During his recent interview with Tobias, Jon Boyar, JD/President of Boyar Research, discussed why great consumer franchises provide profitable investment opportunities saying:
Tobias: The interview on the site, your dad says you look for great consumer franchises. So how do you characterize a great consumer franchise?
Jon Boyar: Yeah. To us brands are critically important to us. That’s something that’s very difficult to replicate. It takes lots of marketing dollars, et cetera and it gives consumers a huge advantage. Or it gives a company a huge advantage with consumers. So we really like kind of two companies. One company is just with a terrific consumer franchise or companies with a great consumer franchise that are masked by a corporate name. Years ago we came up with the idea a coush net and if I mentioned the name to most people, they have no idea what it is but they make title as golf balls, put joy golf gloves, et cetera. And believe it or not, that leads to valuation discrepancies. And over time the stock market usually does the right thing and values the company correctly, but it creates opportunities.
Tobias: Right. One of the interesting things that interview no cigar butts no cyclicals which I was a little bit surprised by. I sort of had the impression that you guys did a little bit more of that. But that was an interesting point that you’ve raised it before that you have to be right twice. I’ve never thought about like that once when you buy and once when you sell.
Jon Boyar: Yeah. When to sell is hard most people concentrate on when to buy. Fortunately because of the way we look at companies, a large percentage of the names that we profiled, they’re taken over. So the decision is made for us and then we evaluate if it’s a stock deal, whether we want to keep the stock or if it’s cash obviously where we’re forced to tender our shares. And going back to your point about cigar butts, that’s kind of how we started in the 70s. And I think that was just where the opportunity set also lied. There were no real computers, everything was done manually. I got high technology was having a calculator. So it was easier to have an information advantage on some of these names. That’s kind of been whittled away and you have to do a little bit more homework.
Tobias: So yeah, if the information advantage is no longer there, and this is true for everybody, what are the advantages that you’re using? Where’s the edge?
Jon Boyar: The edge to be honest is patience. That to us is… Trying to figure out where stock is going to be three or six months from now I think is almost impossible. And it’s a really hard game to play and we choose not to play it. Our advantage is we have terrific clients who will enable us to hold onto names and judge us over multi-year periods that allow us to have these temporary pricing anomalies and take advantage of them. So that’s really our biggest advantage. Listen, we have a great research team that’s terrific. That’s been with us for a long period of time. My father’s been in the business a long time. He’s still very active. So we have definitely the research advantage as well. But I think having that mindset of being able to sit there and not panic is critically important.
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