Mark Boyar’s Three Undervalued Companies

SPECIAL VALUE INVESTING CONGRESS NOTES FOR THE IRREGULARS


Mark Boyar does excellent value investing research that he publishes (his firm also manages a mutual fund, Boyar Value (BOYAX) — it’s an expensive fund so I wouldn’t necessarily want to invest there, but his research is great), and he shared a bunch of lessons with us at the Congress today — along with some specific ideas.

Some of the best broad suggestions? Look for excellent brands that are masked by a corporate holder, that’s the kind of undervalued asset that won’t show up in the same cash flow screens that every investor uses — these days, with everyone having the same full data access, you have to search for things that the computers con’t find.

And think like a private equity buyer — companies like Tiffany’s and Saks during down retail cycles were often valued at less than the extraordinarily understated value of their Manhattan real estate.

Analysts ignore off-balance-sheet items during up cycles, but they become very meaningful in down cycles — the home builders, for example, were absurdly overvalued and built on top of cycle valuations in 2006-2007. Boyar said to short housing in 2007, and buy it in 2011 — that’s some excellent timing and went against all the sell side analysts. So that’s another reminder of the importance of being independent.

His ideas today?

Weight Watchers (WTW)

“If obesity was a stock, you’d want to own it and leverage it as much as you could.”

The weight management industry has an estimated $62 billion in revenues, and obesity is increasing worldwide and will reach three billion people in the coming years. 79 million Americans are pre-diabetic, more than a 50% chance of having diabetes in the next five to ten years — that should be a huge driver for weight management companies, 10% weight loss reduces risk of diabetes dramatically … and Weight Watchers has a proven program that’s holistic and effective, with excellent studies backing up the efficacy over the past 20 years.

They have a million members attending 40,000 meetings a week — patients who go to WTW under doctor’s advice lost twice as much weight as people who just try to lose weight under the doctor’s guidance.

They did an ill-timed debt-financed stock buyback at $82 a share, and you can buy it now in the $40s (that was pushed by their large shareholder private equity ...

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