boards over the years and that’s what makes David Rubicon, such a brilliant leader and thought leader because he has great relationships and his antenna is everywhere and he can have a sense of what’s happening around the world, literally because of his willingness to serve and help others and volunteer to chair the board at Duke and be involved again at the university of Chicago and other places. It’s the special, unique insights that he gained from those experiences.

Jonathan Boyar One of the things I really like to ask successful people is how they spend and organize their work day. How do you divide your day up in money management? There’s no typical day and, and I get it, but can you take us through that typical non-existent day? <

John Rogers, Jr. Yeah, well, parts are the same pretty much every day. You know, I get up in the morning and, and read five newspapers and that’s an important part of just getting the day started. I try to have a workout, you know, for 45 minutes to an hour every morning. And I started taking piano lessons roughly five years ago. So I try to get a little piano practices in the morning. So those are my three early morning endeavors. And then as I transition, as the morning starts to go, my co-manager of aerial fund, John Miller sends me the early research reports, uh, that have come out that morning from the major brokerage firms and see what you guys are thinking, see what others are thinking. And that’s gonna be a morning activity that John and I share. And then if it’s earning season, then you’re typically gonna, when you get to the office, you’re gonna have a series of calls with management teams.

John Rogers, Jr. Every quarter, we talk to all the management teams of all the companies we invest in our small and midcap value product. And so a good bit of the morning often is one of those calls after another seeing what’s changing this quarter, seeing if they’re executing their plan to win consistently or not from the different management teams. And then, you know, you typically gonna go to lunch at the Chicago club and often, and, you know, network with people. And it could be just could be something you’re doing from a civic standpoint or something you’re doing from a, you know, investment point of view or marketing point of view to build the brand and get the word out. But we think it’s important to get out and have lunch and, and network, you know, throughout the Chicago and business community. And you know, and then throughout the day, whenever you get free moments, you’re gonna be reading the latest magazines and newsletters.

John Rogers, Jr. And this is a job for readers as suggested earlier, you know, we were talking about how important it is to be able to get paid for reading. A good bit of my time is finding that free time to read the latest things that are going on in the market today. We had a conversation that Melanie hobson and created with a thought leader in behavioral finance and making sure that we’re on top of all the latest things that are happening, make sure that we’re keeping our research process fresh. So you’re, you’re trying to find time to make sure you’re thinking through things that you can improve on twice a week, we have a regular meeting with all of our portfolio managers and senior analysts to talk about what’s happening. We have a regular scheduling meeting to make sure that we’re on all the zooms and all the calls. And then typically as you move into the evening, there’s gonna be a dinner to go to or cocktail reception fundraiser around town for a community organization or a civic organization. We do believe it’s important to give back to the city that we love so much as, been so welcome to our small company.

Jonathan Boyar Sounds like an exhausting day, but a good one. One of the things that I read about you, I, I don’t know if it’s still true, but your technologically adverse, obviously, you know how to use it if you wanted to, but you choose not to really use email very much. You choose not to really use a computer. How does that help you

John Rogers, Jr. I was reading something. I think it was an Inc. magazine yesterday that was sent to me by a friend where Warren Buffett talks about, you know, how he spends his time and how important and how valuable time is. One of the suggestions in the article was that you control when you look at email and not allow emails to dominate your life. So I don’t email it all. You know, my assistant gets emailed the people that work at Ariel get emailed. I don’t, I don’t wanna have my time just hijacked by anyone trying to, to reach me. You can read more that way and absorb information better if you don’t have that barrage of, uh, email coming at you. So I think that’s been an important thing that I do to try to use my time more effectively. I often talk about that. I often go to McDonald’s and get away from the office and find quiet time there to read. It’s always sort of been a home away from home where, you know, I can just concentrate on things that are important to get done and think about what I hopefully need to be thinking about. So I am a believer that time being so important, I don’t want to let technology transform my life the way it can.

Jonathan Boyar I completely agree. And I wish I was able to, to do that. You know, email can be an unbelievable time waster and I fully agree it’s during the day. You know, how often are you looking at the market? Are you checking stock prices constantly once a day? You try not to. How does that work?

John Rogers, Jr. Yeah. Yeah. I learned a long time ago. It wasn’t healthy for me to check too often. You know, we’re long term investors, as I said, our logos at turtle, we do believe in patients. So I’m typically checking the markets. Maybe it’s three times a day, get the opening, get a midday update and then see things as the market’s closing. Yeah. Otherwise it’s just becomes a big distraction and your emotions go up and down. And I just think it’s not a healthy thing, at least for me to do. And of course, when I’m home during the COVID time, I’ve got the CNBC on the television all the time you go and glance at you can’t help it. Most of the time, I’m not in the room where the TV is. So I really, uh, don’t wanna be distracted by the volatility of the markets.

Jonathan Boyar Just shifting gears a little to your process, you built a, a terrific long term track record dating back to the mid eighties. I’d love to hear about how you manage your client’s money. Someone came to you with 10 million and wanted to separately manage account or whatever your minimum is. How do you construct a, a portfolio for that client?

John Rogers, Jr. Right now? We have basically three different strategies at Ariel. We were sort of slow to diversify. So the answer is little different because we have our international global team in New York and that’s run by Rupa Bon. And she’s a expert in the, you know, international investing. We have our project black, which is a private equity business in New York city. That me started a year ago. And so it’s been nice to have our connection to the whole private equity world and working to build large minority companies through private equity. But the work that is, you know, near and dear to my heart has been the small and midcap value space that I’ve invested in these last 39 years. And when we started, we were one of the early people in the small and midcap value space. So we’re not many, you know, you had Ralph weer at the acorn funds and a few others that were doing that work, but it was really relatively rare.

John Rogers, Jr. So if you come to me with a million dollars or 10 million, what have you, and then find out whether that’s the money that you want in the stock market or not, or are you diversified outside of Ariel? Cause we are a specialist. We know we can’t handle someone’s entire portfolio. We’ll handle a, a portion that is focused on small and the midcap value if you’re talking with us. So the portion that you’re feel comfortable with, we will typically have that portfolio placed in roughly 35 names. You know, over the years we found that 30 to 40 stocks is kind of our sweet spot and we try to focus in relatively few industries. You know, we believe deeply in Charlie Munger’s point of view that, uh, this shouldn’t be like Noah’s arc where you own two of everything, you know, so we really do want to invest in what we understand and industries we like to read about and study and can get to know really, really well.

John Rogers, Jr. And so of course that means there’s gonna be more volatility relative to benchmark because we are benchmark agnostic. So it’s not only a concentrated portfolio, but it’s going to be concentrated in a relative fewer number of industries, which we think is the best way for us to manage money. Our turnover is gonna be typically 20% a year or on average. So it implies, we own the same stocks for five years, but we have stocks in the portfolio that have been there 10 years, 15 years or more sometimes we’ll trade around the names. Sometimes we’ll own it, that same name for, you know, just the long run without ever, you know, selling out of it completely. But we want people to know that when they invest with Ariel, what’s gonna be with that long term perspective and how we put together their portfolios. And, you know, and then just the final thing I would say is that we really do want to pound away to people that they really do have to look out over the horizon. There’s gonna be times with our approach being concentrated portfolios, you’re gonna underperform and you’re not gonna look smart versus the indexes. And you’ve gotta be comfortable with that and ask, letting customers know that maybe you want to add to your portfolios when we’ve gone through a rough spot in underperformed, our benchmarks,

Jonathan Boyar You’ve had some huge successes along the way. Do you have a percentage that you won’t put in an individual name or sector? Like if it gets too big, is there a cutoff point or will you, if you’re confident in the business kind of let things ride?

John Rogers, Jr. No we’ve learned over the years, you know what our comfort level is on that and with our analysts and our fellow co-portfolio managers, we’ll say that we’ll alone 10% of a specific industry, you know, just make it up carpet manufacturers. We’re not gonna have more than 10% of the portfolio in companies like Mohawk. So for an industry itself, not more than 10% of the portfolio in one industry, individual security, wouldn’t be more than 6% in one individual security. 

Jonathan Boyar Is that at purchase or at accumulation

John Rogers, Jr. At accumulation, we’ll buy up until 5%, but we typically, we wouldn’t be buying at 6%. We’re gonna be again, lightning up at 6%

Jonathan Boyar For your own personal portfolio, where obviously you don’t have to answer anyone except for yourself. Would you feel comfortable making something 10, 15, 20%?

John Rogers, Jr. It only happens by accident. You know, as I mentioned earlier, you mentioned earlier, I’ve been on the McDonald’s board 18 years. And I got on the board at a time when the mark was really out of when stock was really out of favor, uh, maybe a year or so after the headlines and business week hamburger, hell. So as directors, do you get on a board, you buy stock and then you get granted stock every year. And those early years I was adding to my position. Cause I believed in the plan, the win that Jim canal Lupo had played out, I believed in the board and the management stock was really cheap. And so, because of all these years, it’s grown into a substantial asset. For me, it wasn’t intentional that it would become a significant part of my P my portfolio. But now that I’m on the board there for all these years, I’m not gonna sell the stock either.

John Rogers, Jr. That’s not, you know, I still believe in the long term story. I think it’s a great, great company and it’ll be hopefully, uh, I’ll loan it for another 20 years. That’s my idea. So, so individually I’ll end up sometimes with a large holding because it’s, uh, tied to a board that I’m involved in. Mm-hmm, <affirmative> the only two stocks that I own independently from my board service that I bought consciously. This Morningstar, when Joe Monto took the company public, I had so much confidence in Joe and Don Phillips and team that was there. Unfortunately I waited too long, but I did buy shares in Berkshire. And, uh, I wish I had bought it 30 years ago

Jonathan Boyar For a decent number of the names that you own. And looking through your 13 Fs, I could tell which ones are your names and which ones are your international names or global names. You know, a few companies you own more than 10% of the outstanding shares. How do you handle, or how do you think about the lack of liquidity there?

John Rogers, Jr. We’ve never worried much about that. You know, we’re buying companies that have strong cash flows that are real businesses that, you know, we’re confident we’ll be around for a long run where they have strong balance sheets. So we’ve not had trouble moving out of those types of businesses. You have trouble if you’re in a bad business that the, uh, balance sheets gone sideways and you’re in a trouble situation. And whether you’re a 5% or 10% owner, you’re gonna have trouble in that situation where everyone’s trying to get out at once. And there’s a steady amount of selling going on when you’ve made a mistake. That can be, I think, problematic, but we’ve worked really hard to make sure our companies have that kind of margin of safety with them that, uh, you know, you make mistakes. We’ve made our fair share over 39 years, but we rather own a lot of something we know and believe in and understand that’s less risky than having our dollars spread out over names that we don’t know well, or in industries, we don’t have high confidence in, and with management teams, we don’t have high confidence in just like in private equity.

John Rogers, Jr. You know, you wanna own a lot of companies you believe in, and Warren Buffett talks a lot about that. You know, he wants to own more of businesses. He loves and, um, believes in the long run, you know, companies themselves with a discounted present value of their future cash flows and not worry about their short term ups and downs

Jonathan Boyar In terms of how you position things, you know, looking at your, you know, fact sheets, you have a lot of three, 4% positions, and then you have some 1% positions. What makes something a 1% versus a four? Is it the upside? Is it the downside you’re looking at? How do you decide that

John Rogers, Jr. What we do is we have our buckets that all the portfolio managers and analysts work on and we talk about together and the buckets will put our companies together and our largest should be. And the companies we have the largest positions in should be the companies. We have the highest conviction in the story and are also the same time selling at bargain prices. So if it’s cheap and it’s a great business, it’s gonna be in the number one bucket, the lower bucket with those smaller percentages are gonna be companies that are either don’t have quite as much conviction in, and they’re no longer selling the same significant discount they’re getting close to their private market value. So the smaller positions can be typically are companies that, again, either you’re scaling out of, cause you’re losing conviction in the company or you’re scaling out because the stocks become very expensive. That’s where you’re gonna have in your lower tier bucket. In the way that we look at these names,

Jonathan Boyar Mentioning that, you know, things get very expensive. I found buying is really easy. The hardest part is selling. How do you decide when to sell? Is it a purely valuation call because there is, you know, momentum is a real thing. How do you figure that out?

John Rogers, Jr. There’s two reasons we sort of touched on a little bit. One is the question, socks get to be expensive. And typically when they’re getting expensive, they’re also sort of moving into the mid value, large value space. So we’re gonna be selling cuz of valuation. We’re gonna be selling because it no longer fits within our small and mid-cap position. That’s a good story. You know, you’re going well and you’ve gotta lighten up because of, and again, valuation or size when you make a mistake. And of course it inevitably happens in this business is when you have earnings, disappointments, the stocks get hit, they seem too cheap to sell. And then as you’re thinking about it and studying it again, it gets cheaper and cheaper and you think it’s cheaper. You know, it’s more and more of a bargain and it is hard to get away from a bad hand.

John Rogers, Jr. You know, it’s a difficult part of our business. We talk to a lot of behavioral finance experts and others, people from the poker world who tell you how hard that is. And that’s an important discipline to constantly push yourself, to be able to sell things that have not done well and not try to, you know, talk yourself into holding those losers or buying more of those losers. So if we lose confidence in the plan to win to management, if we think that the moat isn’t as strong as we originally thought, if we think that they’re making capital allocation decisions that are not intelligent, all those would be reasons for us to scale out of a position completely and realize that you can be wrong in there too. And the stock will come roaring back, but we do believe that we have to have that discipline to get away from those bad, that are the hardest things to sell.

Jonathan Boyar Since you world changed dramatically, technology has evolved. You famously from Ben Graham type stocks, you know, you know, to now buying kind of very high quality businesses. He’s also has the high, fast problem of only being able to buy really large companies at this point in time. How have you evolved and how has your strategy evolved since you started in, in the early eighties?

John Rogers, Jr. Well, it’s evolved in a number of ways. I mean, we have a, uh, one from the beginning. Now we have a strong, strong team. Primarily we do our recruiting at the university of Chicago and university of Chicago business school. And, uh, several of our analysts, you know, train there started out on summer interns, you know, having a great team of folks. Who’ve been with you through the ups and downs and inevitable crisis in this industry, you learn from each other. So the strength of the team is something that’s evolved over the years. And I would say, you know, Tim FLER and Ken curd and John Miller and Sabrina Carlo, you know, just in critical Charlie Bo Brisco has led all the improvements around our balance sheet work and creating our own proprietary debt ratings. That was something that we thought was really very, very important after the oh eight and oh nine crisis.

John Rogers, Jr. So the way that we analyze the balance sheet of our company has evolved significantly. We do a better job now of keeping track of the popularity of our stocks. And we have a numerical way of looking and seeing, which are the most popular names, which are the ones that are hated most on walls street. And making sure that we are understanding where the contrary bets are versus where the consensus bets are. We think that’s an important improvement in our process. We’ve worked really hard through our behavioral finance work, you know, and being fortunate to have Dick Thaler at the university of Chicago and reading gang of conman’s work and understanding a lot around behavioral finance to work on our behavioral weaknesses, you know, trying to understand do we have, you know, just human nature that you’re gonna have confirmation bias. You know, you’re gonna look for information that confirms who you already think, and you know, it’s just, there’s recency bias.

John Rogers, Jr. You know, you get caught up with what’s the, in the here and now and swept up in the emotions of that moment. You have a hard time, you know, you have the endowment effect where you fall in love with what you already own, you know, instead we could go through, but so working hard at understanding our behavioral biases as a group is a critical improvement in the study and research and have the professors help us understand where our weaknesses are, is something that we’ve worked hard at, improving in our process, and then creating an environment with our, our meetings, with our analysts and portfolio managers to make sure we’ve created a safe environment for people to challenge conventional wisdom challenge each other’s perspective. So we actually have, uh, you know, double’s advocate that we added about a dozen years or so ago to make sure that the contrary voice is always heard in our meetings.

John Rogers, Jr. And we think that is, uh, really, really, uh, really important. And then finally, you know, there’s many things, but the last one I’ll mention is that we started working with BIA associates. I know probably 15 years ago or so. And they’re a group that helps you ask better questions and read the body language of people you’re talking to to see whether they’re being truthful or dishonest or not is, you know, a big part of our jobs, you know, your job. And my job is to talk with analysts, talk with management teams and determine the veracity of what they’re telling us again, are they being truthful? Are they being Eva? So, so having, uh, not only B teach you how to do that, but also coaches along the way, help us prepare the right questions, help determine who’s the best at, you know, doing these interviews. That’s the big improvement for us. The BIA work has been really helpful.

Jonathan Boyar That’s fascinating. I guess that’s kind of probably former CIA spy type people who are doing, I mean, what are the backgrounds of those

John Rogers, Jr. Type? Exactly. A lot of them are former CIA, FBI, uh, government agents who, um, know how to ask the right questions and then determine whether people are being truthful, their body language and the follow up questions you ask. And, you know, it’s interesting. You’ll see, when you ask a tough questions, how people will like move around and they’ll do this anchor shift and start to fiddle with their, their face and hands on their face. Things like little things you’ll notice that you really, I never really noticed before, you know, but once you know what to look for, it’s just been fascinating.

Jonathan Boyar Probably helps with poker too.

John Rogers, Jr. Yeah. I do love to play poker and, uh, I have not used it there cause I’m not questioning anybody.

Jonathan Boyar So I’ve been wanting to ask you about this for a while. I think you probably know where I’m going on this you’re among the, the larger shareholders of Madison square garden sports and the largest shareholders in, in Madison square garden entertainment. I think you own 22% of the company or so, you know, it’s a name we own, we own both, you know, both companies suffer from the so-called stolen discount. Can you take us through your investment thesis for both companies and how you see value being unlocked? And maybe also you mentioned project better at McDonald’s how that might work with the Dollins because things could be better.

John Rogers, Jr. Yeah, well I think it was the simpler one is that man square garden sports is a simple, you know, story. You know, sports teams have become more and more valuable as, you know, the television contracts just go up and up and up, you know, live sports is still popular on all the different medium where you can watch content. And um, so we think if you look at what the KNS are worth and the Forbes valuation and what the ranges are worth and is the stocks are selling it a substantial, substantial dis stock is selling a substantial discount of what we think the private market value is for the Knicks and the Rangers combined. And we think the story’s just getting better and better. Of course the, which you guys have talked a lot about. And we agree with, we think the gaming is a big, big deal.

John Rogers, Jr. I was reading a big story this week in business week around what’s going on in the gaming world. And people love to bet. And these we know, and, and sports betting now and online sports betting and the rest of it, we think it’s gonna be a major initiative. That’ll help the Nixon and Rangers. So we just think that’s a pretty simple, straightforward story. It’s a selling less than what comparable transactions, when you think the company’s really worth magic square garden entertainment of course, is, is more of a conglomerate, I guess you could call it. They have many major businesses. And it’s when we look at the sum of the parts we think the stock is selling it well, you know, maybe, you know, as much as a 60 to 70% discount from its private market value, our one analyst has the value as high as $153.

John Rogers, Jr. One of our analysts. And even if you take a more conservative, you have 137, the stock selling in the high fifties, it is extremely, extremely, we think undervalued. And as you know, the core business, we think owning the garden itself, this iconic building that is, uh, full all the time with not only sports, but of course, entertainment and concerts and the like, and being right in Midtown Manhattan, that it’s just really valuable that the air rights are very, very valuable. There’s gonna be a real benefit from gaming there too. Also, you know, you don’t know exactly how it’s all gonna play out, but maybe it’ll be a sports book in the garden or in Penn station. And so we just, we love the garden. We just think it is a unique facility in the world. You talk about having a mode around the company. I think that’s one, that’s just is a people don’t understand the value.

John Rogers, Jr. Most of the analysts valued it based funds and tax valuation from years ago in New York that does not realistic. And the other key that, of course, they’ve spent 2 billion now on the sphere in Las Vegas, which is a, an arena that’s gonna hold 19 to 20,000 people with the best sound system, best technology, best visuals ever, ever. And we think it’s, uh, it’s, it’s a special, beautiful, new, you know, iconic feature in Las Vegas that will open up next fall. We think that if it works out there, they’ll be able to take it around the world to other major cities of London being the first one and do a capital light type of a model. And the growth there will be substantial from the sphere they’ve already, they haven’t announced publicly yet, but all the rumors are the Bono’s gonna be the opening act at the news sphere and we’ve gone there to visit and seen the construction.

John Rogers, Jr. And it just it’s like no other arena in the world. It’s just nothing close to it. And the advertising possibilities on the outside of the arena, the naming opportunities, you just go on and on about how powerful those spheres going to be. And then they own with wiring in Las Vegas, they own towel. And Hawkathon two of the fastest growing nightclub, restaurant entertainment, places generating an enormous amount of cash, enormous amount of profitability. We think that wall street doesn’t give it a proper multiple for the growth rate that’s there. And I think that’s kind of one of the hidden gems within the structure, which is, you know, they’re going to be spinning these companies into two. My part of my thesis is it’s a way to show off the beauty of what’s going on, uh, with Tao and Hawkathon and, and those types of assets, the area that’s been the most troubled of course, has been the regional sports net that was bought guess a little over, was it 18 months ago or so time flies.

John Rogers, Jr. And we all know that traditional cable is dwindling. And so the kind of fees that cash flow, they were able to count on steadily decreases seemingly six to 7% a quarter. But at the end of the day, we do think, believe that the direct to consumer initiative, they’re gonna come up with that they hope to roll out during this, this year’s basketball hockey season will be a powerful way of sort of turning the tie there, you know, having a more positive story for the regional sports net. And we think that the, again, the gaming will be really helpful there too. The advertising is gonna be on the regional sports net. It’s already there, lots of great ads that come on regularly. And then of course they own the Rockettes and they own the Chicago theater and they have all these other added ancillary businesses that we just think there’s gonna be more visibility after the spin spin. And we have two companies independently trading. I think the value gap will start to close for sure. And once the sphere opens up, it’ll be another catalyst for change. So it’s, uh, we’re quite excited about it. It’s already went on a long time about it, but it’s just, it’s a stock where we keep sitting, sitting here trying to figure out what are we missing? Can’t quite put it together.

Jonathan Boyar We’re in the same camp on that, for sure. And, you know, everyone loves to hate the Dolans, but I think they’re better than people give him credit for. I looked on Bloomberg, you know, cable vision from when it went public to when it was sold to alt you know, significantly outperform the S and P 500, but, you know, wall street has lost faith in the dos. And in some ways it’s, it’s been self inflicted. They’ve done some things, you know, the Madison square garden network transaction, et cetera, that probably were not in everyone’s best interest, but how do we actually make money on it? Because, you know, valuation is not its own catalyst. What’s gonna make people start to believe in the Dolans. Does this thesis on Madison square garden sports? Is that predicated on some sort of sale of the team? Like kind of, how do you think about that?

John Rogers, Jr. I do, you know, I, you never know for sure. And, you know, I’ve spent some time with Jim Dolan had some really good friends. Who’ve worked for Jim Dolan who have a lot of respect for him. Uh, I played basketball in college with Steve mills who was a longtime president of the NS. And, you know, he’s always has spoken very highly of Jim and his leadership. So I do think that the discount is way, way overdone. I think the way that you start to see some progress, you know, the team they put in and charge the Nicks, you know, Leon rose and worldwide west, the new gen, you know, the general manager who was, you know, held on and, uh, bringing in Tom Tito as the coach. I think there’s real hope that they will start to win again. And I do think that if you get them a winner in New York city, the value of that franchise will just go up.

John Rogers, Jr. You know, there’ll be more and more people who will wanna buy the team. And I kind of think that Jim Dolan’s heart of hearts, he’s more of an entertainment person than sports person. I mean, I haven’t, I’m just speculating. And I know you guys have speculated on this too, so it wouldn’t be a shock to me that if he sold the teams at some point and just focused on the entertainment vehicles, cuz he loves it. As you know, he has his own band that he plays in and you know, he has a passion for that. He has great relationships in the industry with all the artists who are out there. So if you had to push me on that, I think eventually they’ll sell the company, use the cash to help strengthen the entertainment side of the business and think it’ll be a win-win for everyone over the long run.

Jonathan Boyar He sold a team, New York sports fans would certainly be very happy. And you know, I, I do think he’s much better than people give him credit for, I haven’t had the chance to meet him, but he has done right by shareholders over the long run. I mean, one of the things I like point out is I I’ve been saying they should sell the team for years and the right thing has been to hold onto them. They’ve just only gone up and up and up in value. But I guess one of the questions I’d have for you is, is I struggle with this sometimes is how do you really value what the kn and the Rangers are worth? Obviously you have Forbes Ando, and, and they’re saying this and you have some precedent transactions, but you know, as a value guy and a fundamental investor, you’re paying a rich multiple, how do you kind of, you know, meld the two?

John Rogers, Jr. Well, I think if you look, if you look at the past history, many of the transactions that have occurred in professional sports have been around the valuations are above the valuations from Forbes. So that gives me confidence. There’s some margins of safety built into the valuation that we have for the mix and the Rangers. I think the other thing that’s changed though, since the earlier years, you know, cause Forbes have been, I dunno how many years they’ve been keeping track of sports teams, but transactions have happened steadily over the years. I think it’s transformative. What’s happening with sports betting and the way they’re gonna make watching sports games more and more interactive, you’re gonna have people just loving the content and interacting with the content in ways that people could never have imagined. And that can only help the ratings go up already. People are talking about the next television contract being way more than the last way, more than the next expectations. And I think it’s, you continue to see, you know, what’s happened with the NIS and the other ways that just the value of things that they control and own the teams. I think you can make a case that relative to the fors value it’s this is selling it even a bigger discount than you would’ve said two years ago before all of this took off.

Jonathan Boyar You’ve been unbelievably generous with your time today. I, um, and you know, I want to thank you, you know, for appearing on the show, I learning about your fascinating career, your views on names that we own, like Madison square, garden, sports and entertainment, and you know, kind of how you manage money is just really insightful. And I really thank you for your time.

John Rogers, Jr. Well, thank you. I enjoyed the conversation and I’ve always enjoyed working with you and, and your team and the quality of research you guys provide. It’s been, uh, really appreciate, uh, thoughtfulness.

Jonathan Boyar Well, thank you for that compliment. That is very much appreciated and we value you as a, as a subscriber. I hope you enjoyed the show to be sure you never miss another world. According to Boyar episode, please follow us on Twitter at @boyarvalue until next time.

 

Never miss another podcast click here to subscribe today!

Available wherever you download podcasts:

About The Boyar Family Of Companies

Boyar Asset Management
We have been managing money since 1983 utilizing our proprietary in-house value-oriented equity strategies. We manage money for high net worth individuals and institutions via separately managed accounts. To find out how we can help you with your money management needs please click here

Boyar Research
Since 1975 we have been producing independent research on intrinsically undervalued companies across the market capitalization spectrum and in a wide variety of industries using a business person’s approach to stock market investing. To find out how we can help you with your research needs please click here

Share to:

6 Stocks With Significant Upside

Is the recent stock market advance a bear market rally or the beginning of a new bull market? Regardless Boyar Research has identified 6 stocks that we believe to have a significant upside from current levels that also have catalysts for capital appreciation. We invite you to watch Jonathan Boyar’s presentation below that will outline the investment thesis for these 6 companies. 

One of the companies mentioned in the presentation was recently featured in our latest research issue Fresh Looks: A Special Opportunity Issue. In this special issue, you’ll receive reports on 13 companies,  including in-depth reports on nine companies that we have researched in the past and that we believe to be well-positioned moving forward. In addition, you’ll receive updated one-page summaries on four additional companies that fall within these criteria. Any purchase before August 19th will include two of the most recent issues published by Boyar Research (7 full-length reports)  as a bonus. 

 

 

 

 

 

 

 

The information contained herein reflects certain opinions and projections  of Boyar Intrinsic Value Research (“BIVR”)  as of the date of publication, which are subject to change without notice at any time subsequent to the date of issue. BIVR does not represent that any opinion or projection will be realized. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any data presented. Prospective investors should not treat information in these materials as advice or recommendations in relation to legal, taxation, or investment matters. Past performance is no guarantee of future results.

Statements herein that reflect projections or expectations of future financial or economic performance or potential performance of accounts managed by affiliates of BIVR are forward-looking statements. Such “forward-looking” statements are based on various assumptions, which assumptions may not prove to be correct. Any projections and forward-looking statements included herein should be considered speculative. Accordingly, there can be no assurance that such assumptions and statements will accurately predict future events or affiliates of BIVR actual performance for any accounts that it manages, and no representation or warranty can be given that the estimates, opinions or assumptions made herein will prove to be accurate.

The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Affiliates of BIVR may invest in securities of micro/small-and medium-sized companies and these companies tend to have a shorter history of operations, be more volatile and less liquid and may have underperformed securities of large companies during some periods. Value securities may underperform other asset types during a given period. Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value. Investing involves risk, including the possible loss of principal and fluctuation of value.

Share to:

Uncovering Investment Opportunities in a Bear Market

Bear markets are scary, but they create tremendous opportunities for long-term investors willing to do the research necessary to uncover bargains. However, it’s critically important not to be fooled into thinking something is a bargain simply because it has declined by 30%, 40%, 50% or more.

In order to help our subscribers navigate the bear market, the Boyar Research team is about to release a special report titled Fresh Looks: A Special Opportunity Issue. Because this is such a timely and important issue, we are also selling it on an a la carte basis.

The report will contain profiles of companies we believe to be great investment opportunities because of the recent selloff that have attractive long-term fundamentals as well as catalysts for capital appreciation. All reports are based on intensive research from our team of highly seasoned analysts with an average of 20+ years of experience.

Opportunities in a Bear Market and Past Performance

Make no mistake: bear markets are difficult. That’s why, in times like these, having access to the work of a team that has published research since 1975 (through a combined 24 stock market corrections and bear markets) is a significant competitive advantage.

It’s important to remember this: those who stick with their positions during difficult times (and add to existing positions or initiate new ones) are typically handsomely rewarded – provided those positions are attractively valued and have catalysts for capital appreciation. These are the times that independent thinking, experience and perspective really matter.

A Look Back at Our 2020 Opportunities Issue

Published in April 2020 during the coronavirus induced bear market, this issue provided timely investment ideas and uncovered tremendous opportunities for subscribers looking to invest for the long-term during another period of market dislocation.

The returns have been strong. The average stock profiled in the April 2020 coronavirus update – one (1) year after publication – advanced 76.18% on average vs. 49.83% for the S&P 500, and 45.01% for the S&P 1500 value.

The average stock profiled in the April coronavirus issue two (2) years after publication advanced, on average, 59.98% vs. 57.82% for the S&P 500 and 54.96% for the S&P 1500 value.

Complimentary Offer: Interested in learning more about how we approach investment opportunities in a bear market? Download the full 2020 Opportunities issue here.

What You Will Receive in the 2022 Fresh Looks Issue

In this special issue, you’ll receive reports on 12 companies. Including in-depth reports on nine companies that we have researched in the past and that we believe to be well-positioned moving forward. In addition, you’ll receive updated one-page summaries on four additional companies that fall within these criteria.

New call-to-action
Order Today

Have questions or want to learn more? Reach out to Amalia Danci at 212.995.8300.

 

 

 

 

 

 

 

Important Disclaimer

*This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar’s Intrinsic Value Research (“Boyar”). Past performance does not guarantee future results. This material is as of the date indicated, is not complete, and is subject to change.  Additional information is available upon request.  No representation is made with respect to the accuracy, completeness or timeliness of information and Boyar assumes no obligation to update or revise such information. 

*Nothing in this email should be construed as investment advice of any kind. Consult your financial adviser before making any investment decisions. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information, and Boyar Intrinsic Value Research and its affiliates assumes no obligation to update or revise such information. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable.   Past performance does not guarantee future results. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently verified and Boyar’s Intrinsic Value Research LLC or any of its affiliates is not responsible for third-party errors.  This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research.  Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. The starting date of the calculation was April 15th (the date the report was priced), and the ending date was April 15,2021 for the one-year calculation and April 15, 2022 for the two year calculation. No transaction or management fees were taken into account in this calculation. All stocks were equally weighted when calculating the results. Results include all special dividends and spinouts. Spinoffs such as MTCH, VMEO and QRTEP were calculated as if an investor held the spinoff entity from the date of the spinout to the one-year anniversary/two year anniversary from the pricing date.  The returns do not include dividends for the benchmark or the stocks profiled.

Share to:

The Boyar Value Group’s 3rd Quarter Client Letter

The Boyar Value Group just released our latest quarterly letter to clients.

Please find an excerpt of the letter below:

We haven’t decreased our equity exposure, and we don’t plan to; instead, we like to take advantage of these moments of market dislocation to increase our equity holdings. We’re pained at the thought of losing money for our clients, but we see this year’s losses thus far as “paper losses,” not as a permanent loss of capital. After all, the price of a stock on any given day is simply what people are willing to pay for a business at that moment. But we believe that over the long term, either the stock market will come to reflect the business’s true value or an acquirer will purchase it for its true worth, as we’ve seen so many times before. We have no reason to believe that this time will be any different.

Please click here to read the letter

Share to:

Value Investing Q&A Speaker Series Video Excerpts

Over the next couple of weeks we will be posting excerpts from Jonathan Boyar’s Value Investing Q&A at Brown University.

 

Video #1: UBER Thesis 

/

 

Video #2: Fallen Angels

 

Video #3: Why we buy stocks to “own” for the long term?

 

Video #4: How does Boyar’s approach to portfolio diversification translate to individual client needs?

 

Video #5: Different Types of Value Investing, Boyar’s Type of Value Investing

 

 

 

 

 

 

 

 

 

 

 

 

This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by Boyar Asset Management (“Boyar”) or its affiliates. The results of the Forgotten Forty are not audited. This material is as of the date indicated, is not complete, and is subject to change without notice. Additional information is available upon request. No representation is made with respect to the accuracy, completeness or timeliness of information and Boyar assumes no obligation to update or revise such information. Nothing in this interview should be construed as investment advice of any kind. Consult your financial adviser before making any investment decisions. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information, and Boyar Asset Management and its affiliates assumes no obligation to update or revise such information. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Past performance does not guarantee future results. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently verified and Boyar Asset Management or any of its affiliates is not responsible for third-party errors. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Boyar Asset Management, its employees or affiliates may own shares in any of the companies referenced in this article.

Any results mentioned, do not necessarily represent the results of any of the accounts managed by Boyar Asset Management Inc., and the results of Boyar Asset Management Inc. accounts could and do differ materially from any of the results presented. While the results presented show profits, there was the real possibility of a permanent loss of capital. This information is for illustration and discussion purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Boyar Asset Management Inc. is an investment adviser registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A copy of current Form ADV Part 2A is available upon request or at https://adviserinfo.sec.gov Please contact Boyar Asset Management Inc. at (212) 995-8300 with any questions.

Boyar Asset Management or its affiliates, its employees and/or shareholders  may own shares in any of the companies mentioned in the interview. The presentation represents the  views of Boyar as of the date of this interview and is subject to change at any time without notice.

Share to:

Boyar’s Updated Thoughts on the Recent Stock Market Volatility

Below is a letter we sent to Boyar Asset Management clients on 06/17/2022.

 

On May 6, we wrote you to share our thoughts on the recent stock market volatility, noting that the selloff was likely driven by many different investor concerns: inflation, interest rates, the war in Ukraine, supply chain disruptions, and an economic slowdown in China. Unfortunately, with these factors still in play, the stock market (using the S&P 500 as a reference) has since declined by a further ~11%. We’ve officially entered a bear market, defined as a drop of 20% or more from the previous peak.

Amid the daily parade of frightening headlines, it’s anyone’s guess what will make stocks recover from here. But through all the uncertainty, we’re keeping in mind Warren Buffett’s observation that “[t]he future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.” As we wrote on May 6, we agree with this sentiment wholeheartedly:

The near term will likely be bumpy, but we’re optimistic about the future. In fact, now is when investors should be thinking about increasing their equity exposure: historically, the best     time to invest is when you feel the worst. Even highly experienced and successful investors find taking this plunge difficult, particularly when prices keep falling, but buying great businesses at marked-down prices and holding them for the long term is historically how the best returns are made.

        Although bear markets can be painful, they shouldn’t prompt investors to sell. Decade after decade, investors have been best served by holding their positions in high-quality companies, and they’ve been even better served if they have the funds (and stomach) to buy more—after all, the timing of market rebounds is nothing if not unpredictable. As the following graphic shows, since 1957, the median market return (again, measured against the S&P 500) has been positive 1 month, 3 months, 6 months, and 1 year after officially entering bear market territory. Certainly in some years stocks have been down during those time frames, but that’s been the exception, not the rule.

S&P 500 after closing in bear market

We still believe that investors should stay the course. We haven’t decreased our equity exposure, and we don’t plan to; instead, we like to take advantage of these moments of market dislocations to increase our equity holdings. We’re pained at the thought of losing money for our clients, but we see this year’s losses thus far as “paper losses,” not as a permanent loss of capital. After all, the price of a stock on any given day is simply what people are willing to pay for a business at that moment. But we believe that over the long term, either the stock market will come to reflect the business’s true value or an acquirer will purchase it for its true worth. We have no reason to believe that this time will be any different.

Unfortunately, today’s stock prices are being driven by panic over macroeconomic headlines, not by underlying business fundamentals. Wall Street has historically overreacted to economic data, whether positive or negative, prompting economist Paul Samuelson to famously observe that “the stock market has predicted nine out of the last five economic recessions.” The stock market hates uncertainty more than anything else, and right now we’re knee-deep in it. How long before we’ll find solid ground is anyone’s guess.

Reasons for Optimism

But the situation isn’t all doom and gloom. The U.S. banking system hasn’t been this strong in decades, unemployment is at historic lows, and consumer balance sheets have been bolstered by recent government stimulus programs (though the savings rate has recently declined, and credit card balances have increased significantly—developments we’ll be keeping a close eye on). A recession is certainly possible, but these factors should help mitigate its effects.

Equally important, investor sentiment is at multiyear lows, with consumer confidence even lower than after the September 11 attacks, during the 2008–2009 financial crisis, and during the coronavirus lockdowns. Both these markers have historically been great contraindicators for future stock market returns. Consumer confidence might well go lower from here, but its worth noting that —according to JP Morgan, the average 12-month return of the S&P 500 after the eight consumer sentiment troughs since 1971 was 24.9%:

Finally, and most important, the stocks we own are quite inexpensive—and the best predictor of future stock market returns is valuation. In times like these, putting things into their proper perspective is essential. Today’s headlines are alarming, but they pale in comparison with those we saw during 2008–2009, when people thought the global financial system was on the brink of actual collapse. Likewise, in 2020, when the coronavirus drove the economy off a cliff in mere months, investors feared for their physical health, not just their financial health. Even so, staying the course was the right move in both cases, and we see no reason this time should be any different.

As always, we’re more than happy to answer any questions you might have. Please feel free to call our office at (212) 995-8300 or email us at info@boyarvaluegroup.com. Looking forward to better days ahead.

Best regards,

Mark A. Boyar

Jonathan I. Boyar

 

 

 

 

 

 

 

Important Disclaimers

This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by Boyar Asset Management (“Boyar”) or its affiliates. This material is as of the date indicated, is not complete, and is subject to change without notice. Additional information is available upon request. No representation is made with respect to the accuracy, completeness or timeliness of information and Boyar assumes no obligation to update or revise such information. Consult your financial adviser before making any investment decisions. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information, and Boyar Asset Management and its affiliates assumes no obligation to update or revise such information. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Past performance does not guarantee future results. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently verified and Boyar Asset Management or any of its affiliates is not responsible for third-party errors. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein.

Any results mentioned, do not necessarily represent the results of any of the accounts managed by Boyar Asset Management Inc., and the results of Boyar Asset Management Inc. accounts could and do differ materially from any of the results presented. While the results presented show profits, there was the real possibility of a permanent loss of capital. This information is for illustration and discussion purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Boyar Asset Management Inc. is an investment adviser registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A copy of current Form ADV Part 2A is available upon request or at https://adviserinfo.sec.gov Please contact Boyar Asset Management Inc. at (212) 995-8300 with any questions.

Share to:

Jonathan Boyar on The Virtual Value Investing Q&A Speaker Series at Brown University

In a recent edition of The Virtual Value Investing Q&A Speaker Series at Brown University (where previous guests have included Howard Marks, Wally Weitz, and Arnold Van Den Berg) Jonathan Boyar discuses:

  • Our stock selection method(s)
  • Two of Boyar Asset Management’s largest positions: Home Depot and Microsoft and the importance of holding stocks for long periods of time
  • His views on the current media landscape
  • His thoughts on Uber, IAC, and ANGI
  • How Boyar is investing in the cannabis industry
  • His thoughts on portfolio diversification
  • And much more…

To listen to the interview in its entirety, please click here. 

 

Click Here to Read the Interview Transcript

[00:00:00]
[silence]

Interviewer: 0:03 We’re absolutely glad to have Jonathan Boyar here with us today. Jonathan Boyar is president of BIVR, an independent research boutique established in 1975 that counts some of the world’s largest sovereign funds, hedge funds, mutual funds and family wealth offices as subscribers.

0:21 He is also principal of the Boyar investment management which has been managing money utilizing a value-added strategy since 1983.

0:26 He has been interviewed in Barron’s, Welling on Wall Street and Guru Focus. He spoke at the 2017 London Value Investor Conference, the 2017 Guru Focus Value Conference and the 2017 International Value Investing Conference. He is also a contributor to the latest edition of Harriman’s Book of Investing Rules of the do’s and don’ts of the world’s best investors. He is a senior contributor to Forbes as well as the host of the World According to Boyar podcast.

0:50 Thank you for joining us today Mr. Boyar

Jonathan Boyar: 0:52: Thank you for having me today it’s an honor to speak for your organization, and I’m happy to just chat and I look forward to getting some great questions later. I first thought I’d start by just telling you who we are, what we do and how we come up with stocks for four clients. We’ve been doing this for quite some time and the slide up here says unlocking value since 1983 that’s somewhat true.

1:27 We actually started as a research boutique; my father started the business in 1975
to sell independent research to hedge funds, mutual funds, family offices, that type of thing utilizing what we like to call a business person’s approach to stock market investing and then in 1983 we established four-year asset management where we manage money for family offices, high net worth individuals and institutions.

1:58 I’m not sure why the slide’s not working but here, let’s do it this way.

2:09 Here’s a disclaimer. You have that.

2:15 So first, I thought I talked a little bit about what we do. We’re very different than your traditional value investors and, I’ll talk about value investing in general, a couple slides from now, but what we do is we take every company whether it’s Walt Disney, Microsoft, any big, huge company or a tiny 2:39 one like Town Square Media and we look at it through the lens of an acquirer and we say or what we try to do is we can buy it at a significant discount to what we think it’s wort.

2:56 That’s something we will consider, that’s the first, you know first criteria it has to meet and then the second criteria is it has to have a 3:08 catalyst. I have to have a reason for the stock to go up over a reasonable period of time and we’re much more patient than most people. You know, Barron’s once called my father the world’s most patient investor.
3:20 We look at catalyst that could take two or three years to unfold. We don’t mind waiting that long because patience is generally rewarded.

3:34 I love this quote and I think it’s as true as when Sir John Templeton was investing as it is today: “I think that you can’t be afraid to be different.” If you’re buying the same stocks as everyone else is as Sir John says you’ll get the same results so what you want to do 3:57 is find stock that you believe in that are believed to be intrinsically undervalued, stocks that you want to own for long periods of time to allow the magic of tax-free compounding to work.

4:17 So personally I dislike the term value investing. I think it’s a term that’s really kind of used by consultants and other institutions to try and style box people, put everyone in a neat little corner.

4:36 I like to say I don’t think any growth investor wants to overpay for a stock

4:41 So, value investor is the same thing. There are lots of different schools of value investing and some people like to buy traditional value stocks where mediocre businesses that are just very very cheap and that’s really the deep value camp and that’s something we rarely do anymore. It worked really well when my father started the business in the 70s and in the 80s when having a calculator was a kind of a big advantage and a big technological thing. It doesn’t really work as well anymore.

5:28 If you’re doing deep value investing, you’re going to end up probably with a lot of broken retailers.

5:34 There’s special situation investing where there’s an event that’s going to occur that you think you can analyze better than others. There are asset plays like Madison Square Garden that own extremely, that don’t look statistically cheap but if you sum up the value of all the assets they have, the stock price significantly discounts that value.

5:58 So there’s lots of different ways to approach value investing and what we like to do is we like to invest in in high quality businesses selling at a significant discount to
what an acquirer pays and has a catalyst for capital appreciation.

6:17 Having that high to medium good business is critically important.

6:23 We don’t want to rent stocks we want to own them, we want to own them for
very, very long periods of time.

6:35 If I look at where we have made the most money, probably our two largest positions are Home Depot and Microsoft where I think we bought them starting in2006 and 2007 and sold very little of it and they’ve come to become outsized positions. I think it cost us then30 dollars a share and now they’re significantly better than that. And when we bought them, they were good businesses. We could never imagine that they would have compounded the way they have and 7:14 Microsoft would have the renaissance that it did, but we knew we were buying a high-quality business and we kind of just let stuck along for the ride.

7:27 One of the things I like to tell people is doing nothing is an action. You don’t need to be turning your portfolio over every day. If you do that, you’re gonna miss the jump from in Home Depot from $30 to $300 and change and you’re gonna be paying taxes
along the way.

7:50 Just briefly gonna talk about our investment process. We look at how much cash flow a company can generate, we like to look at recent comparable transactions that’s extremely important to us as they’re the best judge of a business value.

8:09 To us, the most important thing is protecting the downside, the upside takes care of itself. We want to buy businesses where we have the chance to make a fair amount of money but most importantly not lose a lot of money so that’s something that’s critically important to us.

8:34 It’s also to have that. Buffett and Hunger call a circle of confidence. There are things that we like to invest in and they’re things that we don’t.

8:48 We like the businesses, a lot of consumer-oriented businesses, media businesses things that you can touch, feel, analyze, and really understand. We don’t like commodity-oriented businesses and over a long period of time that has helped us. And the thesis behind not wanting to own a commodity-oriented business-like oil and gas company or something to that effect is your whole thesis or a large part of it is predicated on the price of oil which is out of your control, and I have no idea how to value what oil is and where it’s going. So, if I’m looking at buying an entire business which is what I do when I buy individual stocks and looking at it if I’m buying the whole company, I wouldn’t want to own a business that is solely dependent or largely dependent on a commodity price that is outside of our control.

9:54 Over the long run that’s helped us. 2019 it was great when oil stocks and energy stocks did terrible. 20 or 21 we suffered and so far, it’s March 3rd we’re suffering this year, but I think over the long run it’s the right thing to do

10:17 We have lots of different approaches. We look for stocks as I said we like looking for hidden values, hidden assets that are not properly reflected on the balance sheet. We like looking at the 10:34 franchise approach rate, consumer franchises especially when they’re masked by a corporate name. That’s actually a really great way to find value.

10:47 If I told if I asked most people and I actually did this when I was on a trip when we were actually allowed to travel, do you know what Acushnet was? No one really knew what it was, and these were sophisticated investors and I said, well they own Titleist
golf balls and golf gloves and other really great brands and that’s actually it stops people from looking at it and they see Acushnet, what’s this and they go on to the next thing. So, it’s actually a great way to find value.

11:28 We love when an industry falls out of favor and that can happen really quickly
You’re seeing so far, the early signs of it with the technology share so far this year.
How low that goes is anyone’s guess but when an industry comes out of favor, they throw the baby out with the bath water and we try to find the best of breeds, the ones that are going to survive and thrive over the long run and that’s been a successful approach for us over time.

12:04 You look at things like capital allocation, decisions financial strength and again prices for what other companies have been acquired in the recent past is critically important.

12:21 Hidden asset approach is also something that’s great and that we love and one of the reasons that we love it is no computer screen in the world or artificial intelligence
is going to tell you that something’s not valuable. Something that’s valuable is not reflected on the balance sheet and I’ll just give you a very quick example. Madison Square Garden has been a holding of ours for a long period of time and we’ve had a decent amount of success with it.

12:57 When we first started analyzing it Wall Street assigned zero value to the air development rights where you can actually sell your pair to neighbors but what we saw was the real estate that was located near Penn Station. That’s equal to the enterprise value of the entire company, so essentially at that price you were buying Madison Square Garde’s business for zero costs. So, a lot of times because of accounting rules and things like that great assets are obscured.

13:34 The classic example I gave you, my father told me one of the first stocks he ever
looked at was Tiffany and company and at the time you could have bought the whole
company for 24 million dollars in 1975. The building it owned on 57th street and in fifth avenue which wasn’t reflected on the balance sheet was worth more than the entire
market cap of the company. So, you’re getting the Tiffany name, all the jewelry etc. for free. These things still work, and it still happens you just have to be patient and pick your spots.

14:11 I talk about you know consumer franchises before, we also like fallen angels, we love looking at the one starlings of Wall Street or that are now unwanted, unloved.
What’s critically important is not falling into a value trap. You have to look at the reason why the stock has gone down and look if there’s a long-term business there that’s not in secular decline and that’s obviously a business judgment that you have to make and that’s something that you get with time.

14:56 We also look at spin-offs that’s a fruitful area to define things. That’s been pretty well documented.
15:08 We also sometime look at companies emerging from bankruptcy so it’s just basically we’ll look anywhere there’s value that we can understand, and you know I’ll just say one more time: being inexpensive stock is only halfway there. You need to have that catalyst otherwise you have a significant danger of falling into a value trap which is one of the biggest problems that investors fall into.

15:40 I promised I would be brief, and I think this was about 18 minutes or so. if you have any questions, feel free to contact me. I’d also encourage you; I have a podcast called The World According to Boyar. That’s available anywhere. We
have really interesting guests, that’s a good way to get some business lessons and you can sign up for everything if you go to boyarvaluegroup.com. Thank you for your time.

Interviewer: 16:14 Thank you so much, that was a really excellent presentation and I’ll send you the questions.
16:19 Our first question is how do you see the media streaming space going forward?

Jonathan Boyar: 16:25 The media industry obviously is undergoing a tremendous amount of change and you’re trying to find the winners is very difficult.There’s a lot of smart people chasing this. You know, there’s an old adage: content is king and to me the ones with the best content are the ones that are gonna win and looking at a company like Disney they’re gonna be winners. They’ve already I think have 130 million subscribers to Disney plus. They’ve priced it competitively they still haven’t rolled it out to the rest of the world. I see them being big winners.

17:07 We really like the AT&T deal with Discovery. That’s going to happen early in this sometime in the second quarter. It looks like that’s where it will uh occur and you’re marrying lots of different type of content. It’s a lot of overlap, not a lot of overlap so there’s a lot of synergies there so I think these it’s going to be a game of scale and there are these things called free radicals. Companies like that that John Malone calls free radicals like AMCX and others that’ll probably be gobbled up so it’s gonna be a very interesting space to monitor over the next couple of years. I think there’s a lot of value there you have to be patient. It’ll be very interesting to see what happens when Discovery and AT&T consummate the merger. There’s going to be AT&T shareholders are going to be given Discovery stock and most are a lot of their shareholder base is retail. We probably don’t want to own a levered media company so is there going to be a lot of force selling. I don’t know it’s probably been the most telegraphed thing I’ve seen in a long time. So it’s quite an interesting space to be in.

Interviewer:18:28 Absolutely and let me ask you another question about the sectors. One of the players that you have right now is Apple TV and I think you know the
marketing cap and the size of the company compared to some of these other players is much much much larger um and they have quite a lot of uh quite a large cash balance but they’ve been going more through an organic raptor they’ve been developing their own content. Do you think we will see them go more and then we’re gonna graft at some point and buy one of these other major players?

Jonathan Boyar: 18:54 I wouldn’t rule anything out. I don’t know, I mean it’s interesting. They said if you know Steve Jobs had lived they would have probably bought Disney. Now Disney’s too big and it made a lot of sense for a lot of reasons. I think it would make sense for Apple. You know it’s very difficult to replicate, to create original content. These production studios cetera cost a lot of money it would make sense for them to buy something. I mean they have a lot of other issues that they have to contend with they have government regulations you have to contend with, so I don’t know.
It’s always puzzled me why they haven’t done that and what their real true intentions are, but you know time will tell.

Interviewer: 19:48: Can you speak about your thesis on UBER and I mean do you have any sort of forecast for when you think they will reach profitability?

Jonathan Boyar:19:53 Over the next couple of years they should. I think UBER is extremely undervalued. I think it’s a terrific re reopening play and what we really like about UBER is the competitive advantage. I mean they literally spent billions and billions of dollars to have this network. It reminds me in some ways a PayPal. Five, six, seven years ago or what not where it didn’t get the respect it deserved from the from this from Wall Street and this network is extremely valuable. Some people like to complain about UBER and drivers aren’t happy, that passengers aren’t happy. Bottom line is people are using them and demand is picking up and I think with the reopening
I think the rides business is going to really surprise. On the on the upside, the CEO, they have a great CEO, former IAC Expedia guy, just bought 10 million dollars’ worth of stock. It’s a name that we like it’s not in your traditional value camp but it has things that we think are of value which is that network.

Interviewer: 21:14 And so you think them reaching profitability will be more related to revenue growth and economies of scale or do you think it’s going to be more related to them having such a large market share just being able to jack up the pricing of rides?

Jonathan Boyar: 21:25 I think the more of the first and then in the second I mean they were subsidizing a lot more rides in the in the beginning than they are or now. I just think it’s the economies at scale. They’re going to be, listen, Disney’s great at this too with their new um park system where they’re able to maximize revenue. It’s great to be able to do that but you also do want to keep your customers happy to some degree.

Interviewer: That makes sense and can you please speak about your thesis for ANGI home services as well?

Jonathan Boyar: 22:02 In terms of ANGI it’s more looking at IAC in general which owns 85 of ANGI home services so essentially if you’re buying IAC you’re also making a bet on ANGI that’s probably a better risk reward way of doing it.

22:17 ANGI’s a great business and they’re pivoting in a really unique way. They want to you know the company is controlled by Barry Diller who’s been this type of person you want to invest alongside with he’s had returns that were you know compounding at 15 a year since 1995 or so.

22:42 He’s been very shareholder friendly and what he’s really good at doing is taking
offline businesses that traditionally were done in person. Ticketmaster for example, Expedia, online dating, all of these things that I for you you’re a little younger you’ve grown up with this online your whole life, but it hasn’t obviously always been that way and they’re really good at that making that transition and they’re looking at making that transition to for home services which is a huge total addressable market and they want to be kind of the one-stop shop where they have something called ANGI services where let’s say you needed your gutters clean you go on your phone, you say what the job is and then basically they say okay they’ll cost sixty dollars whatever it is someone will be there um in two days. And they take care of everything and that’s what they’re trying to do it’s a very very difficult thing it’s it’s hard to do but if anyone can do it’s Barry Diller and his team there so they’re making that transition which is just quite difficult to do but it’s faith in the management team, it seems like they’re making the right progress um you know. Probably shouldn’t be a public company probably should be part of IAC as it was growing but I think IAC with owning matched uh I’m sorry owningcare.com having a 27 stake in Turo which is about to go public having a whole host of other valuable businesses: Dotdash Meredith. They just bought Meredith late last year it’s it’s a really great hodgepodge of businesses that makes a lot of sense.

Interviewer: 24:50 I spoke about Tesla in the past. How do you see Tesla today both from let’s say evaluation perspective but also from a business perspective? Let’s say, do you think in 10 years Tesla world you know have maybe a similar market share in the spaces they have today or do you think they’re going to really be competed away by some of these legacy players or some other Startups?

Jonathan Boyar: 25:09 Listen, I I’ve been the wrong person to listen to when it comes to Tesla. I don’t understand as a value person how it’s afforded such a high multiple.
I know people say it’s more than a car company, I get that thesis I just don’t necessarily believe it. I think that they’re in for a rude awakening when GM you know they’re coming out with a whole host of great other cars there’s going to be other competition with Ford. I mean it’s a very very difficult space and traditionally hasn’t been the best business to be in so not really sure why because it’s electric. I realized there it’s a little bit different but it’s to me at these levels it makes no sense.

26:02 Wouldn’t bet against it I think Elon Musk, I admire what he’s done and what he’s accomplished some of the ways he’s done I questioned but, he is certainly a controversial person, but he’s revolutionized an industry. But will he be the ultimate winner?

26:25 And even if he is you know should it be uh top 10 S&P 500 companies. I think it’s worth more than Berkshire Hathaway or roughly. I don’t have a marked caps in front of me but if someone said John for your birthday, I’m either going to give you Tesla or I’m going to give you Berkshire Hathaway. You get Geico you get a huge steak and Apple and Bank of America, you get all these wonderful businesses, I’ll choose Berkshire.

Interviewer: 26:58 It makes sense. Also, you have some at least one investment that’s related to the cannabis industry maybe. Speak a little bit about that and how you view the cannabis industry today.

Jonathan Boyar: 27:13 You know we’re valued investors and as I mentioned before margin of safety downside protection is extremely important to us. We kind of got into the cannabis business by happenstance. We own a company called Scott’s Miracle Gro. James Hagedorn was a guest on my podcast and certainly a very interesting fellow.

27:36 He’s done a great job and they’re in the home and garden space you know anyone who gardens and even if you don’t garden you know what Scott’s is. They’re by far, they’re Coca-Cola like market share in what they do.

27:53They’re sold at Home Depot, Lowe’s, their pricing power, they’ve raised prices three times in the past year. About 10 years ago or so they 28:05 decided to get into the cannabis space but to do it in a different legal way. So, they’re kind of it’s a pick and shovel like during a gold rush event where or situation where they are providing lighting and filtration and all the other anything that a grower would need. And they are by far number one in in their field on this. It’s a billion-dollar business growing rapidly. The stock was $254 in April of 2021 it’s currently $140. And if you chart uh Scott’s Miracle Gro next to a cannabis ETF it looks very similar it’s not solely gone down because the
cannabis business is down in the dumps uh temporarily but it it it’s really been a huge factor and at these levels the way I look at it is I’m buying Scott’s traditional business which is at a full multiple of what it would go in a transaction and essentially getting their fast-growing hydroponics business for free. That also has valuable stakes or will have
29:30 valuable stakes in other consumer branded cannabis companies so it’s a really interesting play. They’re great capital allocators., they give it a special dividend when their stocks expensive they, buy back stock and their stock is cheap. They pay decent they have a decent yield and I think at some point in time they’re probably going to split the company in two.

Interviewer: 30:02 That makes sense. Also, can you speak please about how important do you think either an MBA or a CFA is in the investment management industry especially in regard to value investing?

Jonathan Boyar: 30:16 I’m sorry I didn’t hear the question.

Interviewer: 30:23 Sorry, can you please speak about how important you think either a MBA or a CFA is in uh the investment management industry especially in regards to value investing?

Jonathan Boyar: 30:29 I would say um that I came from a different path. I was a litigator um and then went to this which is I wouldn’t recommend anyone to do. If you’re thinking of going to law school call me, I’ll talk you out of it. I actually love law school. Being a litigator, I didn’t. I would say it’s different. You’re getting a tangible you’re getting a qualification with the CFA, you’re getting you know that you have a very good quantitative background and certainly is impressive on any resume. I think that’s something that especially while you’re in college if you can try and do it and get that you know MBA

31:21 it’s it depends. I mean it’s been weird; I don’t know how it works over the last couple of years with covid and a lot of the MBA is the people you meet if you go to Harvard Business School or some of these other prestigious institutions. That’s part of what you get with an MBA.

31:38 I think you have to take costs into a factor and look what your return on investment is. Certainly can’t hurt but you’re paying a lot. All these studies, people going out of school hundreds of thousands of dollars in debt so it’s something nice if you can afford it but it’s really not necessary. CFA is you have to pay for the test but it’s essentially free

Interviewer: 32:10 Absolutely. You spoke a little bit about your background there so why do you prefer investment management to when you’re a litigator?

Jonathan Boyar: 32:18 It was night and day. I mean, I don’t like looking at my watch and trying to figure out how I’m gonna bill something for a project. I love to read, I love to become curious, I like learning about industries, I like speaking with people. Litigation to me it’s an adversarial field it’s a process, it’s just what didn’t suit my temperament. I really enjoy investment management; I like looking at companies that other people
aren’t looking at. I like finding these hidden gems and working with, we have a fantastic team of analysts at Boyar and hearing their insights. So, it’s you have to do what’s you know a preference for you, know yourself. To me it was hands down a fantastic choice.

Interviewer: 33:16 Speaking of spoilers, what sort of uh backgrounds or previous experiences are you looking for? Let’s say, college students who dream of one day working at Boyar as an analyst.

Jonathan Boyar: 33:27 We typically don’t hire people right out of school just because we’re a small shop and I think people can get you know it’s it takes a lot to train people and we’re very specific at what we do. But I think it’s just a love of value investing, a love of writing, a love of coming up with ideas, being analytical. It’s a whole host of things but having that enthusiasm for value investing is critically important and value investing is something either you get, or you don’t.

34:05 We’ve hired analysts in the past who you know we’re really growth analysts. You can tell that they just didn’t speak our language that they didn’t understand why you should buy a particular stock because they have so much real estate that you’re essentially getting the business for free. They’re looking at the growth rate of the business. You have to have to be something that you’re comfortable with.

Interviewer: 34:35 Absolutely. Can you speak a little bit please about diversification and how you look at that in the portfolio turnover position sizing those types of things?

Jonathan Boyar: 34:46 We treat every account differently, individually based on our clients’ needs so we’ll have anywhere between 20 and 50 names in a given portfolio depending on how concentrated someone wants to be. We’re also believers in not investing everything all at once. It hurt us over the last 10 years when you have a market that’s gone you know straight up but I think over the, I’m always looking at your downside and I like to ease into positions and buy things slowly over time. I just think it’s the right thing to do for a client.

35:33 I don’t look at what sector weightings. Our sector weightings are nowhere near what they are of the S&P 500 or the S&P 1500 value or any of the others. We don’t buy any energy stocks so right there goes one waiting that’s out of the window.

35:57 We don’t like heavy technologies and that’s 26 percent of the index so it goes back to my first slide. You have to or one of my first slides on John Templeton, you have to do things a little bit differently.

Interviewer: 36:14 The next question, why did you switch from deep value from offered deep value investing approach to more of a moat investing approach?

Jonathan Boyar:36:20 I think it’s just about going with the times. I mean deep value I don’t think it works as well it’s also tax inefficient because you’re not buying a company that you want to own forever so you’re holding it for one, two, three years. If the pieces worked well you have to pay the government 25 percent of your earnings so it’s just I don’t think a great tax efficient way to invest.

Interviewer 36:57 Some students have noticed that you tend to own a fair amount of
relatively highly levered companies almost like equity stub opportunities. Is this on purpose and what’s sort of the thinking behind this?

Jonathan Boyar: 37:09 We’ll own levered companies when we think it’s when they have the cash flow to just to support it. We’re in a lot of John Malone names and a lot of them are cable companies and things that have high degrees of cash flow can support that leverage. Obviously in a downturn that could really hurt you so you have to really know what you’re buying.

37:35 I think when you’re buying a leveraged position you should also do your position sizing accordingly.

Interviewer: 37:46 Absolutely. Can you speak about how do you analyze management?

Jonathan Boyar: 37:53 How we analyze management? Yes, we’re a little bit different, we generally we’ll speak to management, but we generally try and avoid them. They tell you everything that they want you to hear, they’re very good salesmen. Sometimes it’s good to speak about their general thoughts on that on the business and where they’re going and their vision, but I’ve never had a company CEO tell me business was bad and
don’t buy the stock.

Interviewer: 38:29 That makes sense. Also, um do you find sort of screeners a part of
your research process either quantitative screeners or keyword screeners?

Jonathan Boyar: 38:40 We do some screening but it’s generally one of the advantages of having a research service. We have some of the most sophisticated people as clients and they also tell us ideas to look into so we’re just always on the hunt and screening works but everyone has the same screens. It’s really digging deeper and you know spending your time reading and coming up with ideas. It’s creating you know it’s a decent starting point but you know you’d also miss like a Madison Square Garden if you were doing the stream. You don’t get those hidden assets and things like that.

Interviewer: 39:19 Can you speak a little bit about your thesis for Disney?

Jonathan Boyar: 39:26 Disney is one of the greatest companies in the world. New customers born every day. Just mentioned earlier they have the best contents out there and I think one of the things that people are not or Wall Street’s not fully appreciating is how well those theme parks are going to be going forward especially with the reopening. I think Disney plus is going to be a tremendous success, it’s going to be bumpy along the way um but I think there’s a lot of upside to Disney.

Interviewer: 40:04 Absolutely. Can you speak about some of the long-term economic impacts that you see as a result of covid?

Jonathan Boyar: 40:10 Can you repeat the question?

Interviewer: 40:10 Sorry, some of the long-term economic impacts that you see as a result of covid.

Jonathan Boyar: 40:16 I think it’s too early to tell. I think there’s a psychological impact on how people have been shot in, shot out for the last couple years. I don’t know what the long-term effects they’re gonna be, but they certainly will be. What is the future of work, I don’t know in terms of remote versus in person? I’m not sure what the long-term impacts are but the world is changing very rapidly. I mean we’re right now, it’s war in Europe there’s lots of horrible things going on but time will tell.

Interviewer: 41:11 Absolutely. How did you initially become interested in investing in specifically in value investing?

Jonathan Boyar: 41:11 I think this is something I’ve been you know; my father started the business so I’ve always watched what he did and admired what he did I’m a curious person and I read a lot and something I just grew up and I never thought I would actually do it as a career but it just to me makes a lot of sense. I enjoy it it’s fulfilling, and you know you get paid to read so it’s a pretty good way to make a living.

Interviewer: Absolutely. Can you talk a little bit about your process for selling an investment? What do you know and how to determine when you sell security and what are some of the reasons that you sell the stock for?

Jonathan Boyar: 41:45 Selling is by far a much harder decision than buying. It’s extremely difficult. We sell for a few reasons. One, thesis changes, we’re wrong on a stock and we just want to get out and cut our losses. We’ll do that, you have to be humble enough to be able to do that or if you need cash and you think there’s a better opportunity to deploy that cash. But we’re reluctant sellers, we like the way you know for taxable accounts the way we look at it is if we’re selling a name, we have to find a stock that has a, that’s 25 you know, that’s significantly more upside. We get to pay 25 percent tax to the government roughly depending on your tax bracket. If it’s a long-term capital gain, we take that consideration, so we’ll only really sell something that we still like if it’s blatantly overvalued.

Interviewer: 43:05 That makes sense. Concluding question, what are some of the
most influential events of your investing career?

Jonathan Boyar: 43:10 I’ve been doing it for a lot longer than I’d like to admit but watching 2008 uh 2009 financial crisis stocks you know going down10 20 percent in a day, S&P going down four, five, six percent in a day. I mean that was just unbelievable to watch. I was much younger then, but it showed you how inexpensive stocks can be and how important it is one, to only invest what you can afford to invest that you don’t need for living or immediate needs, but also how cheap stocks can get. So, it’s good to have some cash on the sidelines to take advantage of some bargains

Interviewer: 44:08 Absolutely. Thank you so much, this is a really terrific session, and we really appreciate you taking the time of your busy schedule to speak with us today.

Jonathan Boyar: 44:19 Thank you very much. Thanks for having me. Have a great day

Interviewer: 44:19 Great, thank you!

All Stocks Sales Listenable Related From Value Investing Q&A Series Brown University Recently uploaded

This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by Boyar Asset Management (“Boyar”) or its affiliates. The results of the Forgotten Forty are not audited. This material is as of the date indicated, is not complete, and is subject to change without notice. Additional information is available upon request. No representation is made with respect to the accuracy, completeness or timeliness of information and Boyar assumes no obligation to update or revise such information. Nothing in this interview should be construed as investment advice of any kind. Consult your financial adviser before making any investment decisions. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information, and Boyar Asset Management and its affiliates assumes no obligation to update or revise such information. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Past performance does not guarantee future results. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently verified and Boyar Asset Management or any of its affiliates is not responsible for third-party errors. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Boyar Asset Management, its employees or affiliates may own shares in any of the companies referenced in this article.

Any results mentioned, do not necessarily represent the results of any of the accounts managed by Boyar Asset Management Inc., and the results of Boyar Asset Management Inc. accounts could and do differ materially from any of the results presented. While the results presented show profits, there was the real possibility of a permanent loss of capital. This information is for illustration and discussion purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Boyar Asset Management Inc. is an investment adviser registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A copy of current Form ADV Part 2A is available upon request or at https://adviserinfo.sec.gov Please contact Boyar Asset Management Inc. at (212) 995-8300 with any questions.

Boyar Asset Management or its affiliates, its employees and/or shareholders  may own shares in any of the companies mentioned in the interview. The presentation represents the  views of Boyar as of the date of this interview and is subject to change at any time without notice.

Share to:

Interview With Jonathan Boyar at the London Value Conference 2022

 

 

Jonathan Boyar  and our partner MAPFRE Asset Management presented on May 19th at the London Value Investor Conference alongside other speakers such as Sir Christopher Hohn and Joel Greenblatt.

Please click here to view Boyar's full presentation which includes 6 stock ideas.

If you would like to request sample reports on companies profiled by Boyar Research, please fill out the form below:


 

 

 

 

This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by Boyar Asset Management (“Boyar”) or its affiliates. The results of the Forgotten Forty are not audited. This material is as of the date indicated, is not complete, and is subject to change without notice. Additional information is available upon request. No representation is made with respect to the accuracy, completeness or timeliness of information and Boyar assumes no obligation to update or revise such information. Nothing in this interview should be construed as investment advice of any kind. Consult your financial adviser before making any investment decisions. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information, and Boyar Asset Management and its affiliates assumes no obligation to update or revise such information. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Past performance does not guarantee future results. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently verified and Boyar Asset Management or any of its affiliates is not responsible for third-party errors. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Boyar Asset Management, its employees or affiliates may own shares in any of the companies referenced in this article.

Any results mentioned, do not necessarily represent the results of any of the accounts managed by Boyar Asset Management Inc., and the results of Boyar Asset Management Inc. accounts could and do differ materially from any of the results presented. While the results presented show profits, there was the real possibility of a permanent loss of capital. This information is for illustration and discussion purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Boyar Asset Management Inc. is an investment adviser registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A copy of current Form ADV Part 2A is available upon request or at https://adviserinfo.sec.gov Please contact Boyar Asset Management Inc. at (212) 995-8300 with any questions.

Boyar Asset Management or its affiliates, its employees and/or shareholders own shares in Scotts Miracle-Gro, Warner Bros. Discovery, Bank of America, Comcast Corporation, Levi Strauss & Co., Callaway Golf Company. The presentation represents the  views of Boyar as of the date of this article and is subject to change at any time without notice.

Share to: