Jonathan Boyar on opportunistic value in $UBER, $UNF, $HHH, $MSGS, $BATRA and $MRK | S07 E41
Summary
Small Caps: Expectation of a coming small-cap revival driven by long-overdue re-rating and time arbitrage, with quality small caps (S&P 600) preferred over junkier names (Russell 2000).
Small Cap M&A: Rising deal activity seen as the catalyst to surface intrinsic value in overlooked names, highlighted by recent transactions and strategic asset sales.
Sports Franchises (MSGS, BATRK): Scarce trophy assets like MSG Sports and Atlanta Braves Holdings are undervalued versus private-market comps, with catalysts including minority stake sales, potential breakups, buybacks, and favorable media economics.
Uber (UBER): High-conviction idea with strong EBITDA growth, buybacks targeting ~50% of FCF, and potential to be the central aggregator for autonomous fleets rather than being disrupted by them.
UniFirst (UNF): Cheap garment-rental operator with activist involvement, family dynamics creating a sale catalyst, and a prior bid from Cintas providing a valuation marker above current prices.
Healthcare/Pharma (MRK, PFE): Constructive on large-cap pharma; Merck’s Keytruda concerns appear manageable given extensions and pipeline, while Pfizer faces post-COVID normalization and debt from acquisitions but offers income and optionality.
Market Structure & Risks: Passive concentration skews the S&P 500 toward tech-like exposure, creating potential risk for shorter horizons; credit spreads are tight, favoring Treasuries over corporates for defensive capital.
Transcript
I think we're live. This is Value After Hours. I am Tobias Carile. Not joined today by Jake. He's he's on the road. He'll be he'll be back next week. Uh 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 won't personally. [laughter] He uh as soon as he found out you were on, he he No, no, I'm kidding. He It's been planned out in advance. Uh we've known each other for a long time. I I remember we we used to meet on the floor of a value investing congress. >> Yeah. When people used to have go to conferences. It was that that was those were the days. >> That was a long time ago. Um folks who don't know you, tell everybody a little bit about Boyer Value. >> Sure. Um, Ber Value Group uh started in 1975. It's a family-run business started by my father Mark. We we started as a uh a research boutique basically serving hedge funds, mutual funds, family offices, looking at stocks in a a completely different way. What would an acquirer pay for a business? >> I love it. >> Great approach. >> Which Yeah, which I'm sure is something you can uh appreciate. um you know basically taking a private equity approach to to public markets and you know we developed a good reputation in the in the value community and over time you know we formed Ber asset management in in 1983 and today we have two businesses uh still the same we have a research business that's still going strong and a money management business you know serving kind of high netw worth individuals and and institutions so it's kind of a hybrid approach And uh t take us through a little bit more about the the philosophy and the strategy. You're looking for special situations or or just things that are undervalued on a on an 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 as well. And it's really to take that uh business person's approach. And you know, if something's selling at a material discount to what an acquirer 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 the catalyst. What's going to make that stock ascend in value over a reasonable period of time? And we're we're more patient than than most. To us, a reasonable period of time is 2 3 4 years. Uh this way it helps us avoid value traps and you know that's why we take we take that catalyst approach >> uh over the period that you've been running. So you you you took over from or your dad and you guys continue to work together a little bit. I know he continues to sign the the docks that go out. Um >> yeah, he's still uh he he's he's still involved. Uh you know, going strong, I think at 80 84. Um and he's he's he's doing great. And you know, he helps with the idea generation and you know, I'm running the day-to-day operations and also portfolio manager and and help with the research effort. So we we have a great team. We have myself and my father and then four great analysts. uh many of which have been with us for for quite some time. Everyone on our team is a generalist. We really don't believe in industry specific analysts. You know, we like to say, you know, industry analysts can tell you everything there is to know about a stock except when to buy it. So, >> that's right. >> So, we we just want people to, you know, come up with ideas that they think are are timely. And you know, I think what kind of gives us our edge on the money management side is our research operation is we have to continuously come up with ideas for a really sophisticated audience. And you know, they they really challenge us us challenge us on those ideas. They ask us, you know, the assumptions behind our our models, you know, they they ask us if we're crazy. Uh it's it's really it's helpful. And then of course they pitch us ideas. We're 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, you know, this was the biggest um technological advancement that you that you have. You have an you know, if you're able to afford $1,000 for a calculator or whatever it costs, you know, 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, etc. So, you know, we started as a real deep value net type of shop. Uh, we we even had a report, a net net reports. Um, and that has changed to we've really gravitated more towards quality and um, which I I know is is something that a lot of people say, but it's more avoiding the really deep uh, you know, the deep value situations. you know, 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, 3, four, 5 years. It's good for a trade, but not necessarily um 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 probablyformational mostly? That's a that's a net net world. And then maybe a calculator means that you can calculate a little bit faster. But to 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, so I think that's that's what's really gives us our our edge. Also another I guess edge is small cap and micro cap names are are all but ignored. You know many of the names we follow have one two three analysts. So there are some people who just not looking at the names. >> Do you think that that uh normalization is a little bit harder over the last 5 years given the we had co co stimulus that it's just been a weird kind of market in between. I feel like there's been quite a lot of soggginess since 22 when a lot of that sort of co stimulus worked its way through. >> Yeah. No, I mean we're we're living uh in extremely interesting volatile times with uh you know a once in a century thing happening every few years. Uh so yes normalized is 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 5 years. You might want to keep a a larger than average cash position if you're worried um about the future as a hedge. But yeah, no, I I think generally um but generally your your your point is is well taken. What what misperceptions do people have about value, modern value, given that it's sort of 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. >> Mhm. >> Well, I think the misperception it doesn't work. Uh I would I would 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 um 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 I accept that I think people might think, you know, lowquality stocks, etc. I mean value has is a big tent from GARP to um 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? >> Yeah, it's I wish I could come with a clever answer and say, you know, we have this great uh proprietary formula that spits out these these ideas. It's it's a very manual process. You know, our team, you know, as I said, has four analysts, both 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 that's what they do. And we're 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 uh for ideas. You know, we love looking for companies with hidden assets. You know, assets that are not properly reflected on the balance sheet. That's something that we we like. We really like great consumer franchises. Um we particularly like them when they're masked by a corporate name. What I mean by that is if I told you the name Aushnet, I don't know if you've heard of it or not. Um most people uh haven't um you know it's a golf club manufacturer um and you know when when they're masked by these uh corporate names you know they own titleists etc. Uh people tend to ignore it. We like looking at fall fallen angels the one 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 your 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 it's difficult if not impossible. I mean, it's part of it is just gut feeling from 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. any value investor that's you know that's a hazard of of of being in the business you know you you have to really take a hard look and see is this a cyclical or a secular problem and you know so you know we've we've gone through we've made our share of mistakes especially with these content companies um you know five six seven years ago where we thought you know we didn't antic anticipate how the world would change with streaming and that's you but you learn from that and you know that's 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 we wrestle with internally [snorts] um so far we the answer is we don't think so but after what happened with the content companies you know five years ago or so you know we're open into 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. >> Uh what's the first thing you like to look at when you're researching a company? >> I just like to get to know why someone how they make money and why someone would want to use use their product or services. I mean that's I know that's simple but you know if you can't get a a handle handle on the 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 uh 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 of research on something. >> Uh what does what does man what role does management play? How how hard are you looking at management? >> Uh more and more lately. I I think that's something that I've grown. You know, I used to come up with, hey, um just find a great business. Management's a great or great salespeople. You know, they're only going to tell you that everything is is fantastic. I personally never met a uh a you know, a CEO who's who's told me business is terrible. you know, so they're they're they've gotten that where they are for being great salespeople, but trying to hear them, especially in larger companies, interviewed as much as possible on either on podcast or uh on TV, etc., and just see what makes them tick, are they good, you know, is is there alignment? Are they in it for the long term? So, so I I think management it's not it's not a it's it's getting more and more important to our process. >> How do you think about downside protection and uh permanent impairment of capital? >> No, it's a great question. Um I I think the only way to to do that is one never use leverage. Extremely important. Um, and two, you have to buy something at a significant margin of safety, and that that's your downside protection. Um, 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 uh 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 it's what would an acquirer pay for that business? We look, you know, in the priv like in the private markets, you know, is it RevPar, you know, in the hotel industry, what whatever someone, you know, that that's the essence of what a business is really worth is what is someone willing to to pay for the entire business and and that's how we that's how we look at it. There are things where you have some of the parts stories I think is is also critically important. You know, you know, we've been quite vocal on a company like Madison Square Garden Sports, for example, which, you know, is controlled by James Dolan. It owns the the New York Knicks and and the Rangers. It's uh the enterprise value, I think, is $5.5 billion. The Knicks alone probably worth 10. Um the the Rangers probably worth four. So there, I think I have a decent margin of of safety there. and and you're also, you know, that it 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 [snorts] it's worth a lot to negotiate a transaction because there's 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 cuz they're run Yeah. Well, yeah. There it's these are not statistically cheap companies, but one the economics are are only getting better with TV deals, etc. and the globalization of of some of these sports. But yeah, I mean this it's it's the ultimate trophy. These things the last time the Knicks went on sale were I think 1992 early at least early 1990s. So when they do come up for sale, people are willing to to pay up. >> Uh how do you incorporate qualitative research into the quantitative research? Um, we just read everything there is to know about a company. I mean, we're just curious. We we we ask people what they think about the product or service. We um 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 you know why is someone using using this product or service? >> Um do you want to take us through some of the some of the names in the forgotten 40 the boy forgotten 40 tell folks what that is first. Oh yeah, absolutely. The uh Forgotten 40, it's it's our flagship product. It comes out um 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 li a look at all the companies that we research in in our coverage universe and which ones are going to do we ones we're going to do the best because a catalyst we identify and then we do one-page snapshots of them and people love it. It's a great reference guide. Um we sell it on an allocart 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 is 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 univer it's. a um garment rental business. It's the third largest one, not exactly the most exciting company in the world. Uh cashrich balance sheet, trades at about $160 a share. Earlier in January of of this year, Cintas made an offer for the for the entire business. U first offer $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 trades at like eight or nine times IBIDA and the margins are much lower than than Cintas. The multiple 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 fund um filed, 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. Uh 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 Synthas's first offer. And 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 uh management and the family is going to be pressurized to um you know deliver value for shareholders whether that's increased 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 on the balance sheet? How do they let that build up? Do you know what that's been what [snorts] the reason for that has been? >> Conservativism. They the 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 they're third in third in the market uh they have national accounts um just it's is it a great business no it's a it's a very good business >> and what are they who are they is it uniforms that they're renting or what what are they renting >> yeah uniforms that they're uh renting um 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 were on too but I think it's worked and it's contin continues to be interesting what's the what's the story Yeah. No, Uber is one of our highest conviction ideas. It's it's sold off a little bit in the last uh month or so along with with pretty much everything else. A lot of the fears around the company are unfounded. You know, people think robo taxis are going to kill them. I think they're going to be a beneficiary um of that trend. Actually, it's a well-run company. They're going to return about 50% of cash flow uh to shareholders in the form of buybacks. DHA has has done a fantastic job. They're going to different verticals. They're they're kind of becoming a super app and you know they're they're growing. I think they're growing IBIDA 30% per year for the past 3 years or so. I mean, it's been really impressive. I mean, it's you know, high fixed cost, low variable cost. So, it's they're in the right part of the cycle, and this could be one of those I hate using the word, you know, long-term compounders, but this is just a great business that's not um, you know, absurdly expensive and and something I' I'd want to own for long periods of time. >> Why do you think uh, Whimo is not a threat? Uh 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 I Whimo 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 what's the story there? >> Yeah, I mean, again, Madison Square Garden Sports is the trophy assets. We um big big fan of them. We we like things that they're are, you know, they're scarce assets. It's like it's like you're buying a publicly traded collectible. Uh you know, you you see these trophy assets go on sale. You see the Lakers go for $10 billion. You see a 10 just a 10% a minority stake in the New York Giants, the football team go for $10 billion. The the uh what was it? The the New England Patriots, I think 9 billion for a minority stake. So, 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, uh that he also can split the company into two, have a publicly traded, um New York Knicks team, have a publicly traded Rangers team to help show showcase value. Uh another team, Liberty, Atlanta Braves Holdings, it's controlled by John Malone. So you can't really have very different as different a set of owners as you do between having John Malone and James Dolan. Uh you know 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. uh he's been more of a seller than a buyer recently. And the two-year spin-off milestone from Liberty Media has already approached, so there's no tax consequences if it was bought or 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 your the uh 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 or the Braves. Um, let me just give a quick shout out to folks who are uh Warren Buffett from the land of retirement. What's up? Peditikfa, Israel, Breenidge, Toronto, Cleveland, Bendigo, Victoria must be daylight saving in Oz cuz the Aussies are awake. Boisey Idaho Durham Lausan Switzerland Belleview Limmerick what's up Colomb Jupiter Toronto Edinburgh Valparaso New London Holland Michigan Cesno New South Wales the Aussies are up Fremont California Tampa it's good having you guys here JT is uh on the road he's in China uh 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. Yeah. And the Aussies are waking up early for you. >> Well, I guess it's uh I guess it's morning there. It's it's tougher in the summer when we're on daylight saving and they're they're not, but we can do it this time of year. [gasps] Okay, that's good stuff. We'd ordinarily have JT's veggies. Uh, you can write it down. He's he's not here to do it this week, so there's no time stamp this week, folks. Um, 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 it's and listen, passive for the most part has been active significantly, and I could see why investors would 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 is now a 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 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 board decades. That was Exxon and GE. not names that I necessarily would want to own now. Um, of today's 10 largest companies, only four were on the list a decade ago and just one appeared 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 [laughter] that in that they quietly needed an end >> switch out the something gets changed every now and again. Um do you think that the decline because you you straddled that period where there was sort of ubiquitous sellside coverage and that seems to have gone away. Do has that hurt the markets do you think? >> I mean depends how you look at it. I I think it's given us opportunities. Um, I think it was we were talking about offline. I think what's going to obviously being a small and midcap investor has been extremely painful over the last decade or so. Besides interest rates getting lower, I think what's really going to help uh small cap uh investors is the fact um you know once you start getting M&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 you see that with WBD, um, you know, looking for deals. You you have, uh, I think Exalta announced this morning they're they're merging with Nikon. You see, uh, Top Golf, Callaway brands selling uh, 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, uh, you know, the structural parts of the of the market and and having less coverage has has certainly hurt, but I think for people who are long-term patient investors, it's it's going to really help. And what's amazing is there some really large companies with very little sellside coverage. I mean, it I had Thomas Pedy on my podcast, uh, who who was Interactive Brokers. He has like one or two sellside coverage. I mean, he's a huge firm. Lowe's, the the Tish family company has no sellside coverage. Universe, which is a smaller company, I think has two [clears throat] or three. So, it's, you know, the research business uh is a tough business and it's not particularly profitable for the banks. So, they stop doing it. >> Why do you think interactive has such a low why 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 would seem 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 didn't have an investment banker and I guess they don't do that many deals. They they keep a ton of cash on the balance sheet. So, >> right, >> brokers just ignore them. There's no other fees available. >> Yeah, not particularly. So, I mean, it's kind of an indictment on the uh 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 [snorts] is that the cause of the underperformance of fundamental sort of strategies or is that a result of the underperformance of of fundamental strategies? >> Can can you can you say that again? >> It was like a it was like a 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 transactional side >> and and it seems like that's really that >> um or maybe a little bit after that that we really started seeing the underperformance of fundamental strategies versus so this 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, it's that there's this sort of there's nobody to shine a light on the smaller mid midsize companies and and you know, for most folks aren't focused on the market. They're a little bit time poor. They need that sort of sellside research to to help them out there. >> Uh it's a very unsatisfying answer, but I think probably a little bit of both. Uh I I don't think there's a one type thing, but I think a lot of it it's it's one of the greatest momentum trades of all time is, you know, just investing in the S&P over the last, you know, couple of years. And you have flows into these funds every 15, the 15th of the month or the 30th whenever people, you know, cash their paychecks. Um, and you know, the buy the dip has been a fantastic strategy and you know, and it's a great strategy till it isn't. So, uh, it's [laughter] not unprecedented though. I've 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 in the equal weight versus the 500 that equal weight is the substitute for small or 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 in like increasing levels of concentration into those biggest companies and it seems to me that at every level the very long-term um experience is that bigger companies have tended to underperform smaller companies and you can see that in small caps relative to midcaps relative to S&P 500 relative to the biggest of the biggest but there are clearly these periods of time and there are about a half a dozen of them going back a hundred 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 on them to occur where you see these very big companies outperforming even though the experience is over the very long term that 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 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 Michael Green favors a a passive bid, but I think it's just a feature of the market that it does it. It just happens. Yep. No, I think it's uh I mean people say, "Oh, it's different this time," which obviously are dangerous words. and and they cite the fact that private companies are staying private for longer and and that's taking some of the gains from the smaller companies because >> maybe maybe that maybe that's true or maybe it's just >> you know cycle like everything else and people are used to having cycles in the period of three five 10 years and really can't look past that over long periods of time. we're just not wired for that, you know. So, it's I I I firmly believe that some of these smaller companies that are well-run and and 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 on X, you know, the 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 for 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's absolute trs the 600 which is the has the profitability and quality filter and they are slightly bigger companies has trounced the the 2000 which has no quality filter but there are you can see it on 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 it's a long way above trend So, I've been watching that just sort of waiting for that to break down. And, you know, I'm a fundamental value guy. I 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 it's easier to explain it in that 600 >> because folks can sort of understand that that concept that it's a it's a it's a passively selected uh index. Have you ever found out why they don't have 600 names in it? >> No. [laughter] Why is that? [clears throat] I didn't know that. >> I don't know. I'm asking you. I You It's >> Well, the wheelchair 5000 there's 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. I >> mean, there's lots of causes, right? Like Syain Oxley in 2000 made it so much more expensive for small companies to go public. And so that's p pushed a whole lot of companies to stay private for longer. But now I think we've got this funny p uh 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 the 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. >> Look like it's I think StubHub is down, you know, significantly. They tried to go public multiple times and they just picked the absolute wrong time to to do it. Um but yeah, no a real measure of value is, you know, the public markets versus the private markets in terms of uh and it's it's it's quite striking. >> Get to mark your own homework. You always do a little bit better than >> when the teacher does it. >> Oh, no. I mean, there's a lot of things that, you know, worry me. That's one of them. The private credit is is an accident waiting to to happen. Um, you know, there there's a lot of kind of danger signs. >> It's always credit. Credit goes first in some way, shape, or form. >> Yeah, it's well, it's always greed. Um, which then leads to uh leads to that. But yeah, no, credits and you look at the credit spreads, you're you're not getting paid >> um at all. I don't know why anyone is buying a corporate bond now where the >> the spread that you're getting compared to treasuries is is almost nothing. I'd rather just, you know, keep it in in treasuries and and take my risk on the equity side. >> It's not investment advice, but HYG versus TLT is always a something interesting like that. >> Um, how do you maintain conviction when a trade's going against you? >> I take it off my screen. uh [laughter] >> ignore it. >> I ignore I mean you have to be you know one I I buy things slowly over time. Uh I mean I I mean that's one thing but yet you just know the business and 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 the psychological bias and and that's something you really have to train yourself on and and also being willing to admit you're wrong. Um and being early by six years is is to me the same thing as being wrong. [laughter] So you have to um you have to be very humble in this business. But you you also can't be swayed, you know, swayed by short-term moves. Uh, but if something's not working out for a year or two, you really have to re-evaluate the the thesis. >> That would have kept you out of Dillards. Didn't work for the first six years and had a 10 bagger in the seventh year. But that's >> Yes, >> that's okay. You're going to miss a few like that. >> Yes. No, Dillards was uh we did an issue. We used to do these summer thematic pieces 200 I think we did in 2005 companies worth more dead than alive and Dillards was was one of them. And wow, that 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 uh the co sty I think as well. >> Yes. Yes. >> Um do you feel like there are any industries today that are particularly fertile for mispricings? Um I mean we spend most of our time on things we can touch, feel and understand and you know so we tend to gravitate towards things like consumer oriented names, communications, financials, um industrials. So it's hard for me to say that you know we don't generally take a sector view. We do it one stock at a time. Uh if I look at our portfolio though, you know, we have a decent amount of insurance names, uh 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. Uh so that's something I I keep uh in the back of my mind, but you know, we're we're generally sector agnostic and you know, when trying to and when we're building a portfolio, we're okay having a decent sector bet. uh but we do it by accident not necessarily with you know we do it on a stockby stock basis. >> I think uh I've seen healthcare is one sector that >> uh there's been a lot of discussion on on Twitter at least about healthcare and I think that there are 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 with? >> Yeah. Yeah. No. Yeah. No, those um they're hated. You know, you're you're worried about government, you know, intervention, etc. But, you know, that's been the story on on healthcare names since the since Hillary Clinton tried to remake healthcare in the '90s. Uh but overall, they've been pretty good bets. So, yeah, Merc's interesting. People think people are worried about the 28 2028 2029 Katruda, you know, expiration. which, you know, it seems like they're going to be able to extend the patent for for for some of their medications longer than that. Plus, they have a very good pipeline. Plus, they they're getting tremendous lot of amount of free cash flow that they're being able to invest in other drugs. You have a company like Metronic that has done nothing for years. It finally looked like it woke up. Um, and you know, that that's something we're we're happy about. a company called Cooper um which is a their main business is contact lenses. Uh they also do some women's health. There's a lot of interesting companies within the healthcare sector. You you want ones with good balance sheets that can withstand um you know short-term pressures and you know something like Merc and uh Fizer you're you're getting paid handsomely to wait. >> Yeah. What about what about FISA? you know, we like that. I mean, that's certainly more hated uh than than than Merc. You know, Merc would probably be our our choice of the of the two, but you know, if you want to kind of diversify, you know, I don't think you you can go wrong with 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 um revulsion to the vaccinations? I don't watch a lot of network TV, but I catch it whenever there's a Super Bowl or something like that. I'm always shocked at how much pharmaceutical advertising there is, particularly because I come from a country that that they banned it. So, I'm I'm always shocked at how much there is on and then it's just wallto-wall coverage. >> Yeah. Um, no, it is amazing how much money they spend on ads and and I think in Australia, it's probably probably decent public policy um uh not to do that. I is is there blowback? You know, you're talking about Fer Fizer specifically or just all of them? >> Well, not not necessarily all of them, but Fizer I just thought is the was one of the ones that was out front and center. I think Madna the Madna stock price chart is sort of >> Oh god. Yeah, >> it's something worth having a look at if you haven't seen [laughter] it. >> Yeah. No, it's not a it's not a pretty chart um to to say the least. Um I I think a lot of the price concerns has been you know kind of the RFK factor. There was also a big sugar heist on Fizer specifically going out of COVID and I don't think people >> realized how little people wanted the vaccines you 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, you know, there's a lot of there's certainly a lot of uncertainty uh in there and that's why I think you have to kind of place your bet accordingly. >> Um, have you looked at HH? Is that something you can >> Yeah. No, I mean, we've we've we've looked at it. It's kind of at this point a show me story. Uh, you know, Bill Aman, you know, took control of the company. It looks like he's going to buy an insurance company um and you know try and turn it into the Birkshire Hathaway model. Who knows? I mean he's a great investor. I have a lot of respect for him. Uh maybe he'll do it, maybe he won't. Um, but you know, I you their traditional master plan community business is doing really really well and you just we're gonna have to wait and see um 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 you know with the float. though it's, you know, he's very in. 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 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 Well, I I don't I don't I haven't looked at it uh in detail. What is it? >> It it it has something to do with the uh I it's from memory because I wrote a a letter you know I think was you know 6 months or so ago kind of objecting to it. He it's he since toned it down but basically they gets I I believe some sort of carry. I could be wrong based on how the 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, HH really was going nowhere fast before he came in. So, it's hard to, you know, we'll see. >> Uh, are there any industries that you guys avoid entirely? Are there things you won't touch? >> I mean, I just things we can't understand. I mean like a biotech, you know, heavy technology, uh, commodity oriented businesses. You know, we we we stay away generally from from energy, although we do own Lowe's, which is, um, and have written about it, which, you know, has some energy exposure. That's the Tish family. Uh, Lowe's, not the home improvement company. Um, 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? >> Certainly seems that way for the for the time being that you know some of the part stories asset heavy stories you know the Madison Square Garden Sports for example is is a big one doesn't necessarily do a great job uh with real estate holdings either. Um, so the and that might go back to what we were talking about before with less analyst coverage. I'm not I'm not really sure. Um, 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 sort of got slightly subpar flows out of it. Is that the >> Yeah. to it? if it's not but if it's not needed in the day-to-day operations or you can do something like MGM did and and do some sort of deal with Blackstone and to monetize their real estate you know yeah I guess you have to look at every situation differently something like a retailer where you have the you know here Target owns a whole bunch of stores the real estate's worth a significant percentage of the market cap but they got 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 depends on you know we treat each client individually. Um so it's just not like a a model portfolio. So we'll go as low as 2530 names as high as 50 or so. Um, we don't want to own, you know, you know, we want to be able to make meaningful bets on companies. We generally like the top 10 names to be, you know, 30 to 50% of the of the portfolio if if possible. You know, we we're sector agnostic as I as I mentioned before. Um but we uh you but we pay attention to it just to make sure we're not owning you know we by accident owning 50% financials for example. So we're um we're going to look very different than almost any major any of the indices um and and and that's fine by us. >> What's your sell discipline? How do you think about selling? >> We're reluctant sellers. Um, most of our time 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 if you look at our top holdings as a firm, you'll see a lot of Home Depot, you'll see a lot of America, 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 have done that that are great companies and buy them cheaply selling them are very difficult because you you have to find something that's 25% better after paying capital gains tax. So it's, you know, if it's a high quality business, our sell discipline is different than when our the the business is maybe a medium quality business. And I don't mind having large positions in in companies, you know, after purchase. >> Do you have any uh macro considerations? Do you 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 I mean, if you read the paper, you're thinking about macro. uh and somehow it seeps into your into your brain. Um but I try it's all 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 if new money comes in, I'll invest it more slowly, but I I try not to um, you know, let it let it influence our day-to-day decisions as as much as humanly possible. >> What's the next uh 5, 10, 20 years look like for value or for fundamental strategies? >> Oh, better than the last 15 to 20. Uh [laughter] I mean 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 this look at how much how much investing has changed you know we started with the you know 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 will be one of the few things that AI uh will not be able to help investors with because people are inherently not patient. >> 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 I love when um when now on CNBC they say or or the headlines Dow down 800 points. I mean, it's it's like nothing on >> Nobody even knows what that means. >> Yeah. Yeah. [laughter] >> I I say that the CNN fear and greed meter is like it's it's it's an extreme fear. [laughter] We're off about 3%. >> Yeah. Yeah. >> I don't know. 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 a good enough job is is kind of writing down how you feel at certain periods of time. You know, one of the things that I I did and I just I wish I bought more was during Liberation Day was buy an equal weighted basket of our forgotten 40. I 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 is up like 37% in you know and the timing was just really lucky. Um, but think about how much hasn't been that long of a period of time and everyone thought the world was ending that the the economy was going to implode. And listen, I think it was a horrible policy idea and we can I don't want to get into politics, but you 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 or down four or five days in a row. I mean, who cares? Um, this it's it's it's it's certainly not the end of the world. >> Um, we're coming up on the end of the interview. Jonathan, if folks want to follow along with uh what you're doing or get in contact, what are the best ways of doing that? >> Sure. Uh we're at Boyervalue and if you want to know more about the forgotten40, you know, just go to boyervalgroup.com/value. Um and or just go to boyervalgroup.com and you can you can find us and we'd love to hear from anyone. >> Uh good stuff. Jonathan Boyer Boy value folks will be back next week. Sat time, Sbat channel. JT will be back. He'll have some veggies and some uh new insights on China, I'm guessing. So, uh look forward to seeing everybody then.
Jonathan Boyar on opportunistic value in $UBER, $UNF, $HHH, $MSGS, $BATRA and $MRK | S07 E41
Summary
Transcript
I think we're live. This is Value After Hours. I am Tobias Carile. Not joined today by Jake. He's he's on the road. He'll be he'll be back next week. Uh 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 won't personally. [laughter] He uh as soon as he found out you were on, he he No, no, I'm kidding. He It's been planned out in advance. Uh we've known each other for a long time. I I remember we we used to meet on the floor of a value investing congress. >> Yeah. When people used to have go to conferences. It was that that was those were the days. >> That was a long time ago. Um folks who don't know you, tell everybody a little bit about Boyer Value. >> Sure. Um, Ber Value Group uh started in 1975. It's a family-run business started by my father Mark. We we started as a uh a research boutique basically serving hedge funds, mutual funds, family offices, looking at stocks in a a completely different way. What would an acquirer pay for a business? >> I love it. >> Great approach. >> Which Yeah, which I'm sure is something you can uh appreciate. um you know basically taking a private equity approach to to public markets and you know we developed a good reputation in the in the value community and over time you know we formed Ber asset management in in 1983 and today we have two businesses uh still the same we have a research business that's still going strong and a money management business you know serving kind of high netw worth individuals and and institutions so it's kind of a hybrid approach And uh t take us through a little bit more about the the philosophy and the strategy. You're looking for special situations or or just things that are undervalued on a on an 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 as well. And it's really to take that uh business person's approach. And you know, if something's selling at a material discount to what an acquirer 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 the catalyst. What's going to make that stock ascend in value over a reasonable period of time? And we're we're more patient than than most. To us, a reasonable period of time is 2 3 4 years. Uh this way it helps us avoid value traps and you know that's why we take we take that catalyst approach >> uh over the period that you've been running. So you you you took over from or your dad and you guys continue to work together a little bit. I know he continues to sign the the docks that go out. Um >> yeah, he's still uh he he's he's still involved. Uh you know, going strong, I think at 80 84. Um and he's he's he's doing great. And you know, he helps with the idea generation and you know, I'm running the day-to-day operations and also portfolio manager and and help with the research effort. So we we have a great team. We have myself and my father and then four great analysts. uh many of which have been with us for for quite some time. Everyone on our team is a generalist. We really don't believe in industry specific analysts. You know, we like to say, you know, industry analysts can tell you everything there is to know about a stock except when to buy it. So, >> that's right. >> So, we we just want people to, you know, come up with ideas that they think are are timely. And you know, I think what kind of gives us our edge on the money management side is our research operation is we have to continuously come up with ideas for a really sophisticated audience. And you know, they they really challenge us us challenge us on those ideas. They ask us, you know, the assumptions behind our our models, you know, they they ask us if we're crazy. Uh it's it's really it's helpful. And then of course they pitch us ideas. We're 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, you know, this was the biggest um technological advancement that you that you have. You have an you know, if you're able to afford $1,000 for a calculator or whatever it costs, you know, 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, etc. So, you know, we started as a real deep value net type of shop. Uh, we we even had a report, a net net reports. Um, and that has changed to we've really gravitated more towards quality and um, which I I know is is something that a lot of people say, but it's more avoiding the really deep uh, you know, the deep value situations. you know, 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, 3, four, 5 years. It's good for a trade, but not necessarily um 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 probablyformational mostly? That's a that's a net net world. And then maybe a calculator means that you can calculate a little bit faster. But to 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, so I think that's that's what's really gives us our our edge. Also another I guess edge is small cap and micro cap names are are all but ignored. You know many of the names we follow have one two three analysts. So there are some people who just not looking at the names. >> Do you think that that uh normalization is a little bit harder over the last 5 years given the we had co co stimulus that it's just been a weird kind of market in between. I feel like there's been quite a lot of soggginess since 22 when a lot of that sort of co stimulus worked its way through. >> Yeah. No, I mean we're we're living uh in extremely interesting volatile times with uh you know a once in a century thing happening every few years. Uh so yes normalized is 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 5 years. You might want to keep a a larger than average cash position if you're worried um about the future as a hedge. But yeah, no, I I think generally um but generally your your your point is is well taken. What what misperceptions do people have about value, modern value, given that it's sort of 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. >> Mhm. >> Well, I think the misperception it doesn't work. Uh I would I would 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 um 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 I accept that I think people might think, you know, lowquality stocks, etc. I mean value has is a big tent from GARP to um 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? >> Yeah, it's I wish I could come with a clever answer and say, you know, we have this great uh proprietary formula that spits out these these ideas. It's it's a very manual process. You know, our team, you know, as I said, has four analysts, both 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 that's what they do. And we're 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 uh for ideas. You know, we love looking for companies with hidden assets. You know, assets that are not properly reflected on the balance sheet. That's something that we we like. We really like great consumer franchises. Um we particularly like them when they're masked by a corporate name. What I mean by that is if I told you the name Aushnet, I don't know if you've heard of it or not. Um most people uh haven't um you know it's a golf club manufacturer um and you know when when they're masked by these uh corporate names you know they own titleists etc. Uh people tend to ignore it. We like looking at fall fallen angels the one 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 your 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 it's difficult if not impossible. I mean, it's part of it is just gut feeling from 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. any value investor that's you know that's a hazard of of of being in the business you know you you have to really take a hard look and see is this a cyclical or a secular problem and you know so you know we've we've gone through we've made our share of mistakes especially with these content companies um you know five six seven years ago where we thought you know we didn't antic anticipate how the world would change with streaming and that's you but you learn from that and you know that's 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 we wrestle with internally [snorts] um so far we the answer is we don't think so but after what happened with the content companies you know five years ago or so you know we're open into 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. >> Uh what's the first thing you like to look at when you're researching a company? >> I just like to get to know why someone how they make money and why someone would want to use use their product or services. I mean that's I know that's simple but you know if you can't get a a handle handle on the 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 uh 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 of research on something. >> Uh what does what does man what role does management play? How how hard are you looking at management? >> Uh more and more lately. I I think that's something that I've grown. You know, I used to come up with, hey, um just find a great business. Management's a great or great salespeople. You know, they're only going to tell you that everything is is fantastic. I personally never met a uh a you know, a CEO who's who's told me business is terrible. you know, so they're they're they've gotten that where they are for being great salespeople, but trying to hear them, especially in larger companies, interviewed as much as possible on either on podcast or uh on TV, etc., and just see what makes them tick, are they good, you know, is is there alignment? Are they in it for the long term? So, so I I think management it's not it's not a it's it's getting more and more important to our process. >> How do you think about downside protection and uh permanent impairment of capital? >> No, it's a great question. Um I I think the only way to to do that is one never use leverage. Extremely important. Um, and two, you have to buy something at a significant margin of safety, and that that's your downside protection. Um, 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 uh 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 it's what would an acquirer pay for that business? We look, you know, in the priv like in the private markets, you know, is it RevPar, you know, in the hotel industry, what whatever someone, you know, that that's the essence of what a business is really worth is what is someone willing to to pay for the entire business and and that's how we that's how we look at it. There are things where you have some of the parts stories I think is is also critically important. You know, you know, we've been quite vocal on a company like Madison Square Garden Sports, for example, which, you know, is controlled by James Dolan. It owns the the New York Knicks and and the Rangers. It's uh the enterprise value, I think, is $5.5 billion. The Knicks alone probably worth 10. Um the the Rangers probably worth four. So there, I think I have a decent margin of of safety there. and and you're also, you know, that it 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 [snorts] it's worth a lot to negotiate a transaction because there's 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 cuz they're run Yeah. Well, yeah. There it's these are not statistically cheap companies, but one the economics are are only getting better with TV deals, etc. and the globalization of of some of these sports. But yeah, I mean this it's it's the ultimate trophy. These things the last time the Knicks went on sale were I think 1992 early at least early 1990s. So when they do come up for sale, people are willing to to pay up. >> Uh how do you incorporate qualitative research into the quantitative research? Um, we just read everything there is to know about a company. I mean, we're just curious. We we we ask people what they think about the product or service. We um 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 you know why is someone using using this product or service? >> Um do you want to take us through some of the some of the names in the forgotten 40 the boy forgotten 40 tell folks what that is first. Oh yeah, absolutely. The uh Forgotten 40, it's it's our flagship product. It comes out um 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 li a look at all the companies that we research in in our coverage universe and which ones are going to do we ones we're going to do the best because a catalyst we identify and then we do one-page snapshots of them and people love it. It's a great reference guide. Um we sell it on an allocart 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 is 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 univer it's. a um garment rental business. It's the third largest one, not exactly the most exciting company in the world. Uh cashrich balance sheet, trades at about $160 a share. Earlier in January of of this year, Cintas made an offer for the for the entire business. U first offer $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 trades at like eight or nine times IBIDA and the margins are much lower than than Cintas. The multiple 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 fund um filed, 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. Uh 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 Synthas's first offer. And 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 uh management and the family is going to be pressurized to um you know deliver value for shareholders whether that's increased 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 on the balance sheet? How do they let that build up? Do you know what that's been what [snorts] the reason for that has been? >> Conservativism. They the 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 they're third in third in the market uh they have national accounts um just it's is it a great business no it's a it's a very good business >> and what are they who are they is it uniforms that they're renting or what what are they renting >> yeah uniforms that they're uh renting um 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 were on too but I think it's worked and it's contin continues to be interesting what's the what's the story Yeah. No, Uber is one of our highest conviction ideas. It's it's sold off a little bit in the last uh month or so along with with pretty much everything else. A lot of the fears around the company are unfounded. You know, people think robo taxis are going to kill them. I think they're going to be a beneficiary um of that trend. Actually, it's a well-run company. They're going to return about 50% of cash flow uh to shareholders in the form of buybacks. DHA has has done a fantastic job. They're going to different verticals. They're they're kind of becoming a super app and you know they're they're growing. I think they're growing IBIDA 30% per year for the past 3 years or so. I mean, it's been really impressive. I mean, it's you know, high fixed cost, low variable cost. So, it's they're in the right part of the cycle, and this could be one of those I hate using the word, you know, long-term compounders, but this is just a great business that's not um, you know, absurdly expensive and and something I' I'd want to own for long periods of time. >> Why do you think uh, Whimo is not a threat? Uh 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 I Whimo 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 what's the story there? >> Yeah, I mean, again, Madison Square Garden Sports is the trophy assets. We um big big fan of them. We we like things that they're are, you know, they're scarce assets. It's like it's like you're buying a publicly traded collectible. Uh you know, you you see these trophy assets go on sale. You see the Lakers go for $10 billion. You see a 10 just a 10% a minority stake in the New York Giants, the football team go for $10 billion. The the uh what was it? The the New England Patriots, I think 9 billion for a minority stake. So, 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, uh that he also can split the company into two, have a publicly traded, um New York Knicks team, have a publicly traded Rangers team to help show showcase value. Uh another team, Liberty, Atlanta Braves Holdings, it's controlled by John Malone. So you can't really have very different as different a set of owners as you do between having John Malone and James Dolan. Uh you know 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. uh he's been more of a seller than a buyer recently. And the two-year spin-off milestone from Liberty Media has already approached, so there's no tax consequences if it was bought or 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 your the uh 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 or the Braves. Um, let me just give a quick shout out to folks who are uh Warren Buffett from the land of retirement. What's up? Peditikfa, Israel, Breenidge, Toronto, Cleveland, Bendigo, Victoria must be daylight saving in Oz cuz the Aussies are awake. Boisey Idaho Durham Lausan Switzerland Belleview Limmerick what's up Colomb Jupiter Toronto Edinburgh Valparaso New London Holland Michigan Cesno New South Wales the Aussies are up Fremont California Tampa it's good having you guys here JT is uh on the road he's in China uh 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. Yeah. And the Aussies are waking up early for you. >> Well, I guess it's uh I guess it's morning there. It's it's tougher in the summer when we're on daylight saving and they're they're not, but we can do it this time of year. [gasps] Okay, that's good stuff. We'd ordinarily have JT's veggies. Uh, you can write it down. He's he's not here to do it this week, so there's no time stamp this week, folks. Um, 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 it's and listen, passive for the most part has been active significantly, and I could see why investors would 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 is now a 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 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 board decades. That was Exxon and GE. not names that I necessarily would want to own now. Um, of today's 10 largest companies, only four were on the list a decade ago and just one appeared 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 [laughter] that in that they quietly needed an end >> switch out the something gets changed every now and again. Um do you think that the decline because you you straddled that period where there was sort of ubiquitous sellside coverage and that seems to have gone away. Do has that hurt the markets do you think? >> I mean depends how you look at it. I I think it's given us opportunities. Um, I think it was we were talking about offline. I think what's going to obviously being a small and midcap investor has been extremely painful over the last decade or so. Besides interest rates getting lower, I think what's really going to help uh small cap uh investors is the fact um you know once you start getting M&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 you see that with WBD, um, you know, looking for deals. You you have, uh, I think Exalta announced this morning they're they're merging with Nikon. You see, uh, Top Golf, Callaway brands selling uh, 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, uh, you know, the structural parts of the of the market and and having less coverage has has certainly hurt, but I think for people who are long-term patient investors, it's it's going to really help. And what's amazing is there some really large companies with very little sellside coverage. I mean, it I had Thomas Pedy on my podcast, uh, who who was Interactive Brokers. He has like one or two sellside coverage. I mean, he's a huge firm. Lowe's, the the Tish family company has no sellside coverage. Universe, which is a smaller company, I think has two [clears throat] or three. So, it's, you know, the research business uh is a tough business and it's not particularly profitable for the banks. So, they stop doing it. >> Why do you think interactive has such a low why 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 would seem 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 didn't have an investment banker and I guess they don't do that many deals. They they keep a ton of cash on the balance sheet. So, >> right, >> brokers just ignore them. There's no other fees available. >> Yeah, not particularly. So, I mean, it's kind of an indictment on the uh 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 [snorts] is that the cause of the underperformance of fundamental sort of strategies or is that a result of the underperformance of of fundamental strategies? >> Can can you can you say that again? >> It was like a it was like a 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 transactional side >> and and it seems like that's really that >> um or maybe a little bit after that that we really started seeing the underperformance of fundamental strategies versus so this 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, it's that there's this sort of there's nobody to shine a light on the smaller mid midsize companies and and you know, for most folks aren't focused on the market. They're a little bit time poor. They need that sort of sellside research to to help them out there. >> Uh it's a very unsatisfying answer, but I think probably a little bit of both. Uh I I don't think there's a one type thing, but I think a lot of it it's it's one of the greatest momentum trades of all time is, you know, just investing in the S&P over the last, you know, couple of years. And you have flows into these funds every 15, the 15th of the month or the 30th whenever people, you know, cash their paychecks. Um, and you know, the buy the dip has been a fantastic strategy and you know, and it's a great strategy till it isn't. So, uh, it's [laughter] not unprecedented though. I've 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 in the equal weight versus the 500 that equal weight is the substitute for small or 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 in like increasing levels of concentration into those biggest companies and it seems to me that at every level the very long-term um experience is that bigger companies have tended to underperform smaller companies and you can see that in small caps relative to midcaps relative to S&P 500 relative to the biggest of the biggest but there are clearly these periods of time and there are about a half a dozen of them going back a hundred 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 on them to occur where you see these very big companies outperforming even though the experience is over the very long term that 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 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 Michael Green favors a a passive bid, but I think it's just a feature of the market that it does it. It just happens. Yep. No, I think it's uh I mean people say, "Oh, it's different this time," which obviously are dangerous words. and and they cite the fact that private companies are staying private for longer and and that's taking some of the gains from the smaller companies because >> maybe maybe that maybe that's true or maybe it's just >> you know cycle like everything else and people are used to having cycles in the period of three five 10 years and really can't look past that over long periods of time. we're just not wired for that, you know. So, it's I I I firmly believe that some of these smaller companies that are well-run and and 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 on X, you know, the 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 for 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's absolute trs the 600 which is the has the profitability and quality filter and they are slightly bigger companies has trounced the the 2000 which has no quality filter but there are you can see it on 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 it's a long way above trend So, I've been watching that just sort of waiting for that to break down. And, you know, I'm a fundamental value guy. I 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 it's easier to explain it in that 600 >> because folks can sort of understand that that concept that it's a it's a it's a passively selected uh index. Have you ever found out why they don't have 600 names in it? >> No. [laughter] Why is that? [clears throat] I didn't know that. >> I don't know. I'm asking you. I You It's >> Well, the wheelchair 5000 there's 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. I >> mean, there's lots of causes, right? Like Syain Oxley in 2000 made it so much more expensive for small companies to go public. And so that's p pushed a whole lot of companies to stay private for longer. But now I think we've got this funny p uh 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 the 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. >> Look like it's I think StubHub is down, you know, significantly. They tried to go public multiple times and they just picked the absolute wrong time to to do it. Um but yeah, no a real measure of value is, you know, the public markets versus the private markets in terms of uh and it's it's it's quite striking. >> Get to mark your own homework. You always do a little bit better than >> when the teacher does it. >> Oh, no. I mean, there's a lot of things that, you know, worry me. That's one of them. The private credit is is an accident waiting to to happen. Um, you know, there there's a lot of kind of danger signs. >> It's always credit. Credit goes first in some way, shape, or form. >> Yeah, it's well, it's always greed. Um, which then leads to uh leads to that. But yeah, no, credits and you look at the credit spreads, you're you're not getting paid >> um at all. I don't know why anyone is buying a corporate bond now where the >> the spread that you're getting compared to treasuries is is almost nothing. I'd rather just, you know, keep it in in treasuries and and take my risk on the equity side. >> It's not investment advice, but HYG versus TLT is always a something interesting like that. >> Um, how do you maintain conviction when a trade's going against you? >> I take it off my screen. uh [laughter] >> ignore it. >> I ignore I mean you have to be you know one I I buy things slowly over time. Uh I mean I I mean that's one thing but yet you just know the business and 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 the psychological bias and and that's something you really have to train yourself on and and also being willing to admit you're wrong. Um and being early by six years is is to me the same thing as being wrong. [laughter] So you have to um you have to be very humble in this business. But you you also can't be swayed, you know, swayed by short-term moves. Uh, but if something's not working out for a year or two, you really have to re-evaluate the the thesis. >> That would have kept you out of Dillards. Didn't work for the first six years and had a 10 bagger in the seventh year. But that's >> Yes, >> that's okay. You're going to miss a few like that. >> Yes. No, Dillards was uh we did an issue. We used to do these summer thematic pieces 200 I think we did in 2005 companies worth more dead than alive and Dillards was was one of them. And wow, that 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 uh the co sty I think as well. >> Yes. Yes. >> Um do you feel like there are any industries today that are particularly fertile for mispricings? Um I mean we spend most of our time on things we can touch, feel and understand and you know so we tend to gravitate towards things like consumer oriented names, communications, financials, um industrials. So it's hard for me to say that you know we don't generally take a sector view. We do it one stock at a time. Uh if I look at our portfolio though, you know, we have a decent amount of insurance names, uh 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. Uh so that's something I I keep uh in the back of my mind, but you know, we're we're generally sector agnostic and you know, when trying to and when we're building a portfolio, we're okay having a decent sector bet. uh but we do it by accident not necessarily with you know we do it on a stockby stock basis. >> I think uh I've seen healthcare is one sector that >> uh there's been a lot of discussion on on Twitter at least about healthcare and I think that there are 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 with? >> Yeah. Yeah. No. Yeah. No, those um they're hated. You know, you're you're worried about government, you know, intervention, etc. But, you know, that's been the story on on healthcare names since the since Hillary Clinton tried to remake healthcare in the '90s. Uh but overall, they've been pretty good bets. So, yeah, Merc's interesting. People think people are worried about the 28 2028 2029 Katruda, you know, expiration. which, you know, it seems like they're going to be able to extend the patent for for for some of their medications longer than that. Plus, they have a very good pipeline. Plus, they they're getting tremendous lot of amount of free cash flow that they're being able to invest in other drugs. You have a company like Metronic that has done nothing for years. It finally looked like it woke up. Um, and you know, that that's something we're we're happy about. a company called Cooper um which is a their main business is contact lenses. Uh they also do some women's health. There's a lot of interesting companies within the healthcare sector. You you want ones with good balance sheets that can withstand um you know short-term pressures and you know something like Merc and uh Fizer you're you're getting paid handsomely to wait. >> Yeah. What about what about FISA? you know, we like that. I mean, that's certainly more hated uh than than than Merc. You know, Merc would probably be our our choice of the of the two, but you know, if you want to kind of diversify, you know, I don't think you you can go wrong with 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 um revulsion to the vaccinations? I don't watch a lot of network TV, but I catch it whenever there's a Super Bowl or something like that. I'm always shocked at how much pharmaceutical advertising there is, particularly because I come from a country that that they banned it. So, I'm I'm always shocked at how much there is on and then it's just wallto-wall coverage. >> Yeah. Um, no, it is amazing how much money they spend on ads and and I think in Australia, it's probably probably decent public policy um uh not to do that. I is is there blowback? You know, you're talking about Fer Fizer specifically or just all of them? >> Well, not not necessarily all of them, but Fizer I just thought is the was one of the ones that was out front and center. I think Madna the Madna stock price chart is sort of >> Oh god. Yeah, >> it's something worth having a look at if you haven't seen [laughter] it. >> Yeah. No, it's not a it's not a pretty chart um to to say the least. Um I I think a lot of the price concerns has been you know kind of the RFK factor. There was also a big sugar heist on Fizer specifically going out of COVID and I don't think people >> realized how little people wanted the vaccines you 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, you know, there's a lot of there's certainly a lot of uncertainty uh in there and that's why I think you have to kind of place your bet accordingly. >> Um, have you looked at HH? Is that something you can >> Yeah. No, I mean, we've we've we've looked at it. It's kind of at this point a show me story. Uh, you know, Bill Aman, you know, took control of the company. It looks like he's going to buy an insurance company um and you know try and turn it into the Birkshire Hathaway model. Who knows? I mean he's a great investor. I have a lot of respect for him. Uh maybe he'll do it, maybe he won't. Um, but you know, I you their traditional master plan community business is doing really really well and you just we're gonna have to wait and see um 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 you know with the float. though it's, you know, he's very in. 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 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 Well, I I don't I don't I haven't looked at it uh in detail. What is it? >> It it it has something to do with the uh I it's from memory because I wrote a a letter you know I think was you know 6 months or so ago kind of objecting to it. He it's he since toned it down but basically they gets I I believe some sort of carry. I could be wrong based on how the 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, HH really was going nowhere fast before he came in. So, it's hard to, you know, we'll see. >> Uh, are there any industries that you guys avoid entirely? Are there things you won't touch? >> I mean, I just things we can't understand. I mean like a biotech, you know, heavy technology, uh, commodity oriented businesses. You know, we we we stay away generally from from energy, although we do own Lowe's, which is, um, and have written about it, which, you know, has some energy exposure. That's the Tish family. Uh, Lowe's, not the home improvement company. Um, 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? >> Certainly seems that way for the for the time being that you know some of the part stories asset heavy stories you know the Madison Square Garden Sports for example is is a big one doesn't necessarily do a great job uh with real estate holdings either. Um, so the and that might go back to what we were talking about before with less analyst coverage. I'm not I'm not really sure. Um, 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 sort of got slightly subpar flows out of it. Is that the >> Yeah. to it? if it's not but if it's not needed in the day-to-day operations or you can do something like MGM did and and do some sort of deal with Blackstone and to monetize their real estate you know yeah I guess you have to look at every situation differently something like a retailer where you have the you know here Target owns a whole bunch of stores the real estate's worth a significant percentage of the market cap but they got 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 depends on you know we treat each client individually. Um so it's just not like a a model portfolio. So we'll go as low as 2530 names as high as 50 or so. Um, we don't want to own, you know, you know, we want to be able to make meaningful bets on companies. We generally like the top 10 names to be, you know, 30 to 50% of the of the portfolio if if possible. You know, we we're sector agnostic as I as I mentioned before. Um but we uh you but we pay attention to it just to make sure we're not owning you know we by accident owning 50% financials for example. So we're um we're going to look very different than almost any major any of the indices um and and and that's fine by us. >> What's your sell discipline? How do you think about selling? >> We're reluctant sellers. Um, most of our time 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 if you look at our top holdings as a firm, you'll see a lot of Home Depot, you'll see a lot of America, 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 have done that that are great companies and buy them cheaply selling them are very difficult because you you have to find something that's 25% better after paying capital gains tax. So it's, you know, if it's a high quality business, our sell discipline is different than when our the the business is maybe a medium quality business. And I don't mind having large positions in in companies, you know, after purchase. >> Do you have any uh macro considerations? Do you 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 I mean, if you read the paper, you're thinking about macro. uh and somehow it seeps into your into your brain. Um but I try it's all 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 if new money comes in, I'll invest it more slowly, but I I try not to um, you know, let it let it influence our day-to-day decisions as as much as humanly possible. >> What's the next uh 5, 10, 20 years look like for value or for fundamental strategies? >> Oh, better than the last 15 to 20. Uh [laughter] I mean 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 this look at how much how much investing has changed you know we started with the you know 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 will be one of the few things that AI uh will not be able to help investors with because people are inherently not patient. >> 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 I love when um when now on CNBC they say or or the headlines Dow down 800 points. I mean, it's it's like nothing on >> Nobody even knows what that means. >> Yeah. Yeah. [laughter] >> I I say that the CNN fear and greed meter is like it's it's it's an extreme fear. [laughter] We're off about 3%. >> Yeah. Yeah. >> I don't know. 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 a good enough job is is kind of writing down how you feel at certain periods of time. You know, one of the things that I I did and I just I wish I bought more was during Liberation Day was buy an equal weighted basket of our forgotten 40. I 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 is up like 37% in you know and the timing was just really lucky. Um, but think about how much hasn't been that long of a period of time and everyone thought the world was ending that the the economy was going to implode. And listen, I think it was a horrible policy idea and we can I don't want to get into politics, but you 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 or down four or five days in a row. I mean, who cares? Um, this it's it's it's it's certainly not the end of the world. >> Um, we're coming up on the end of the interview. Jonathan, if folks want to follow along with uh what you're doing or get in contact, what are the best ways of doing that? >> Sure. Uh we're at Boyervalue and if you want to know more about the forgotten40, you know, just go to boyervalgroup.com/value. Um and or just go to boyervalgroup.com and you can you can find us and we'd love to hear from anyone. >> Uh good stuff. Jonathan Boyer Boy value folks will be back next week. Sat time, Sbat channel. JT will be back. He'll have some veggies and some uh new insights on China, I'm guessing. So, uh look forward to seeing everybody then.