People Hate These 5 Stocks But They'll Be Wrong | TCAF 261

The Decline of Stock Picking Success [00:00:00]

• The percentage of stocks outperforming the S&P 500 has drastically decreased over the past decade, with only 23.2% beating the index over a 10-year holding period.
• This trend has been ongoing since at least 2017, driven by the concentration of gains in a few mega-cap technology stocks.

• "So you're right. Keep talking, Jonathan."

Re-evaluating "Buy and Hold" [00:01:30]

• "Buy and hold" is rejected as a strategy; it's a result of successful stock picking and continuous reevaluation.
• Investors must constantly assess business performance, competition, and valuation.

• "I think that article was like, buy and hold is dead. I think there was something. It's a buy and hold doesn't work. Buy and hold. I don't think it ever worked."

Concentration and Patience in Investing [00:03:45]

• Successful stock picking often requires concentrated positions in a few high-conviction names.
• Investors must be prepared for periods where their investments go against them, like Microsoft's dip earlier in the year.

• "And you also have to prepare, be prepared to have years where things go against you."

The Danger of Overvaluation [00:05:15]

• Even great businesses can become terrible investments at inflated valuations, as seen with Coca-Cola at 60 times earnings.
• Investors must be careful not to overpay, even for quality companies.

• "He said one of his biggest mistakes ever was in 1998, not selling Coca-Cola when it was at 60 times earnings."

Trading Around Positions and Media Portrayal [00:07:00]

• The media often portrays stock decisions as black and white (bullish or bearish), ignoring the nuances of position sizing and trimming.
• Trimming a stock that has appreciated significantly isn't necessarily a loss of faith but a portfolio management decision.

• "The, am I a bull? Am I a bear? That's problematic, but it's the way the media talks about stocks."

The Impact of Market Structure [00:09:30]

• Money flows to where it's treated best, which is currently with the dominant tech companies.
• This market structure makes it difficult for the average stock to perform comparably to the best companies.

• "Money moves to where it is treated best and money is treated best with the best companies."

The Evolution of Value Investing [00:11:00]

• Traditional "deep value" strategies like buying "net nets" or "cigar butts" are less effective today.
• The focus has shifted to identifying great, dominant, or unique businesses that can be owned for the long term.

• "If you're a deep value investor, you're investing in, you know, broken retailers. That doesn't work."

Gauging Sentiment Without Technicals [00:13:00]

• While not relying heavily on technicals, investors consider price action to avoid "catching a falling knife."
• A stock stopping its decline, even on bad news, can signal a lack of sellers.

• "You know, one of the stocks we'll talk about, you know, pool corp, but we can talk about it later."

The "Junkiest Stocks" Rally [00:14:30]

• This year, quantitatively "junky" stocks have outperformed high-quality undervalued businesses.
• The Goldman Sachs Most Shorted basket is up significantly, while long-short strategies are down.

• "One of the dumbest things that happens and you see it all the time is this basket trading."

Quality Businesses Under Pressure [00:15:30]

• Quality metrics like return on equity aren't protecting stocks like McDonald's from significant price declines.
• High initial multiples combined with stumbles in quality companies can lead to severe losses.

• "Quality is not bailing anybody out this year. It's not, it's not working as a factor."

Nike's Struggles [00:17:30]

• Nike's stock has been impacted by falling earnings and multiple de-rating due to product missteps and a failed direct-to-consumer strategy.
• Competitors are stronger, and athletes may not need Nike as a platform as much as they once did.

• "They told Foot Locker to go themselves. That was like their number one retailer."

AI-Driven Basket Selling [00:19:00]

• New AI agents that help manage subscriptions are causing indiscriminate selling in "consumer inertia" baskets.
• Stocks like The New York Times and Booking.com have been hit hard despite strong fundamentals.

• "And so there's a basket, a consumer inertia basket from Goldman Sachs. And ever since the launch of these AI agents, the stocks are, the stocks are getting killed."

Broadridge: A "Toll Booth" Business Under Siege [00:22:00]

• Broadridge, a dominant player in financial system plumbing like proxy voting, has seen significant multiple compression.
• Concerns about AI and tokenization disrupting its business model are driving the sell-off, despite its recurring revenue and near-monopoly status.

• "It's, it's essentially a monopoly. I mean, they're market share. They have 80, according to you guys, 80% of all proxy votes they handle among other things."

Booking.com's AI Fears [00:25:00]

• Booking.com has been impacted by fears that AI agents like Muse will disrupt the travel booking process.
• However, the complexity of travel booking, inventory management, and regulatory hurdles make widespread AI disruption unlikely in the short term.

• "Muse isn't going to do all this stuff. They're going to use booking. This is a positive for booking, not a, of course it's going to use it. It's going to use the site."

Uber's Persistent Discount [00:32:00]

• Despite insider buying, buybacks, and progress in robo-taxi partnerships, Uber's stock remains depressed.
• The market seems unwilling to give credit for its growth, potentially leading to a long-term hold situation.

• "The insiders are buying. Um, they actually have concrete, like, uh, robo taxi partnerships on the streets of multiple cities with multiple partners. It doesn't matter."

Pool Corp's Steep Decline [00:42:00]

• Pool Corp, the largest wholesaler of pool supplies, has seen its stock plummet due to a slowdown in new pool construction.
• Despite a strong installed base generating recurring maintenance revenue, the stock is trading at historically low multiples.

• "So you would think like you build a pool, you're not going to fill it in with cement two years later."

Burger King's Turnaround [00:46:00]

• Burger King, under new leadership, is in the middle of a turnaround, addressing issues with unit economics and same-store sales.
• The company's stock has held up better than competitors, partly due to its cheaper valuation and ongoing recovery.

• "Burger King North America is now in a turnaround phase and they're in the middle of the turnaround."

Comcast's Controversial Outlook [00:49:30]

• Comcast faces challenges in its broadband business from competition like fixed wireless and Starlink.
• Despite a low valuation, some within Boyar Value Group are hesitant due to the tough competitive landscape.

• "But the broadband business is a tough, tough business. You're going to have lots of competition, fix wireless."

StubHub: A Consumer Pariah [00:51:00]

• StubHub is widely disliked by consumers due to convoluted ownership structures and poor customer service experiences.
• Despite potential for profit, its negative consumer sentiment makes it an unattractive investment.

• "I hate StubHub. Yes. A lot. Every, everyone hates StubHub, right?"

MGM Resorts: A Japan Opportunity [00:53:30]

• MGM Resorts is seen as a strong business trading at a reasonable multiple, with a significant catalyst in its exclusive casino in Japan.
• Analysts are not fully pricing in the revenue potential from this venture.

• "And in 2031, they're going to have the only casino in all of Japan."

Vici Properties: The Vegas Landlord [00:56:00]

• Vici Properties, the REIT that owns much of the Las Vegas Strip, has seen its stock decline significantly.
• This decline is attributed to casino companies selling real estate to Vici to buy back stock at market highs.

• "V I C I. This is the landlord of Las Vegas. So what happened during the activist shareholder era, what happened with all these casino companies is they sold their soul by which I mean, they sold their real estate to this REIT."

Opportunities in a Challenging Market [00:58:30]

• Despite market headwinds, there are numerous opportunities for long-term, patient, and tax-efficient investors.
• Boyar Value Group's research focuses on identifying these opportunities, particularly in companies experiencing significant multiple compression.

• "And we're, you know, if you're looking for a long-term patient tax efficient investor, you know, consider us."