Jonathan Boyar on opportunistic value in $UBER, $UNF, $HHH, $MSGS, $BATRA and $MRK | S07 E41

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I think we're live. This is Value After Hours. I am Tobias Carlisle. Not joined today by Jake. He's on the road. He'll be back next week. But special guest today is Jonathan Boyer of Boyer Valley. Welcome, John. Good to see you again. Great to see you. I think Jake was absent last time. I wasn't even personally. As soon as he found out you were on, he... No, no, I'm kidding. It's been planned out in advance.

uh we've known each other for a long time i i remember we used to meet on the floor of the value investing congress yeah when people used to go to conferences that's right that was those were the days that was a long time ago um Folks who don't know, tell everybody a little bit about Boyer Value. Sure. Boyer Value Group started in 1975. It's a family-run business started by my father, Mark.

We started as a research boutique, basically serving hedge funds, mutual funds, family offices, looking at stocks in a completely different way, what would an acquirer. pay for a business. I love it. Great approach. Yeah, which I'm sure is something you can appreciate, you know, basically taking a private equity approach to public markets. And we developed a good reputation in the value community. And over time, we formed Boyer Asset Management in 1983. And today we have two.

Business is still the same. We have a research business that's still going strong and a money management business, you know, serving kind of high net worth individuals and institutions. So it's kind of a hybrid approach.

And take us through a little bit more about the philosophy and the strategy. You're looking for special situations or just things that are undervalued on an acquisition basis? So we consider ourselves... opportunists you know we're not traditional values you know we were talking about before you know names that we like include uber but we also are in some of the value

camps uh camp as well as well and it's really to take that uh business person's approach and you know if something's selling a material discount to what an acquire would pay for the entire business it's something that that really interests us But that's really just step one of the equation. Step two is to catalyst what's going to make that stock ascend in value.

over a reasonable period of time, and we're more patient than most. To us, a reasonable period of time is two, three, four years. This way, it helps us avoid value traps. And that's why we take that catalyst approach.

period that you've been running so you you took over from your dad and you guys continue to work together a little bit i know he continues to sign the the docs that go out um yeah he's still involved uh you know going strong i think at 80 84 um and he's he's doing great and you know he helps with the idea generation

And I'm running the day-to-day operations and also portfolio manager and help with the research effort. So we have a great team. We have myself and my father and then four great analysts, many of which have been with us for quite some time. Everyone on our team is a generalist. We really don't believe in industry-specific analysts. We like to say industry analysts can tell you everything there is to know about a stock except when to buy it. That's right.

So we just want people to, you know, come up with ideas that they think are timely. And, you know, I think what kind of gives us our edge on the money management side is our research operation. because we have to continuously come up with ideas for a really sophisticated audience. And, you know, they really challenge us on those ideas. They ask us,

You know, these assumptions behind our models, you know, they ask us if we're crazy. It's really it's helpful. And then, of course, they pitch us ideas where we're very cognizant that they're. you know pitching their own book but you know a lot of the ideas are quite good have you seen an evolution from i mean your dad started in 75

the markets have changed materially even even since 2010 the markets have changed pretty materially have you seen an evolution over that period that you've been running boyer absolutely i mean when he When my dad started the business, this was the biggest technological advancement that you have. If you're able to afford $1,000 for a calculator or whatever it costs, that gave you an edge.

Now there's, you know, you have access to so much information from, you know, substack, various things on the internet, et cetera. So, you know, we started as a real deep value net net. type of shop we even had a report and net net reports and that has changed to we've really gravitated more towards quality and which I know is something that a lot of people say, but it's more avoiding the really deep value situations. We're looking at something.

That we want to own for a long period of time. And I don't want to own a mediocre business for, you know, three, four or five years. It's good for a trade, but not necessarily good for a long term investment. Does that mean that. The sources of market inefficiency have sort of changed over time, where previously it was probably informational mostly. That's a net-net world. And then maybe a calculator means that you can calculate a little bit faster.

to today like what's the what's the what are the major sources of inefficiency today do you think i think really the major source of inefficiency is time arbitrage i think that's really the only thing left There are very few people who are looking at things on a two, three, four year basis. Like the rest of the world, they just want instant gratification and they want to know what's going to do well over the next six.

to months to a year, I think it's a lot harder to do that than, you know, what is a business going to look like under normalized, you know, conditions. So I think that's what really gives us our... edge also another i guess edge is small cap and micro cap names are all but ignored you know many of the names we follow have one two three analysts so

There are some people who are just not looking at the names. Do you think that that normalization is a little bit harder over the last five years, given we had COVID? that it's just been a weird kind of market in between. I feel like there's been quite a lot of sogginess since 22 when a lot of that sort of COVID stimulus worked its way through.

Yeah, no, I mean, we're living in extremely interesting, volatile times with, you know, a once in a century thing happening every few years. So, yes, normalized is difficult. uh to to predict but you can get it within the ballpark of a range obviously you can't really prepare for a pandemic or you don't want to necessarily

invest as if a pandemic is going to happen in five years. You might want to keep a larger than average cash position if you're worried about the future as a hedge. But yeah, no, I think generally... But generally, your point is well taken. What misperceptions do people have about value, modern value, given that it's underperformed, hasn't done really well?

There aren't a lot of defenders. I think most people would say they've transitioned to quality growth. Well, I think the misperception doesn't work. I would... disagree with that i think over a long period of time trying to buy something for less than it's worth is a sound strategy it might not have worked over the last 10 15 years but i think it's a strategy that's worked well for

for decades and decades and i i think it will continue to to to work um but i don't know if there's a misperception i except that i think people might think you know low quality stocks etc i mean value has is a big tent from garp to net nets to you know deep value to um special situations to asset plays. So I think I personally dislike the term value investing. I think it's something that's kind of made for consultants more of an opportunistic.

investing is i think a better way to to describe it um take us through your idea generation process how do you guys come up with new ideas yep it's i wish i could come with a clever answer and say you know we have this

great proprietary formula that spits out these ideas. It's a very manual process. Our team, as I said, is four analysts plus myself and my father. And they're just paid to read. They're paid to come up with ideas specifically outside the mainstream to be contrarians. And that's what they do. And we're forced to continuously come up with ideas.

because we have this institutional research service that people pay a lot of money for and they want these new ideas. And I think a lot of investors, you know, portfolio managers run into issues where they recycle. their ideas this keeps us fresh but you know we have probably four or five buckets that we come up with for ideas you know we love looking for companies with hidden assets

assets that are not properly reflected on the balance sheet. That's something that we like. We really like great consumer franchises. We particularly like them when they're masked by a corporate name. What I mean by that is... if i told you the name of kushnet i don't know if you've heard of it or not um most people uh haven't um but you know it's a golf club manufacturer um and

You know, when they're masked by these corporate names, you know, they own Titleist, etc. People tend to ignore it. We like looking at Fallen Angels, the ones starlings of Wall Street that are now.

unwanted unloved you have to be very careful about value traps when when doing that um and we like special situations spin-offs but you have to be very careful some spin-offs are horrible sometimes you're company is spinning off a problem so we um there's no shortages of ways you just have to you know look for the right pitch how do you prospectively identify a value trap

It's difficult, if not impossible. I mean, part of it is just gut feeling from doing this for a long time. But if you can find a reason for a stock not to languish for... you know, over a reasonable period of time, that lessens the odds of it being a value trap. But any value investor that's, you know, that's a hazard of. of being in the business. You know, you have to really take a hard look and see is this a cyclical or a secular problem. And, you know, we've gone through.

We've made our share of mistakes, especially with these content companies, you know, five, six, seven years ago, where we thought, you know, we didn't anticipate how the world would change with streaming. And that's, but you learn from that. And, you know, that's what you have to do. And I'm trying to now figure out a company like Comcast, which is statistically cheap. Is that a value trap? And that's something that we wrestle with internally.

So far, the answer is we don't think so. But after what happened with the content companies five years ago or so, we're open to the disruption theory. How do you know when something's temporarily depressed versus structurally challenged? I guess you have to look at why it's challenged. You know, the reasons people are saying what the company is saying. And that's, again, more art than science.

What's the first thing you like to look at when you're researching a company? I just like to get to know how they make money and why someone would want to use their product or services. I know that's simple. you know if you can't get a handle handle on the value that they create for customers why you know that's the first thing you want to do and just read as much as humanly possible

about it. I mean, it's and it takes a while. I mean, it's not, you know, we rarely will buy something quickly and we do months and months and months of research on something. What role does management play? How hard are you looking at management? More and more lately. I think that's something that I've grown. I used to come up with... Hey, just find a great business management to great salespeople. They're only going to tell you that everything is fantastic. I personally never met a...

a CEO who's told me business is terrible. So they've gotten that where they are for being great salespeople. trying to hear them especially in larger companies interviewed as much as possible on either on podcasts or on tv etc and just see what makes them tick are they good you know is there alignment Are they in it for the long term? So I think management, it's getting more and more important to our process.

How do you think about downside protection and permanent impairment of capital? No, it's a great question. I think the only way to do that is, one, Never use leverage. Extremely important. And two, you have to buy something at a significant margin of safety, and that's your downside protection. you know it sounds simplistic but that's that's really what it is and companies that have a lot of leverage we're not adverse to buying them but i think we would size our position accordingly

How do you think about valuation? What are your favorite valuation methods? When do you deviate from them? it's what would an acquirer pay for that business that we look you know in the product like in the private markets you know is it rev par you know in the hotel industry whatever someone you know that that's the

essence of what a business is really worth is what is someone willing to pay for the entire business? And that's how we look at it. There are things where you have some of the parts stories I think is also critically important. We've been quite vocal on a company like Madison Square Garden Sports, for example, which is controlled by James Dolan. It owns the New York Knicks and the Rangers.

The enterprise value, I think, is $5.5 billion. The Knicks alone, probably worth $10. The Rangers, probably worth $4. So there, I think I have a decent margin.

safety there and and you're also you know that if that's something where you're not buying this for the cash flow you're not buying this you know you're buying it as a trophy type asset so that's and that's what people buy them for so that's that's that's how you how you analyze it yeah so you have to look at that in the context of it's it's worth a lot to negotiate a transaction because this

The most successful guy in town at the time will try and buy that for as much money as he can, but in the interim, they don't make a lot of money because they run. Well, yeah, these are not statistically cheap companies, but one... the the economics are only getting better with tv deals etc and the globalization of some of these sports but

Yeah, I mean, it's the ultimate trophy. These things, the last time the Knicks went on sale were, I think, 1992, at least early 1990s. So when they do come up for sale, people are willing to pay out.

How do you incorporate qualitative research into the quantitative research? We just read everything there is to know about a company. I mean, we're just curious. We ask people what they think about the product or service.

we utilize the product or service ourselves but you you really want to have cold hard data too you don't want to invest on anecdotal evidence or you know kind of uh you know you want you want to do deep research but you're also human and you kind of you you just want to see what is um Why is someone using this product or service? Do you want to take us through some of the names in the Forgotten 40, the Boya Forgotten 40? Tell folks what that is first.

Oh, yeah, absolutely. The Forgotten 40, it's our flagship product. It comes out December of every year. It's our Christmas gift to our clients. And it's, you know, it's our 40 best ideas. you know for the year ahead as i mentioned we're normally long-term patient investors but we every year we we take a look at all the companies that we research in our coverage universe

And which ones are going to do, ones we're going to do the best because the catalyst we identify and then we do one page snapshots of them. And people love it. It's a great reference guide. Sell it on an a la carte basis and people seem to.

to really uh like it um and right now we're kind of looking through all the names and seeing you know we we've made no final choices yet uh but you know what interests us what we think it's going to do well in the year ahead one name i can't say if it's going to be in the forgotten 40 or not but a company like universe unf it's a company that probably Most of your listeners have not heard of it. It's a garment rental business. It's the third largest one. Not exactly the most exciting.

company in the world. Cash-rich balance sheet trades at about $160 a share. Earlier in January of this year, Cintas made an offer. for the for the entire business uh first off for 275 um they barely even negotiated with them it's a family controlled business and those are tough you're dealing with family dynamics and that was probably one of the reasons they didn't negotiate and so we have a cheap stock

It's trades at like eight or nine times EBITDA and the margins are much lower than Cintas. The multiple is significantly lower than Cintas and there's a lot of things that they can do to turn around the company.

so the worst case scenario is you have a good turnaround situation but what's gotten us interested recently is about two or three days ago engine capital i think that's the name of the company this activist uh funds um files you know uh put as part of a proxy they're going to have themselves and the grandson of the founder so clearly there's family

dissension in there. And the goal is to try and sell the company. And they would get a lot more than $161 a share. I think they would get a lot more than $275 a share, which was Synthos' first offer.

So now you really have that catalyst. Before you just had kind of a cheap stock with a couple of ways to win. Now I think management and the families can be pressurized to deliver value for shareholders, whether that's... increase buybacks which could happen raising the dividend you know operational improvements lots of ways to win uh what how do they get so much cash in the balance sheet how do they let that build up do you know what that's been

What the reason for that has been? Conservativism. The founder was very conservative. They were saving up for acquisitions that some of them they did. Most of the time they didn't. And that's the only... reason it's it's a good business 90 or so i think retention rate you know they have uh you know i think the third and third in the market uh they have national accounts um

Is it a great business? No, but it's a very good business. Is it uniforms that they're renting or what are they renting? Yeah, uniforms that they're renting. to you know companies like i'm not saying that they're a client but ups for example they don't have their the drivers aren't going home and washing their uniforms they're they're giving it to them they take care of it and um

you know have some sort of distribution system so they're they're the ones that take care of the business um what about uber i think that's an interesting one we discussed that last time you're on too but I think it's worked and it continues to be interesting. What's the story there? Yeah, no, Uber is one of our highest conviction ideas. It's sold off a little bit in the last month or so along with pretty much everything. Else, a lot of the fears around the company are unfounded, people think.

Robo taxis are going to kill them. I think they're going to be a beneficiary of that trend, actually. It's a well-run company. They're going to return about 50% of cash flow to shareholders in the form of buybacks. Dara has done a fantastic job. They're going to different verticals. They're kind of becoming a super app. And they're growing. I think they're growing EBITDA. 30 per year for the past three years or so. I mean, it's been really impressive. I mean, it's, you know.

High fixed costs, low variable costs. So it's they're in the right part of the cycle. And this could be one of those. I hate using the word long term compounders, but this is a great business. That's not. you know absurdly expensive and something i'd want to own for long periods of time why do you think uh waymo is not a threat because i

I don't think there's just going to be one autonomous vehicle company and no one's going to want to just have one, you know, to have like six different apps. There's going to have to be a central aggregator of these things. And I think Uber has the best platform to do it. So Waymo may be a winner, but I think there's room, just like there are lots of different car companies that are doing well, there'll be lots of different autonomous vehicles that are doing well, I think.

elon musk has promised the moon i would never bet against him but i don't think he's going to be the only winner in this game um we sort of touched on it briefly before but the uh

Madison Square Garden MSG Sports and the Braves. What's the story there? I mean, again, Madison Square Garden Sports is the trophy assets. Big fan of them. We like things that they're scarce assets. It's like you're buying a publicly traded collectible. You know, you see these trophy assets go on sale. You see the Lakers go for $10 billion. You see just a 10%, a minority stake in the New York Giants, the football team, go for $10 billion.

The New England Patriots, I think $9 billion for a minority stake. So it's something that Dolan can do if he's not going to sell the whole team is just sell a minority stake, use the proceeds to buy back a ton of shares. So he also can split the company into two, have a publicly traded New York Knicks team, have a publicly traded Rangers team to help showcase value. Another team, Atlanta Braves Holdings.

It's controlled by John Malone, so you can't really have as different a set of owners as you do between having John Malone and James Dolan. malone is a cold-blooded capitalist and i think he would sell the braves as soon as he got a a legitimate offer it's also worth noting that it's been one of the few stocks that he's been making open transaction open market purchases for in in his empire

He's simplifying his empire. He's been more of a seller than a buyer recently. And the two-year spinoff milestone from Liberty Media is already approached, so there's no tax consequences if it was bought. or sold. They also own valuable real estate selling for about $39 a share. We think conservatively it's worth about $60. And there's another catalyst.

A lot of people aren't talking about this, but in the next couple of years, I think 2027, there's a tax law change where if you're a public company, not a private company, but if you're a public company, you cannot deduct for income tax purposes. the salaries of your top five highest paid employees. And in most businesses, that's not a huge deal. But on the New York Knicks payroll,

When it's $150 million and they're making $175 million a year, that's a big deal. So they're at a huge competitive disadvantage to their privately traded counterparts. So I think that could be an impetus of a sale for...

for Knicks, Rangers, or the Braves. Let me just give a quick shout out to folks who are Warren Buffett from the Land of Retirement. What's up? Petit Tikva. Israel, Breckenridge, Toronto, Cleveland, Bendigo, Victoria. Must be daylight saving in Oz because the Aussies are awake. Boise, Idaho. Durham. Lausanne, Switzerland. Bellevue. Limerick. What's up, Colm? Tomball, Texas. Jupiter, Toronto, Edinburgh, Valparaiso, New London.

Holland, Michigan, Cessnock, New South Wales. The Aussies are up. Fremont, California, Tampa. It's good having you guys here. JT is on the road. He's in China. Back to China again. Can't stay away. That's amazing that you have this worldwide audience. That's really cool. It's a good spread, isn't it? Yeah. And the Aussies are waking up early for you.

Well, I guess it's morning there. It's tougher in the summer when we're on daylight saving and they're not, but we can do it this time of year. Okay, that's good stuff. We'd ordinarily have JT's veggies. You can write it down. He's not here to do it this week. So there's no timestamp this week, folks. Do you have any thoughts on passive? Has the rise of passive affected the markets, do you think? I think 100% so. I mean, it's...

And listen, passive, for the most part, has beaten active significantly. And I can see why investors would gravitate toward it. But it's distorted the markets. And I mean, I'm not saying anything new. But the S&P 500 is now basically a technology fund for all intents and purposes. So I don't think individual investors know how much risk.

they're taking i think any someone who's buying an s p 500 fund and holding them for the next 20 years i think it'll be fine these things tend to work themselves out but for people maybe with shorter term time horizons they could be um in for some in for some pain one of the things that was interesting and i was looking at it before and it was in our latest quarterly letter and this kind of has to do with those you know

top 10 names you know dominating is jp morgan guide to the market i don't know if you ever look at it it's a free guide that you can just download from their website it's fantastic they they had a graphic that showed for the last

by by decade you know you had 1985 1990 etc up until 2025 the top 10 in terms of market cap so no company over that period has remained in the top 10 for any of the any of those decades the most were four and the four that were the uh the most were two um two of them were for four uh decades. That was Exxon and GE, not names that I necessarily would want to own now. Of today's 10 largest companies, only four were on the list a decade ago.

and just one appear two decades ago so the s p you know 500 you know there could be significant rotation within it um who knows maybe the mag 7 will continue to uh outperform but you know people people need to be careful i think they quietly switched out netflix for nvidia in that in that they they quietly just needed an n switch out something gets changed every now and again um do you think that the decline because you straddled that period where

there was sort of ubiquitous sell-side coverage, and that seems to have gone away. Has that hurt the markets, do you think? I mean, it depends how you look at it. I think it's given us opportunities. I think we were talking about offline. I think what's going to obviously being a small and mid cap investor has been extremely painful over the last decade or so. Besides interest rates getting lower, I think what's really going to help small cap investors.

is the fact um you know it once you start getting m and a activity and that will highlight the discount to intrinsic value many of these companies are you're starting to see that i mean you see that with wbd um you know looking for deals. You have, I think, Exalta announced this morning they're merging with Nipon. You see Topgolf, Callaway brands selling.

60 of top golf so companies are starting to do things to help highlight value and i think that's what's going to be the spark for uh that eventual um small cap run so The structural parts of the market and having less coverage has certainly hurt. But I think for people who are long-term patient investors, it's going to really help. And what's amazing is there...

some really large companies with very little sell-side coverage. I mean, I had Thomas Pederfee on my podcast, who was Interactive Brokers. He has like one or two sell-side coverage. I mean, he's a huge firm. Lowe's, the Tisch family company, has no sell-side coverage. Unifirst, which is a smaller company, I think has two or three. So it's the research business.

this is a tough business and it's not particularly profitable for the bank so they stopped doing it why do you think interactive has such a low what why is it not covered more broadly because it's it seems like most most people in the financial industry know what interactive is so it seemed natural that they would want to cover it uh i asked him that because i i agree with you and his response was well he went

public kind of with that reverse you know the same way google did yeah and you know didn't have an investment banker and i guess they don't do that many deals they keep a ton of cash on the balance sheet so brokers just ignore them

There's no other fees available? Yeah, not particularly. So, I mean, it's kind of an indictment on the sell side because it's been a fantastic performer over pretty much any... period of time do you think that that sort of disappearing of the self-coverage has is that the cause of the underperformance of fundamental sort of strategies or is that

a result of the underperformance of fundamental strategies can you can you say that again it was like a it was like there was a change in the law following i think that was like a 2000 the 2000 crash they changed the law to separate out the sell side coverage so they couldn't use it to to support the the bank transactional side and it seems like that's really that um or maybe a little bit after that

we really started seeing the underperformance of fundamental strategies versus... So there's two potential causes. One, it's just passive, the passive bid constantly hitting the biggest. And so those are the companies that perform the best. Or alternatively, there's nobody to shine a light on the smaller, mid-sized companies. And most folks aren't focused on the market. They're a little bit time poor. They need that.

sort of silsod research to help them out there? It's a very unsatisfying answer, but I think probably a little bit of both. I don't think there's a one type thing, but I think a lot of it is... It's one of the greatest momentum trades of all time is just investing in the S&P over the last couple of years. And you have flows into these funds every...

the 15th of the month or the 30th, whenever people cash their paychecks and buy the dip has been a fantastic strategy. And it's a great strategy till it isn't. so uh it's not unprecedented though i've tried to show this a few times in a few different ways but there's i've looked at equal weight versus the market capitalization weight version of the s p 500 or you can compare the largest 100 stocks to the 500.

So in the equal weight versus the 500, that equal weight is the substitute for small and the 500 is the bigger companies. And then if you compare the 500 to the 100, the 100 become the bigger companies. Or you can look at... mag 7 versus the 100, which gives you that increasing levels of concentration into those biggest companies. And it seems to me that at every level, the very long-term...

experience is that bigger companies have tended to underperform smaller companies. And you can see that in small caps relative to mid caps relative to S&P 500. relative to the biggest of the biggest. But there are clearly these periods of time, and there are about half a dozen of them going back 100 years, where you get...

probably a change in the market where there's a new technology that comes in and it sort of upends the market. And I just wonder if it's these companies growing so big relative to every other company in the market that that's what causes the...

that phenomenon to occur where you see these very big companies outperforming even though the experiences over the very long term of the smaller companies tend to outperform and this one that we're in at the moment started in say it depends on how you measure it but certainly from 2015.

to today so it's a decade it's a little bit more than a decade the way i measure it and that's that's the second longest in the data and the longest one is 45 to 61 which was uh i guess that's 16 years 15 and a bit years so we've got a little bit potentially a little bit further to go but i think that we've already sort of in terms of like rising above the

that that trend we're way way above trend we're very close to the as big as we've ever got relative so i'm sort of fairly positive about the fact that we turn around at some point here but it's been very painful getting here and i don't really know the cause i know that microgreen favors a passive bid but i think it's just a feature of the market that it doesn't it just happens yep

No, I think it's, I mean, people say, oh, it's different this time, which obviously are dangerous words. And they cite the fact that private companies are staying private for longer. And that's taking some of the... gains from the smaller companies because maybe that's true or maybe it's just a cycle like everything else and people are used to having cycles in the period of 3, 5, 10 years and really can't look past that over long periods of time. We're just not wired for that.

I firmly believe that some of these smaller companies that are well run. And you look at the difference between the S&P 600 and the Russell 2000, and you point that you've done a very good job on X. the times where you know it's a kind of a junk rally the russell 2000 outperforms and when it's actually a quality small cap rally the 600 outperforms and i think it'll be very healthy when you have a sustained s p 600

rally for a long period of time. And that's when you know things will shape up. I posted this chart yesterday, but it showed 35 years of the 600 versus the 2000. The 2000 is absolutely... the 600 which is that has the profitability and quality filter and they are slightly bigger companies has trounced the the 2000 which has no quality fit filter but there are you can see it in the chart there's a 2000 spike there's a

2021 spike and there's this 2024 to 25 spike that we're going through now and it seems to me that we're in that looking at that chart it's a long way above trend so I've been watching that to sort of waiting for that to break down you know i'm a fundamental value guy look at the 600 as being like that's still

fairly bloated and junky compared to what you can get out of a concentrated portfolio of genuinely undervalued cash flowing kind of businesses. But I just, I think it's easier to explain it in that 600. because folks can sort of understand that concept that it's a passively selected index. Have you ever found out why they don't have 600 names in it?

No, why is that? I didn't know that. I don't know. I'm asking you. Well, the wheelchair 5,000, there's not 5,000 companies to stick into it anymore. Yeah, yeah, that's, yeah. It's... I always found that kind of interesting or kind of funny. There's lots of causes, right? Like Sarbanes-Oxley in 2000 made it so much more expensive for small companies to go public. And so that's... push a whole lot of companies to stay private for longer. But now I think we've got this funny...

private bubble as well where a lot of these private names are at valuations that they just wouldn't get in a public market and then every now and again they come public and get smashed to pieces and there was a twitter account yesterday saying public markets are brutal to these companies like these things are down 60 plus when they they have a little pop when they come out because they get you know they restrict the amount that they sell and then they

promote it heavily and they have a ramp for the first few days where they shift all the shares that they want to sell but then these things like collapse pretty quickly after that I think StubHub is down significantly. They tried to go public multiple times and they just picked the absolute wrong time to do it. But yeah, no, a real measure of value is...

you know, the public markets versus the private markets in terms of, and it's, it's, it's quite striking. Get to mark your own homework. You always do it a little bit better than when the teacher does it. I know. I mean, there's a lot of things that worry me. That's one of them. The private credit is an accident waiting to happen. There's a lot of kind of danger signs.

It's always credit. Credit goes first in some way, shape or form. Yeah. Well, it's always greed, which then leads to that. But yeah, no credits. And you look at the credit spreads, you're not getting paid at all. I don't know why anyone is buying a corporate bond now where the spread that you're getting compared to treasuries is almost nothing.

I'd rather just keep it in treasuries and take my risk on the equity side. It's not investment advice, but HYG versus TLT is always something interesting like that. Yes. How do you maintain conviction when are trades going against you? I take it off my screen. Ignore it. I ignore it. I mean, you have to be... One, I buy things slowly over time. I mean, that's one thing. But yeah, you just know the business and we have stocks within our team where if...

It goes against us. We'll let another analyst take a look at it. And, you know, sometimes you just have the psychological bias and that's something you really have to train yourself on. also being willing to admit you're wrong. And being early by six years is to me the same thing as being wrong. So you have to be very humble in this business. But you also can't be swayed by short-term moves. But if something's not working out for a year or two, you really have to reevaluate the thesis.

That would have kept you out of Dillard's. Didn't work for the first six years and had a 10-bagger in the seventh year, but that's okay. You're going to miss a few like that. Yes, no, Dillard's was, we did an issue, we used to do these summer thematic pieces, I think we did in 2005, Companies Worth More Dead Than Alive, and Dillard's was one of them.

Wow, that thing had, that was a lesson in patience. That was a little, it had a little bit of a, it was a little bit of a benefit of the COVID STEMI, I think, as well. Yes, yes.

Do you feel like there are any industries today that are particularly fertile for mispricings? I mean, we spend most of our time on things we can touch, feel, and understand. So we tend to gravitate towards things like consumer-oriented names, communications, financials, industrials. So it's hard for me to say that we don't generally take a sector view. We do it one stock at a time. If I look at our portfolio, though, we have a decent amount of insurance names.

partially because they've done quite well. You know, being in this, I'm worried about the, you know, the start of a hard market. So that's something I keep in the back of my mind. you know we're generally sector agnostic and you know we try to and when we're building a portfolio we're okay having a decent sector bet but we do it by accident not necessarily with

You know, we do it on a stock by stock basis. I think I've seen health care is one sector that there's been a lot of discussion on on Twitter, at least about health care. And I think that there's some.

interesting healthcare names biotech as well as being a little bit adjacent to healthcare but you've got a few healthcare names that you think are interesting do you want to go with merc do you want to start yeah yeah no yeah no those um they're hated You know, you're worried about government, you know, intervention, etc. But, you know, that's been the story on on health care names since since Hillary Clinton tried to remake health care in the 90s.

But overall, they've been pretty good bets. So, yeah, Merck's interesting. People think people are worried about the 28, 2028, 2029, Keytruda, you know, expiration, which. You know, it seems like they're going to be able to extend the patent for some of their medications longer than that. Plus, they have a very good pipeline. Plus, they're getting a tremendous amount of free cash flow that they're being able to invest in other drugs.

You have a company like Medtronic that has done nothing for years. It finally looked like it woke up. And that's something we're happy about. A company called Cooper, which is a...

Their main business is contact lenses. They also do some women's health. There's a lot of interesting companies within the healthcare sector. You want ones with good balance sheets that can withstand... you know short-term pressures and you know something like merc and uh pfizer you're getting paid handsomely to wait yeah what about what about pfizer you know we like that i mean that's certainly more hated

than Merck. You know, Merck would probably be our choice of the two. But, you know, if you want to kind of diversify, you know, I don't think you can go wrong with both. Again, not investment advice. Has there been any sort of political blowback from the vaccinations or sort of just general market kind of revulsion to the vaccinations?

network TV, but I catch it whenever there's a Super Bowl or something like that. And I'm always shocked at how much pharmaceutical advertising there is, particularly because I come from a country that they banned it. So I'm always shocked at how much there is on. And then it's just wall-to-wall coverage. Yeah. No, it is amazing how much money they spend on ads. And I think in Australia, it's probably a decent public policy.

Not to do that. Is there a blowback? Are you talking about Pfizer specifically or just all of them? Well, not necessarily all of them, but Pfizer, I just thought was one of the ones that was out front and center. I think the Moderna stock price chart is sort of... Oh, God, yeah. It's something worth having a look at if you haven't seen it. Yeah, no, it's not a pretty chart, to say the least. I think a lot of the...

Price concerns has been kind of the RFK factor. It was also a big sugar heist on Pfizer specifically going out of COVID. And I don't think people realized how little people wanted the vaccines. know post the pandemic so that's obviously been a um been a factor they also made a large acquisition put on a lot of debt And it's too early to tell how that acquisition is going. So there's certainly a lot of uncertainty in there. And that's why I think you have to kind of place your bet accordingly.

Have you looked at HHH? Is that something you can discuss? Yeah, no, I mean, we've looked at it. It's kind of at this point a show me story. You know, Bill Ackman, you know, took control of the company. It looks like he's going to buy an insurance company and try and turn it into the Berkshire Hathaway model. Who knows? I mean, he's a great investor. I have a lot of respect for him. Maybe he'll do it. Maybe he won't.

But, you know, their traditional master plan community business is doing really, really well. And you just have to wait and see to see what Bill buys. One, for the insurance company. And two, he's going to use the insurance company to buy common stocks, I believe, and also to buy other businesses with the float. So it's, you know, he's very.

The one thing I really like about it is looking at it, there's really no situation where he makes a lot of money and shareholders don't. So that's something that I think is worth. pointing pointing out he's got quite a generous compensation plan there that's been the that's the uh do you i don't i don't i haven't looked at it uh in detail what is it

It had something to do with the, it's from memory, because I wrote a letter, you know, I think was, you know, six months or so ago, kind of objecting to it. He's since toned it. down but basically they get i i believe some sort of carry i could be wrong based on how the share price per share value is created he if the stock does well he'll make a lot of money um but that's that's fine you know hhh really was going nowhere fast before he came in so it's hard to yeah we'll see

Are there any industries that you guys avoid entirely? Are there things you won't touch? I mean, I just think we can't understand. I mean, like a biotech, you know, heavy technology, commodity-oriented businesses, you know, we stay away.

generally from from energy although we do own lowe's which is um and i've written about it which you know has some energy exposure that's the tish family uh lowe's not the home improvement company but we'll pretty much go anywhere we'll go in any market cap you know pretty much any sector um just where we can make money for our clients do you think the market

consistently misunderstands asset-heavy businesses. It certainly seems that way for the time being, some of the parts stories, asset-heavy stories. You know, the Madison Square Garden Sports, for example, is a big one. Doesn't necessarily do a great job with real estate holdings either. And that might go back to what we were talking about before with less analyst coverage. I'm not really sure. People just, you know, people tend to not give it credit.

is it because this sort of there's no real plan to sell the asset so you in the interim you've sort of got slightly subpar flows out of it is that the yeah But if it's not needed in the day-to-day operations, or you can do something like MGM did and do some sort of deal with Blackstone to monetize their real estate.

Yeah, I guess you have to look at every situation differently. Something like a retailer where you hear Target owns a whole bunch of stores, the real estate's worth a significant percentage of the market cap, but they have to... have their store somewhere it's needed in the day-to-day operation so you have to take everything on a kind of a case-by-case basis uh let's talk a little bit about portfolio construction how how concentrated do you guys like to be in the funds

I'd say, I mean, it depends on, you know, we treat each client individually. So it's just not like a model portfolio. So we'll go as low as 25, 30 names, as high as 50 or so. We don't want to own, you know, we want to be able to make meaningful bets on companies. We generally like the top 10. names to be 30% to 50% of the portfolio, if possible. We're sector agnostic, as I mentioned before, but we...

But we pay attention to it just to make sure we're not owning, by accident, owning 50% financials, for example. So we're going to look very different. than almost any major any of the indices um and and that's fine by us what's your cell discipline how do you think about selling we're reluctant sellers Most of our clients are taxable. So, you know, my dad is instilled in me. It's not what you make, it's what you keep. So if you own a great business, if you look at our top holdings as a firm.

You'll see a lot of Home Depot. You'll see a lot of Ameriprise. You'll see a lot of JP Morgan. We bought all those or the majority of those in like 2007, 2008, 2009. And when you can buy companies like that, that are great companies and buy them cheaply, selling them are very difficult because you have to find something that's 25% better after paying capital gains tax.

You know, if it's a high quality business, our sell discipline is different than when our business is maybe a medium quality business. And I don't mind having large positions in companies, you know, after purchase. Do you have any macro considerations? Do you think about macro at all? I think anyone who says they don't think about macro is lying to you. I mean, you have to. If you read the paper, you're thinking about macro.

And somehow it seeps into your brain. But I try... Someone can always paint the story that the sky is falling. that things are terrible and there's always a reason not to buy stocks but historically that's been the wrong move so i you know i think about it and maybe if i'm a little cautious on the market if new money comes in i'll invest it more slowly but i try not to um you know let it let it influence our day-to-day decisions as much as humanly possible

What's the next 5, 10, 20 years look like for value or for fundamental strategies? Oh, better than the last 15 or 20. Listen, how AI... is going to change everything. I have absolutely no idea how it's going to change finance. How is it going to change medicine? How is it going to change law? I mean, just look at how much investing has changed. We started with the calculator.

uh to to now where everything is at the tip of your fingers i can't even imagine what it's going to be like 15 20 years from now um but i still think that time arbitrage will be critically

will be one of the few things that AI will not be able to help investors with because people are inherently not patient. It doesn't seem that the trend towards more information... has helped people be better investors so I don't know that AI helps people necessarily no absolutely it's more the process of investing and getting that information but yes no I I don't think investors are

well served by having you know television networks you know talk about the dow in crisis i love when um when now on cnbc they say or The headlines Dow down 800 points. I mean, it's like nothing. Nobody even knows what that means. Yeah. I say that the CNN fear and greed. It's an extreme fear. We're off about 3%. Yeah. I don't know what drives that. I mean, I know literally the components that drive it, but I don't know why it seems to swing to extreme fear so quickly.

You know, one thing I don't do a good enough job is kind of writing down how you feel at certain periods of time. You know, one of the things that I did and I just I wish I bought more. was during liberation day was by an equal weighted basket of our forgotten 40 and just just did it and i think i did it on april 10th and the plan was to do it a couple more times the thing's up like 37 percent in you know and the timing was just really lucky but think about how much

It hasn't been that long of a period of time, and everyone thought the world was ending, that the economy was going to implode. And listen, I think it was a horrible policy idea, and I don't want to get into politics, but you certainly can have a... a long conversation about that but you know the guy the s p goes down four or five points or down four or five days in a row i mean who cares um this

It's certainly not the end of the world. We're coming up on the end of the interview. Jonathan, if folks want to follow along with what you're doing or get in contact, what are the best ways of doing that? Sure. We're at Boyer Value. And if you want to know more about the Forgotten 40, just go to boyervaluegroup.com forward slash value and or just go to boyervaluegroup.com.

And you can find us and we'd love to hear from anyone. Good stuff. Jonathan Boyer, Boy Valley. Folks, we'll be back next week. Same about time, same about channel. JT will be back. He'll have some veggies and some... new insights on China, I'm guessing. So look forward to seeing everybody then.