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Holly LaFon
Holly LaFon
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Profiting From Uncertainty: Mark Boyar’s Group Finding Mispriced Financials, Media Stocks Pt. II

2017 GuruFocus Value Conference speaker interview in Welling on Wall St.

Interview continued from part one here.

But is any of that for sale?

MARK: You’re asking what’s the catalyst? Well, the catalyst is pretty much the same as it was at Cablevision. They could use the Cablevision play-book and go out and lever the balance sheet because it’s a pristine balance sheet — no debt, $1.2 billion in cash — and pay out special divi-dends to shareholders. They could start a stock repurchase program. They could pay a regular divi-dend. They could try and take MSG private like they tried taking Cablevision private.

If they could stomach the price.

MARK: They would have to pay a significant premi-um — and they do have the wherewithal because they got a couple of billion dollars from the sale of their Cablevision stock; so they could clearly do what they wanted. And the reason that they would have to pay a fair price is, in my guess, that if they didn’t, there would be multiple bidders coming out of the woodwork to try to get this trophy property.

So when you take all the assets and you mark them to the market, you come up with a value of roughly $260 — plus or minus a couple of dollars — on a stock that sells for $165 a share.

We’re convinced the value is there, that something nice will happen over a period of time, and we’ll be able to compound at a very favorable rate. That kind of under-appreciated value story runs through each and every company that we invest in.

What about the other piece, MSG Networks?

JONATHAN: MSGN is also an interesting company on that score, and it’s a perfect acquisition candi-date, perhaps, for Fox to get a toehold in New York sports.

Content is king. Everybody wants content.

JONATHAN: Exactly. And it’s interesting to note that Steven Cohen (Trades, Portfolio) recently filed a 13D on the com-pany. But I’d rather focus on another really inter-esting play in the industry, which is Discovery Communications (NASDAQ:DISCA).


JONATHAN: This is what we like to refer to as a fallen angel — it was once a darling of Wall Street but is now unwanted and unloved. When it was trading in the high-$40s, everyone wanted to own it; now that it’s trading for $24 - $25 a share, and everyone loves to hate it.

So that makes it irresistible to you?

JONATHAN: Yes, especially considering that the Time Warner deal was done around 11 or 12 times EBITDA and now this is trading at 8 times. As you said, content is king, and Discovery owns almost all of its content — and they’re agnostic about how its delivered to consumers. If you have great content you somehow will get paid for it, and yet Discovery is now being put into the penalty box because everyone is wondering how this whole changing media/technology world will settle out — and how to profit from that uncertainty — which was the theme of our summer research issue, as you know.

Where you argued for embracing uncer-tainty, as I recall.

JONATHAN: To us, when times are uncertain, you buy the best companies — ones that can take share — during times of disruption. And we love the Discovery business model because it is the largest cable network in the world, with over 2 billion subs when you combine all their different channels. When people are asked for the names of the top 20 chan-nels they want included in a skinny bundle, a lot of Discovery channels are always listed.

Then, you also have a great capital allocator — John Malone — owning a fair amount of the stock. They bought back about $1.5 billion of stock over the past year, they have about $500 million left outstanding. They took on some debt to do that, but it is scarcely a pressing burden. Their weighted average debt maturity is about 18 years.

Gee, where would the stock be without those buybacks?

JONATHAN: Well, we think the only reason the stock is in the penalty box is the strong dollar — 50% of revenue is generated internationally. And it’s never made a lot of sense to me that Wall St. wants a company to grow internationally and have a worldwide presence but then punishes it when there’s a currency issue.

So we view currency costs as a transitory thing, We don’t really have a view on the dollar, and I think over the long run, they will be fine. They’ve grown their audience share from 5% seven years ago to 13%. They’re doing all the right things.

What do you think Discovery is worth?

JONATHAN: We have it valued at $43 a share or so and I think we’re being pretty conservative there. It’s a logical acquisition candidate. I mean, do they merge with an AMC Networks (NASDAQ:AMCX) — which is another Dolan company, possibly? Does Disney (NYSE:DIS) buy them? Who knows? But it doesn’t neces-sarily make sense for Discovery to be a standalone entity. How it shakes out is anyone’s guess. Anyway, John Malone has shown that at the right price and at the right time, he’s a seller of assets and we’re okay being invested along side him until then.

What’s another under-appreciated stock you like?

JONATHAN: This next one’s stock symbol is EAT — Brinker International. It’s a great consumer franchise hidden behind a corporate name — and we’ve actually had lots of success through the years finding undiscovered values hidden behind corpo-rate names.

For instance?

JONATHAN: For example, a few years ago we researched and bought Energizer when everyone was valuing it like a low-growth battery company. But, in fact, almost 50% of their revenues came from faster-growing consumer products. We knew the valuation disconnect couldn’t last forever and we were proven correct, when they split the compa-ny in two. Now the slow-growth battery business has its own capital structure — appropriate for a cash machine-type business — and the consumer products company with Banana Boat, Schick razors, etc. is probably an acquisition target.

MARK: Let me just mention, for nostalgia’s sake, that looking for companies whose value attributes are masked by a corporate name has long been a wonderful, wonderful way to invest. Years ago, when I taught a class at the New School, I would start off by asking, “Has anybody ever heard of Binney & Smith?” And, of course, no hands would ever go up.

But they’d all used Crayola crayons?

MARK: Crayola Crayons, right. You’ve got it. Likewise, we liked Quaker Oats years ago. Not because we liked the cereal, but because it owned Gatorade and we saw that Gatorade alone was worth more than the entire market value of the company.

So finding these businesses where a great con-sumer franchise is masked behind a bland corpo-rate name has proven to be a wonderful way for us to invest.

If you can keep track of them. They’ve all been rolled up and then spun out or acquired so many times over the course of our careers.

MARK: Oh, absolutely. Quaker Oats certainly has. It’s interesting. One of the great benefits of having the research service that we started in 1975 is that we have research reports on every company we have looked at, going back to 1975. All the compa-nies that we’ve ever written about. You can go back and find some great perspective. Take Tiffany & Co. In 1975, it had a market cap of $24 million.

That’s all?

MARK: Yes. The building that they had, on 5th Avenue at 57th Street was worth more than the value of the whole company. So our library is a great resource. Any time we look at a company today, if we invested in it or had written about it many years ago, we take out the report and we look at the balance sheet. Just to say, “Gee, it’s amazing what can happen to a company in 40 years.” Think of it, a $24 million market cap for a company like Tiffany’s. It’s unbelievable.

It was another world.

MARK: If it wasn’t for that world I would have never gone into this business. I came in in ’69, at the end of that great bull market. It was all about the Nifty Fifty and then Polaroid became the first stock that ever sold at 100 times earnings. Five years later, it sold for under $20 a share and it became a net working capital stock.

It will be interesting when we get a big correction like that again. Because, as a value investor, you want that — Jon says is nobody hates losing money more than I do — and he’s right. But market cor-rections are an integral part of the investment process and without them, you never get five or six baggers. So 2008 was the second-best buying opportunity in my life, and the best was 1970.

That only works if you have anything to buy stocks with —

MARK: Interesting you should mention that. One of the things that we do that is contrary to a lot of other investment advisors — and particularly real-ly drives consultants who look at us nuts — is that we always have a large amount of cash available. It’s because we are stock pickers. People ask, “Why do you have all this cash?” I say, “Well, I’m a reasonably good stock picker and so while the cash will hurt me, I think I can still get a reason-able return and make more money.”

But more importantly I want the optionality that cash provides. When the market has a tremendous dislocation, like it had in ’75 or like happened in 1987 or like it had in 2007 and 2008 — If I hadn’t had a stash of cash, I couldn’t have bought the Columbia Broadcasting System at the great price I did. I couldn’t have bought Saks Fifth Avenue for way less than it was worth. I couldn’t have bought Time Warner. If you’re tapped out during those dislocations, you can’t take advantage of them.

So you’re willing to let cash weigh on your performance in bull markets?

MARK: Yes, you might underperform for a while but you more than make up for it when you get a market correction like that and you can buy quality stocks at the really, really distressed levels.

Buying at the right price is extremely critical. One of my jobs these days, with our team here, is to say no more than yes when they come up with ideas.

Sometimes it’s a great idea, it’s just that the price isn’t right. So it’s not enough to have a great idea, you have to be able to buy it at the right price. If you don’t buy it at the right price, the great idea not going to be great for your portfolio.

I never followed up and asked why you like Brinker —

JONATHAN: Okay, back to EAT, which is a great consumer franchise masked by a bland corporate name —

They obviously tried to make up for that with their in-your-face stock ticker —

JONATHAN: Partly, anyway. They own Chili’s. They are the franchiser. But that’s not widely known. I know that, because when I’m speaking to our research clients and mention “Brinker International,” I’d say at least 30% have no idea what I am talking about until I start specifically talking about its Chili’s franchising operation. But the shares are off significantly from their 52-week high, largely because of Chili’s big exposure to the energy economy. About 17% of Chili’s sales are in Texas, Oklahoma and Louisiana, where the econo-my hasn’t been so hot this year. But as oil stabi-lizes, it should turn better.

The company in 2015 generated $3 billion in rev-enue. What’s interesting is that franchise revenue is only about 3% of Brinker’s overall revenue stream but it generates about 35% percent of the company’s operating profit.

That much?

JONATHAN: It is a cash flow machine, they return it to shareholders. Since 2010, Brinker has returned $2.3 billion to shareholders — that is about 85% of the company’s market cap. Meanwhile, they’ve reduced shares outstanding by 45%. They have also been doing over the last couple of years a sig-nificant amount of cap-ex, but that capital spend-ing push is ending, so we think that cap-ex is going to drop from $145 million a year to the low-$100 millions, which will have a significant impact on the bottom line.

They’re also doing other things like promoting sales of higher margin stuff like beer. Right now, it’s only about 14% of sales; we’re thinking it could grow to about 20%.

Another growth-driver for Brinker is take-out busi-ness. It’s one of the areas that’s growing the fastest within the company and they’ve partnered with a technology company to help with that. They’ve added kiosks at all the tables for ordering take-out. It’s also going to be a part of the Amex rewards network. So they’re doing all the right things. Yet the stock is trading at roughly 5.6 times our fiscal year 2018 EBITDA estimate — so at a discount to its long-term average of about 8 times — at rough-ly $48 - $49 a share. We think it’s worth $69 or so.

Hmm. If its franchising business is that profitable maybe it should focus on it —

JONATHAN: Well, they’re pouring the cap-ex into the business and it’s just going to make it a much more profitable business down the road. Restaurant fran-chising is one of the great business models in the world, given its high margins and the recurring nature of the revenue stream. The strong profitabil-ity of EAT’s company-owned restaurants — it has 17% operating margins at Chili’s — has enabled Brinker to generate robust levels of free cash flow and return significant amounts of capital to share-holders. That cash flow is the thing that we really find attractive about the business. EAT has returned $1.9 billion to shareholders in the form of share buy backs and another $384 million in divi-dends — and it has retired those shares at an aver-age of $32.38 a share, or at roughly a 30% dis-count to its current share price.

MARK: Plus, Wall Street loves companies that have fee income and they’ll put much higher multi-ples on them than on companies that are operating businesses.

JONATHAN: True, look at Wendy’s, what they have done. They took the playbook pretty much from Burger King and did it. McDonald’s was the first to do it, but they didn’t do it as aggressively as Wendy’s or Burger King. But they’re all doing it now and if Brinker went strictly to franchising, it would be accorded at a much higher valuation than it currently has.

So what’s another company that you find intriguing at its current price?

JONATHAN: My father mentioned earlier that the stocks outside of the major indices have been ignored. They don’t have the first buyers, the index funds, knocking on their door daily. And one of those stocks is QVC Group. It’s not in the major indexes. It’s actually a tracking stock, which trades under the symbols QVCA and QVCB. The compa-ny is a wholly-owned subsidiary of John Malone’s Liberty Interactive Corp. (LVNTA and LVNTB).

Too complicated for me —

JONATHAN: Yes, this is one of the Liberty entities and it has a very complicated ownership structure. John Malone hates to pay taxes and he creates all these convoluted — I don’t want to call them schemes — deals and structures to avoid or postpone taxes. He’s an extremely well-respected busi-nessman but his deals are too complicated for most Wall Street analysts, really.

I was going to say something along those lines when his name came up earlier —

JONATHAN: We’re aware. But if you actually look, QVC’s market cap is roughly $8 billion give or take, and there are just 8 sell side analysts cover-ing them. JCPenney’s market cap is $3.1 billion, and they are followed by 21 sell-side analysts. Nordstrom’s market cap is $6.9 billion, and they are followed by 27 analysts on the sell side of the Street. Kohl’s market cap is $7.7 billion — and they’ve got 23 analysts following them. Macy’s is trading at a market cap of $11 billion and they’re followed by 22 sell-side analysts. Yet QVC, with an $8 billion market cap has only 8 sell-side analysts following it.

You mean Wall Street doesn’t respect it?

JONATHAN: What’s misunderstood about QVC is who their core customers are. I’m trying to think of the best way to put this —

They’re not all little old ladies with noth-ing to do but watch TV?

JONATHAN: No, though they do skew female —

They’re clearly not the highly coveted males between the ages of 25 and 35 — JONATHAN: No, but they are a very attractive, wealthy, demographic. Their best customers typically purchase between 15 and 20 items per month. Let me get the exact data: “QVC’s customer base includes women between the ages of 35 and 64 with above-average wealth. The average QVC customer purchases approximately 25 items per month and spends $1,400.00 per year. QVC’s best customers purchase an average of 50 items per year and they have great customer loyalty, with 90% of the compa-ny’s orders coming from existing customers.”

Now, QVC recently reported a bad quarter, but we think that was more a matter of them stubbing their toe than anything else. This is a company with a great operating record since the financial crisis, and because of its soft quarter, you can buy this great franchise now at roughly six times our forward EBITDA projections.

Isn’t Amazon eating their lunch like it is every other retailers’?

JONATHAN: That’s what people tend to think, but QVC is really a different business. When you go to Amazon, you know what you want and you’re searching for it. When somebody goes to QVC.com, or watches QVC on television, they are being sold items — and it’s a completely different business. We think there’s room for both of those business models to do quite well. Besides, there are lots of ways that QVC could increase shareholder value.

How so?

JONATHAN: Well, they own 40%, already, of the Home Shopping Network (NASDAQ:HSNI) and they could potentially merge with it, there could be a tremen-dous amount of synergies there. Right now, QVC (NASDAQ:QVCA) is trading around $18 -$19 a share. Putting a 9 times multiple on our estimate of EBITDA, we think it’s worth roughly $34 per share, so we see pretty good upside potential in QVC.

So basically, it knows how to get certain women addicted to its shopping experience?

JONATHAN: Yes, sure. When you look at retailers, the question is, what’s the reason for them to exist? Well, at QVC proprietary products make up a very high percentage of their sales. It’s definitely anoth-er one of our higher conviction ideas, even though it continues to be overlooked and misperceived by investors. In fact, we wouldn’t be surprised to see a hard spin off of QVC Group floated in the not too distant future, as John Malone continues to stream-line Liberty Interactive’s operations.

Do you want to toss out another idea?

JONATHAN: Well, one group we like and we expect that one of these days is going to turn around is the financials — Bank of America (BAC) and Bank of New York (BNY)and JPMorgan (NYSE:JPM) — would probably be the most favored, but those are all well-covered, well-followed names.

MARK: You know, they have been laggards. They were great off the bottom when the market took off in ’08 - ’09 but then for the last couple of years they really have done very, very little — if any-thing. But I think they’re much better businesses today, at least in one respect, than they were when they had all sorts of other businesses underneath their umbrella.

They’re easier to analyze — you can really dig into them, you can really see what’s there. The disclo-sure is much better. They’ve raised so much capital that each one of them is way, way, way over-capi-talized. The government, in its own infinite wisdom, wanted to make the big banks less meaningful to the economy. But if you take the three largest banks today, relative to the size of the banking sys-tem, they are significantly larger than they were before all the regulations were put in place.

Unintended consequences —

MARK: Always. But now we have banking busi-nesses that have great balance sheets, they’ve been operating in an environment that has been horrible for them and to them — and what I mean by horri-ble for them is that we have virtually zero interest rates, there are no spreads, so they can’t make any money that way. Where they make their money is from fees and mergers and acquisitions and borrow-ings and things of that nature which are very prof-itable businesses.

So if we get to an environment where — I don’t know what normal rates will be, and everybody says you’ll never see 5% 10-year Treasuries again — but I’ve been doing this long enough to know that’s not going to be the case. At some point, we’re going to have a 5% interest rate. Especially since, historically, if you look at the average yield on the 10-year, going back to 1958, it’s higher than 5%.

JONATHAN: 6.17%, I think.

MARK: In fact, if you look at this bull market in bonds in a chart [nearby], it’s incredible. We’ve had 35 years of an almost uninterrupted bull mar-ket in bonds and declining interest rates ever since the nominal Treasury peaked at 15.84% in September of 1981 — and it seems like it will go on forever — but declining rates are going to come to an end, that much I know.

JONATHAN: What I think is really interesting — my father just mentioned the last 30 years of steadily declining rates — but look at the 30 years before that — when rates pretty much just went straight up for basically the same length of time, with only a few hiccups. Now, I wasn’t around then, but forecasters were proba-bly extrapolating recent trends continuing forever then, too.

I was, and you’re right. All eyes were on rates continuing into the stratos-phere. No one even dreamt of ZIRP.

JONATHAN: Yes. You would have been ostracized if you ever made a prediction like that. To me, 10, 15, 20 years is a very long period of time and when people say, “Oh, I’m going to lock in a 10-year Treasury at 1.7% because oh, four people on CNBC or are saying interest rates are going to be low for a long time,” I think, just remember how long 10 years really is.

Umm, not a good bet.

JONATHAN: No, and I’m not by any means predict-ing rates will bounce back up over 15% for a very long-time (if ever). But forecasters do tend to extrapolate recent trends as if they will continue unabated into infinity. So investors contemplating purchasing long-dated bonds should remember that from 1958-1981 Treasury yields increased virtually every year (with a few exceptions) and our bet is during that time frame no mainstream market fore-caster predicted that one day yields would ever fall to 1.6%. We are in a world full of disruptive change and making truly long-term predictions on almost anything (including interest rates) is a fool’s errand. In the early 2000s, who would have pre-dicted that Blackberry and Nokia would no longer produce their own phones and that Samsung and Apple would be the market leaders — well, Samsung until a couple of weeks ago?

MARK: My thinking is that you have now banks that have pristine balance sheets. They’re as well-capitalized as they’ve ever been. A good many of them yield 3% or more, their profitability is increasing, the dividends are covered multiple times. The environment has been horrible for the banks, in terms of government intervention. And I’ll say this — nobody is going to believe it — but this over-regulation has really hurt our economy.

They’re not very sympathetic characters.

MARK: I know, but if you talk to any banker and you ask, what does he think is the problem? He’ll say it’s his inability to make loans because he’s got 10 times — maybe not 10 times — five times as many people that have to approve each step, and the Fed coming in all the time to examine what they are doing. So you could get some relief from regulation. All I’m saying is the regulatory pendu-lum could swing back the other way a little. We might get a little less regulation and the banks will earn a lot more money than people perceive they can right now. Most of them trade right now at book value or below, at only modest multiples of earn-ings. And I could see them becoming market lead-ers now for a couple of years or more.

That would be quite a change —

MARK: Yes, even in the beginning of this year, the financials were the worst-performing sector of the market; it was one of the reasons that we’ve under-performed so far in 2016. We’re not sector investors, we tend to buy the cheapest companies we can possibly find. But when we go back and look at the portfolio at times we’ll see we’re more over-weighted in a particular area because that’s where the cheapest stocks are found. So we’re not overweighted, but we do have a number of finan-cials in our portfolios — which hasn’t been helping us — yet.

The big banks just have a habit of surpris-ing investors, and not in a nice way.

MARK: That’s true. But I think their below-market multiples pretty well discount their proclivities for ugly surprises. And ugly surprises should be less frequent because of all the regulation, number one, and number two, also because they are so well-cap-italized. And not nearly as leveraged as they were heading into the crisis in 2008. Besides, you know as well as I do — we’ve been in the business so long — that the next bad crisis will not mirror 2007-2008. It will come from somewhere else.

True. Not where everyone is watching.

MARK: Never. So I think the financials are a good bet. Some of the money managers, some of the banks. which have done nothing. We just did a report on Franklin Resources (NYSE:BEN). If you look at the balance sheet, they have 40% of the market cap in cash. The family that founded it controls 40% of the shares, so could they take it private? Possibly.

Investing in Franklin is really doubling down on active management —

MARK: True, investment management is a cyclical business and it is our way of playing active versus passive and value versus growth. It’s kind of interest-ing that even with the markets in decline there are still pockets of value. And I think that’s a direct acknowledgement the flaw in passive investing — that there are a lot of stocks that are outside these indexes — and they’ve been forgotten. But through the years, we think that these are the kinds of compa-nies that should do well. So even if they don’t do well for a while, I can sleep well at night knowing that I have a great business. I don’t have to worry about owning a basket of 500 companies where maybe 40% or 50% of them are — who knows. It is crazy that some of these valuations are where they are, but that’s creates opportunity for us and we just have to be patient and wait our turn.

JONATHAN: We put a good quote from Franklin in our report on that idea, from one of their letters: “U.S. passive funds take no view of business fun-damentals or valuation. They are a significant and unnecessary investment risk. For example, investors buying a global index fund in 1989 would have had the bulk of their investment — 34% — in Japan at the absolute worst time to buy Japanese stocks. A decade later, they would have had nearly 25% of their investments in technology companies that were grossly overvalued.”

MARK: With funds flowing into ETFs purchasing shares of stocks regardless of valuation or other fundamentals, some stocks and sectors that don’t happen to be in their baskets undoubtedly get left behind. Companies in the S&P Staples and Utilities sectors earlier in the year were prominent beneficiaries of flows into supposed “safety prod-ucts” like low-vol and smart beta ETFs, and so are trading at premiums to their long-term averages. Consumer staples, for instance, have been trading well above their 20-year average multiple of 21.2 times, and utilities, far above their 20-year average multiple of 15.5 times. Investors have been paying more than 20 times trailing earnings for utilities — think of that.

Meanwhile, the S&P financial sector, has been all but abandoned, trading at less than 15 times trail-ing earnings — versus its long term average of over 17 — and industrials are likewise lagging. We believe that while the shares of Franklin Resources have been adversely affected by the flow of funds from passive to active managers and the outperformance of growth style management in recent years, they’re now attractive as those trends begin to turn. Sure, its investment style has been out of favor — and I’m all too aware that styles can remain out of favor for a number of years — but for the most part they do eventually come back into vogue.

You’re holding out hope that value strategies are coming back —

MARK: Well, last summer — in 2015 — we stuck our neck out and said we thought that value’s long period of underperformance to growth styles might be coming to an end. It’s too soon to declare victo-ry, but the Russell 1000 value has pulled ahead of the Russell 1000 growth since then. With the prospect of higher rates going forward — including a high probability that the Fed will hike rates again before yearend, we wouldn’t be at all surprised if value were able to sustain its current momentum. Especially since the value style has an outsized exposure to financials — they’re about a 28% weighting in the Russell value, and only about 6% of the Russell growth.

What about energy stocks — they’re also overweighted in value indexes vs. growth —

MARK: That’s the other interesting thing — we don’t own oil stocks — I’ve almost never owned oil. I shouldn’t say that. Occasionally, I’ll buy them. But we missed the entire decline in the oil stocks — and some upside, more recently. But cyclical stocks like energy and materials have drastically underperformed since both the prior market peak and the 2009 bottom. Which makes them the most statistically cheap sectors.

That doesn’t excite your value antennae?

MARK: We’ve generally shied away from commodity-driven, cyclical stocks — given our aversion to play-ing the fool’s game which is macroeconomic forecast-ing. We’d rather hunt for less cyclically exposed stocks overly punished by investor uncertainty of one sort or another. There are select companies in the energy sector that we’ve been positive on from time to time, but we don’t believe it’s necessarily the most fruitful place tor value investors to go hunting for out-of-favor stocks in at this point. We just don’t see great prospects for a significant rise in the price of oil within the next few years, given the market’s supply and demand dynamics and the significant global macro uncertainties that dampen our expectations for a quick rebound in oil prices.

So at this juncture, we’d rather focus on uncovering individual businesses that are selling below their intrinsic or private market values, as we’ve said. And we’re currently finding those, as we’ve suggested, among the media stocks, in the financial sector and among the consumer discretionary stocks.

There, we left our interview last Friday, and then came Tuesday’s surprise election results. I checked back in with Mark and Jon to gather their thoughts.

What do you think Trump’s surprise victo-ry might mean for investors?

JONATHAN: The Trump election certainly fits in with our theme of uncertainty! He is an unknown quantity, even now. With Hillary, you basically knew what you were getting and things would have, in all likelihood, remained pretty much constant. Whether that would have been good or bad is a question for another day — but quite frankly it is a moot point.

MARK: As bottom up stock pickers, we should in theory tune out the political and economic noise and just focus on finding undervalued companies regardless of the macro environment. But I think that is an impossible task — and probably not a wise strategy because macro situations certainly affect business values. So we’re watching —

JONATHAN: In terms of how a Trump victory will impact the economy and therefore the stock mar-ket, I just watched a clip of David Rubenstein, the Founder of Carlyle Group, interviewing Jamie Dimon, of JPMorgan Chase back in September. The question of the possibility of a U.S. recession aris-ing from political uncertainty was raised. Mr. Dimon acknowledged that the U.S. faces serious problems but he then said: “America has the best hand ever dealt to any country on this planet.”

He went on to discuss the competitive advantages that America has which he does not believe Americans fully appreciate. It’s well worth viewing, but I won’t keep you in suspense, his main points were:

  1. We have peaceful wonderful neighbors in Canada and Mexico

2. We have the best military barriers ever built due to the Atlantic and Pacific oceans

3. We have all the food, water and energy that we will ever need

4. We have the best military on the planet and we will continue to have that as long as we have the best economy on the planet

5. We have the best universities on the planet

6. We have a rule of law that is not duplicated anywhere

7. We have a magnificent work ethic and inno-vation from the core of our bones

We certainly have our problems and there are many issues that need to be addressed. But I think, due to the reasons cited above along with many others, America’s best days still lie ahead.

We have grown and prospered as a country despite a civil war, The Great Depression, two world wars, the political turmoil of the 1960s including the assassination of a sitting president, Vietnam, Watergate and September 11th. I do not think who will lead us over the next four years will have the long-term impact that people are expecting. We certainly have persevered through worse.

Let’s hope that having plumbed the depths of discord, we can all rediscover better angels in ourselves and others.

This interview originally appeared in Welling on Wall Street (all rights reserved). To learn more about Welling on Wall Street please visit www.wellingonwallst.com.

Jonathan Boyar, part of the Boyar Value Group, will speak at the 2017 GuruFocus Value Conference. Get registered for the event here.

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Performances of the stocks mentioned by Holly LaFon

User Generated Screeners

DBrizan2017 oct20CDN
DBrizan2017 oct20CDN dividend
althekearoct 17 user defined screen
althekearPE >50th percentile of INDUSTR
althekearLow EV/EBITDA
althekearLynch inspiret Oct 17
althekearsg hk best
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