Bargain Hunting with Jonathan Boyar on Barron’s Live

Lauren R. Rublin: Hello everyone and welcome to Barron's Live, our weekly webcast and podcast. I'm Lauren Rublin, senior managing editor at Barron's. Thanks for joining us today for an update on the markets and stocks in the news. I'm thrilled to have two great guests today, Barron's very own Ben Levisohn, who will give us an update on some of the many companies reporting earnings this week. And Jonathan Boyar, a principal at the Boyar Value Group, an investment and research firm in New York. Jon has appeared often in the pages of Barron's and on Barrons.com, particularly for Boyar's Forgotten 40 List. This is a list of undervalued stocks that the firm highlights at the start of every year. It is not quite the new year yet, but Jon already sees a number of stocks that he wants to highlight today and we'll be talking about them. So welcome Jon and Ben, and thanks for joining me today.

Jonathan Boyar: Thanks for having me.

Lauren R. Rublin: Great. So Jon, let's start with the economy, then we'll move on to the markets. And you think it's possible that the Fed will engineer a soft or at least a softish landing, which might even unlock America's frozen housing market. So how do you see this playing out and what are the implications?

Jonathan Boyar: Yeah, no, they may have done the elusive soft landing. It's still ... One, you have the unknown unknown, so you never know what's obviously going to happen, but the economy is doing fine. Interest rates are coming down and housing has been kind of frozen for the last couple of years, and it's such a big part of the economy, not only just from housing itself, but the ancillary parts of the economy that housing helps with. So if we're able to lower interest rates without causing inflation, that stimulates the housing market, and gives us a second leg up in this three-year-old bull market. If that happens, it'll be fantastic. I'm not saying it will, but it's certainly a possibility, but there are a lot of risks out there.

Lauren R. Rublin: What kind of odds do you put on it?

Jonathan Boyar: Sorry, can you hear me?

Lauren R. Rublin: I think Ben, were you saying something?

Ben Levisohn: Nope.

Lauren R. Rublin: Sorry about that. I said what kind of odds would you put on it?

Jonathan Boyar: Hard to put odds because there are so many things that could go wrong, but I think better than even that we're engineering a soft landing and whether that happens with housing, that's too hard to predict, but I think it's certainly a distinct possibility.

Lauren R. Rublin: In the realm of possibilities. All right, so let's talk about the market. You have expressed about investors' complacency, and you've noted signs of froth not only in stocks but in corporate bonds. So what are you most concerned about and what are complacent investors missing here?

Jonathan Boyar: I look at everything in terms of risk reward, to me and to most people, the safest instrument you can invest in is US government securities. And the fact that I believe it's either Microsoft or Apple has bonds that are trading with lower interest rates in the US government is insane because if the US government defaults so goes the world. So I think investors are just being ... They're stretching again for any extra yield and we saw what happened last time and it didn't turn out well, especially for some of the banks. So I think investors have to be extremely careful when investing in corporate bonds because I don't think that they're being adequately compensated for the risks that they're taking. I think they ... Right now, I wouldn't invest in any corporate bonds pretty much. I would just put all fixed income allocations into US Securities until we get a better yield environment.

Ben Levisohn: The headlines about things like First Brands and Tricolor, though those are in the, I think the private credit markets, does that feed into your worries about the corporate credit overall?

Jonathan Boyar: Absolutely. I mean, I don't want to say the private credit is a bubble, but anytime that you have some of these private valuations, it really worries me. I think investors and financial advisors try to make things way too complicated and that's an allocation that I would be very wary of being in, and I think investors should just make it ... keep it simple.

Lauren R. Rublin: So let's talk about stocks for a moment. We've talked about bonds and the market has really been driven this year by expectations for the AI trade, Barron's and others have questioned where the money will come from, to build out the AI infrastructure and there are also concerns about return on this investment. So what is your take about the market's AI enthusiasm and stocks in general?

Jonathan Boyar: I don't want to sound ... Definitely worried about it because investors eventually are going to want a return and I think investors in some aspects, JP Morgan Guide to the Market which comes out each quarter had a really interesting chart that showed productivity advancements for the last century or so when major technologies were introduced. And it's not that great. Even when things like the telephone or whatnot have been ... a personal computer, it hasn't been that great in terms of an advancement. And I'm not sure why this is going to be different or significantly different this time. I think people are betting a lot on AI and I agree that it's going to change the world, it's going to change how pretty much anything happens, but I don't know if we're going to get that instant gratification that investors are pricing in. So I'd be really wary. We're in a market that is driven by AI stocks. If you look at the equal weighted S&P 500, it's up 7% or so this year, which significantly trailing the cap weighted index. So if there's a leg down in some of these names, the market could suffer a lot.

Ben Levisohn: Do you see ... I think it was Andrew Ross Sorkin was on 60 Minutes last night, talking about his fears that we're heading for 1929. The other analog that's brought up all the time is 1999 and the dot com bubble. If you see this ending, does it end one of those? Is it completely different?

Jonathan Boyar: I think it's always different. I listen ... I have a lot of respect for Andrew Ross Sorkin. He's also trying to sell a book, so that's cleverly called 1929, I believe. So I don't know. In terms of the dot com crash, there are parallels and there are distinct differences. You look, I think, what from 1993 to '99 or '94 to '99, the S&P 500 went up each and every year, and then you had in 2000 the huge crash. Whether that happens this time, I have no idea. The companies are certainly significantly better now and more high quality. But there's also a lot of things that are making me nervous. The fact that Nvidia is investing in X company ... And they're buying chips from Nvidia. There's a lot of circular things going on, so it's going to be different than the last time, but it could end badly for investors, and I think investors really need to be careful and don't be greedy.

Lauren R. Rublin: Jon, to that end, you put together a table recently looking at the top stocks in various investment cycles, and you noted how they often are not the same top stocks in the next investment cycle. Try to put that into words for us, what did you find?

Jonathan Boyar: Yeah, no, I have to give credit to ... The names came from JP Morgan, their guide to the market. They really did an interesting job and they looked, they showed each year, every decade from 1985 to the present and there was no stock that was on every year, which is amazing. And there were only two stocks, I believe Exxon and GE that were on four of the five periods. And if you look at the current ones, I think only six or seven of them were part of the top stocks 10 years ago. So I think what it shows you is nothing is forever. Today's leaders are not guaranteed a spot dominating over the next 10 years. With that said, I don't know how Berkshire Hathaway would have ... They're one of the top stocks now and in 2015, there's a caveat there that it didn't go into the major indices until 2010. So a company like that I think has staying power because it's so diversified, but the other ones I would be very wary of.

Lauren R. Rublin: All right. So let's talk about some stocks that are not overpriced by your reckoning. And I want to talk about two in the sports arenas, so to speak. You're a fan of two publicly traded sports plays, Madison Square Garden Sports, which owns the New York Knicks and the Rangers and the Atlanta Braves Holdings, which owns the Atlanta Braves and a lot of real estate around the park and both are so-called asset plays. What do you think the market is missing about these stocks and how do you expect the companies to surface the underlying value?

Jonathan Boyar: Yeah, we're big fans of MSG sports. It owns ... As you said, it owns the Knicks and the Rangers. Right now, you have an enterprise value of five and a half billion dollars. I think the Knicks alone, if there was a sale, would go for 10 billion and the Rangers probably four or so. So you get 14 billion dollars and it's a five and a half billion enterprise value. I think in an expensive market, this is probably one of the best risk rewards out there. What investors are worried about is the Dolans. James Dolan controls it, his family does, and they ascribe a so-called Dolan Discount, which in recent years has been somewhat warranted, although I would say his sphere has started to turn out quite well for investors, as has Madison Square Garden Entertainment. We take a longer term perspective. We look at what he did with Cablevision, where he did a really good job creating shareholder value and sold it to Altice in, I believe, 2017 or 2018 for a price we never thought we would get. So I think they're a seller of assets at the right price. There's a lot of things that they can do absent a sale. And we wrote a letter to James Dolan, which unsurprisingly he didn't respond to, but it was a public letter stating, we think he should split the two teams into two publicly traded entities and that would instantly create a lot of value. And there are other things he could do like selling a stake to private equity, which has been done recently. If you look at the Tisch family and the Giants, they sold the stake to one of the Koch heirs. So there's a lot of ways that value can be unlocked and I think they eventually will do it. You just have to be patient.

Lauren R. Rublin: Those are interesting suggestions given the prices that sports teams are getting these days. What about Atlanta Braves?

Jonathan Boyar: Yeah, so Atlanta Braves, you have a much more rational owner. That's why the discount is not as great. It's controlled by media mogul, John Malone, who's simplifying his empire, he's done a lot of things in recent years to make things easier for his heirs. And a few years ago, he spun out Atlanta Braves Holdings into its own ... It was part of Liberty Media, into its own separate asset-backed stock. It's now eligible to be sold without having any adverse tax consequences. And I think at the right time, sooner rather than later, he's going to sell the team. And the stock is more than just the team. It also owns valuable real estate near and close to the stadium as well. So there's a lot to like there. To me, for both of these theses to work out, you have to believe that there's going to continue to be billionaires and there's going to continue to be billionaires with egos, which is a bet I'm willing to take.

Lauren R. Rublin: Me too. All right, let's move on to Ben and talk about this week's earnings. Ben, third quarter earnings season is kicking off this week. All the big banks are reporting starting tomorrow.

Ben Levisohn: The exciting ones this week.

Lauren R. Rublin: What's that?

Ben Levisohn: I said they're the exciting ones this week.

Lauren R. Rublin: Yes. How about a quick update on the overall earnings outlook and a quick one on the expectations for banks and then we'll drill down and look at some specifics.

Ben Levisohn: Sure. Well, the overall expectations are for a good earnings season, earnings coming in someplace around 9%. You give the usual beats and maybe you get 12% or even more. What's interesting is that sentiment has been strong. Usually, you see annual assessments getting cut into earnings season, they remain pretty flat this time around. I think the biggest worry then is twofold. One is that is there too much optimism about the earnings from the analysts that they aren't seeing some of the things that could hit earnings such as continued tariffs or consumer weakness. And then, there's valuation. The stock market is not cheap, many stocks are not cheap. And so, has the market positioned itself in a way that even if the number is beat, there's going to be some selling from earnings generally. Banks themselves, it's interesting because you look at the KBE, which is the bank ETF. It's actually down 2.9% in the last three months. It's up 4.5% over the last 12. So nothing really great, but when you look at the big banks, they've done very, very well. There's excitement about capital markets and trading and about the rate cuts of course. And so there's a lot of ... I mean the sentiment is very strong for the mega banks and I think that's something that people have to pay attention to heading into these numbers.

Lauren R. Rublin: All right, so let's take a look at some of these specific banks reporting. We're going to start with Citigroup, which reports on Tuesday. And each of these banks has somewhat different dynamics going on, but Citi's had a great 12 months. The stock is up 43%. What is the outlook here?

Ben Levisohn: Earnings are supposed to hit a buck 91. That'd be up from $1.37. So nice earnings growth there. Partially this is just the simplification process that is happening. One of the things that I guess is a bit of a concern is that the company is hinted that expenses are going to be higher than they had originally said, and we'll have to see how the market reacts to that. But they also have said that they're going to try to sell Banamex, it's a a Mexican bank they owned. There's actually some talk that they might be able to get ... Might be able to sell that for more than they would've been able to, I think they initially planned an IPO in 2027. There's actually talk that they may be able to sell it, in which case they would get more money and it would happen faster. So that's something to pay attention to also.

Lauren R. Rublin: So how would you assess overall Jane Frazier's turnaround to city? You think it's working?

Ben Levisohn: I mean it's slow. I think it probably is working though, it was such a hodgepodge of things and so inefficient that it is taken a long time to make changes there, but it does seem like those changes are actually happening. The bank is getting simplified and we'll have to see how that goes. But yeah, I think for now it seems like she's doing a pretty good job.

Lauren R. Rublin: Excellent. All right, let's move on to Goldman also reports tomorrow, trading and capital markets activity are important here. What's on deck?

Ben Levisohn: Yeah, I mean that's what it's all about. It's going to be trading capital markets. M&A is back and there's expectations that they'll do well, IPOs too. And apparently there's a sense that there's a backlog for deals from private equity companies and that should help too. There's the trading, the big thing here is that it's a pretty high bar. The stock is up 48% over the past 12 months and they don't have the same kind of tailwinds from trying to make the business more efficient. So it's really going to have to come from their businesses. And there's a little bit of a worry that this deal that they announced recently with T. Rowe Price could eat into the amount of buybacks the company is supposed to do. So I'll have to hear what they say about the T. Rowe deal and their use of their capital.

Lauren R. Rublin: They made a big investment in T. Rowe, is that right?

Ben Levisohn: That's right.

Lauren R. Rublin: All right, moving on, there's JP Morgan. This is run by Jamie Dimon who's been warning us about excess in the market. He's also a great CEO of JP Morgan. The company reports on Tuesday. What are you expecting from earnings?

Ben Levisohn: Everyone expects it to be great. I mean this is the bank of all US banks. It's bigger than everybody. It has a higher market value than everybody and it seems to just run better than all the others know. Invested banking should be strong. Investors are going to be looking for what happens with net interest income, with rates coming down. Are they going to be able to ... What are they going to say about where net interest income is going? The fears I think are really about valuation. It is more expensive than pretty much any bank out there. I have a number in front of me that trades are about three times tangible book value, which is very high. And so, they really need to continue to show that they are just better taking market share, growing those earnings. The other thing people will listen for is that any comments about Tricolor, that was this ... It was a subprime auto lender that has run into trouble. Barron's wrote about it and people are going to be listening to see what gets said about that on the call as well. How much exposure should be small relative to the bank, but there's this little concern burbling underneath for the credit markets that we're going to see more of these.

Lauren R. Rublin: All right, that is definitely a concern. Let's move on to Wells Fargo also reporting on Tuesday. It's going to be a very busy day for our bank's reporter.

Ben Levisohn: Yes.

Lauren R. Rublin: Wells Fargo behaved badly and had an asset cap imposed on the company, that is ancient history now, the asset cap was lifted. So what's ahead for the bank?

Ben Levisohn: It's interesting because now no one's quite sure what's next for the bank. I mean that asset cap getting removed was the catalyst. Andrew Barry picked the stock about a year ahead of the catalyst being lifted, maybe nine months ahead of that. Great pick, they hit that cap or the cap got lifted and all of a sudden the stock is kind of lagging. It's been down about 6% of the last three months. Earnings aren't as strong as some other places. It's supposed to report a profit of $1.54, that'd be up from $1.52. And so I think people are just concerned at broad, number one about net interest income. They're probably the most rate sensitive of the big banks and just what comes next, what is going to actually lead to growth now that this asset cap is removed and they have a little more power to try to drive those earnings in the future. So I think we have just a lot of paying attention to that.

Lauren R. Rublin: All right, and then let's quickly go through Bank of America, which reports on Wednesday and Morgan Stanley, which reports on Wednesday.

Ben Levisohn: Yeah, Bank of America has been the biggest under performer over the past 12 months. It's only up 16% despite growth of ... It was supposed to have earnings of 94 cents, that'd be up from 81 cents. So pretty decent growth there. It also has a catalyst coming in November. It's holding in investor day, which I think is, its first in a very, very long while. Again, some of the same kind of issues are coming up. Net interest income, who want to see strong investment in banking and capital markets business. But it's one that because of that underperformance, I think that the bar is a bit lower. If the news seems pretty good, the stock could do pretty well.

Lauren R. Rublin: All right, and we'll close the bank discussion with Morgan Stanley.

Ben Levisohn: Yeah, Morgan Stanley is kind of the boring one because, so much focus is on the wealth management business, but it's also been, it was the bank that people were talking about for a while, remember, it has planted Goldman as kind of the popular ... more popular the two investment banks, but then, it kind of fell back again. I think at this point, there are some concerns just about expenses from just how well the markets or the wealth management business has done. The markets have gone up means bonuses are going to be bigger so the compensation expenses could rise. There's a little concern there, but really it's just a question, is that wealth management business really driving things the way it needs to?

Lauren R. Rublin: All right. Jon, I wanted to ask you, I think you own Bank of America and JP Morgan. What is your overall take on the banks?

Jonathan Boyar: We definitely prefer big banks over small ... I think they have huge competitive advantages relative to the regionals. JP Morgan is clearly the best run bank, but the question is Ben pointed to is a price to perfection. I mean, three times book for a bank is far from cheap, but you have Jamie Diamond running the show and he is done a fantastic job. So it's one we continue to hold and I just think there are probably a lot cheaper stocks to buy though.

Lauren R. Rublin: Won't argue there. All right Ben, I want to go through one more company reporting this week that's Jonson and Jonson and the healthcare sector generally is starting to look a little better. Is that also true here?

Ben Levisohn: It is actually the stock has gained 22% over the last three months and that's pretty good. Sales are rising, people are looking for good things to come from their ... I don't want to call it biotech, but those medicines like TREMFYA and whatnot that they sell. They want to hear about the pipeline, they'd like to see some stability out of medical technology. If they can grow sales in the five to 7% range, that's probably good enough. And of course there's always the talc risk that hangs over things and may even be some concern about Tylenol even though that was spun off with Kenvue. Then this could be just listening for guidance. Are they going to raise it or are they going to hold steady? We'll have to see, but I mean I do think that with the stock having done so well over the last three months, the bar gets set pretty high at that point.

Lauren R. Rublin: All right, so a discussion of J&J leads me to Kenvue and Jon, as we know, Kenvue was spun out of J&J as a separate public company in October ... Excuse me, August of 2023. Kenvue owns J&J's consumer brands including Tylenol. The government recently tied Tylenol used by pregnant women to autism and the news really slammed Kenvue shares. We're going to leave the science to others, but talk about the attraction of Kenvue. You've called it an attractive special situation. Why is that?

Jonathan Boyar: Well, yeah, it's certainly ... It's really interesting. One, you have, I believe, multiple activists involved in the stock. You have some fantastic brands, not only Tylenol, you have Band-Aid, Neutrogena, Listerine, so these are a plus brands and now, it's trading at 16 times earnings over something that I think is really just noise, unfortunate noise, but noise, nonetheless. If you look at how much the stock has retraced compared to how much sales and profit Tylenol brings in for the company, it makes absolutely no sense. And I really don't think ... I'm a recovering lawyer, but I don't think the litigation risk is nearly as bad as people are making it out to me. Obviously, I could be proven wrong, but if there's really no harm, it's hard to lose a lot of money in litigation.

Lauren R. Rublin: What kind of upside do you see for the stock?

Jonathan Boyar: I mean, it depends what kind of multiple do you put on a company that has some of these fantastic brands? So I think you could easily get into the low to mid-20s and significantly, higher if the folks at Starboard help reinvigorate sales. So I think it can go significantly higher over the longterm and while you're waiting, you're getting about a 5% yield at these levels. So I think it's about worth taking

Lauren R. Rublin: Not to be dismissed that yield. So next company is one I hadn't heard of before and I'd like you to enlighten us. It's Unifirst, it's a uniform rental company the ticker is UNF and what is bullish these days about the uniform?

Jonathan Boyar: Yeah, it's hardly a household name, right, right. In an expensive market like the MSGS, I'm looking at my downside and let the upside kind of take care of itself. So Unifirst is the third-largest garment rental business in the US. It's trading at a very modest multiple and in January, it rejected an unsolicited proposal from Cintas at $275 a share. Shares were trading about 165 or so at the time of the offer. That's where they're trading now. And it made absolutely no sense. They barely engaged with them. This is a family controlled business.

Lauren R. Rublin: I suspected that.

Jonathan Boyar: Yeah, the founder passed away. There's no heir apparent working at the business. You have, I believe the founders aunt or wife who's 80 something years old, controls this. At some point in time they're going to sell this thing. We have a lot of experience going back to Dow Jones and investing in some of these family controlled businesses. Sooner or later, capitalism kind of wins out over sentimentality

Lauren R. Rublin: And it worked out for Dow Jones, which is now owned by News Corp and happens to publish Barron's. So let's talk about Scott's Miracle grow. Another name you like. We certainly know that one and we've written about it in Barron's. What's attractive about it these days?

Jonathan Boyar: Well, this is another family controlled businesses controlled by the Hagendorn family. They also have fantastic consumer franchises. It's trading at I think roughly 10 times EBITDA. They made a terrible foray into the cannabis business, which they're now getting out of and I think it's going to bring a lot of ... They essentially burned two billion dollars. And they brought their leverage up significantly. They're getting out of the business, leverages coming down. I think you're going to get a lot of shareholders come in who wouldn't invest in it when it was part of a cannabis empire. And I think sooner or later the Hagendorn family will sell this and they'll get a lot more than 10 times EBITDA when they do. I mean we're big believers in the power of brands. They have Coca-Cola like market share. It's just a great business that probably shouldn't be a public company.

Lauren R. Rublin: Do you invest in a lot of family owned companies expecting some sort of value to be unlocked?

Jonathan Boyar: Yeah, I mean for better or for worse, it's not even expecting value to be unlocked. It's one they usually traded a discount, which we like, but it's also ... Over the long term these family controlled companies tend to outperform because their people are managing it for the long term, not for to beat quarterly earnings. Another example would be Lowe's controlled by the Tisch family. They've done a fantastic job and they're not going to make any stupid acquisition. It's trading roughly around book value and these are names that over time will do exceedingly well. And for people who can afford to be patient, you want to invest alongside these families that have great businesses.

Lauren R. Rublin: It's true patience is definitely required. So want to talk about one that is not family owned but quite familiar to us. And that's Uber. I was a little surprised to see it on your list of names. What do you like about Uber?

Jonathan Boyar: Yeah, Uber certainly fits into the non-traditional value camp. It's a name we've owned for quite a while. It was a lot cheaper when we originally bought it and wrote about it in our research business. But I think it has a tremendous moat in its network effects. They are by far the leader in the ride-sharing business in the pandemic. The Uber Eats became a very, very profitable business. Now, it's a business that's buying back a lot of share. It's gotten hit a little bit because of fears of boat taxis. I think they're a winner, not a loser in that business that I don't think everyone's going to have a Tesla and be on their network. There's going to be lots of winners in the self-driving car category and Uber is going to be the platform in which they rent those cars out.

Lauren R. Rublin: That could be an enormous opportunity for them.

Jonathan Boyar: No labor costs, it's pretty good.

Lauren R. Rublin: Right. All right, one more from me and then we're going to go to listener questions, which have been coming in and that is Markel Group. This is an insurance company and kind of a little conglomerate. What's the story with Markel? Why are you bullish on it?

Jonathan Boyar: Yep. Markel is an interesting name. It's another name that has an activist in it. I believe it's Starboard value. They've done a good job in their venture business where they do things like Warren Buffett does, where they buy whole stakes and businesses. But unfortunately their insurance business, which is bad for an insurance company, hasn't done quite well. They're now turning that around. They brought in a new insurance head, which we think will do quite well. We think that they're going to be buying back a lot of stock. It's a sleepy little business run by Tom Gaynor who's done a very good job and it's one of those names again in an expensive market. I think the downside is relatively limited and the upside is pretty good. So it's one that we favor.

Lauren R. Rublin: Okay. We had a question from Bruce about UK listed companies that you like, but I'm going to expand the question and ask whether you look at international companies and any names you might cite there.

Jonathan Boyar: In terms of international, just because of what we do, we tend to look just in the US. That's not to say there's not a lot of opportunities internationally, and if we had more bandwidth, we certainly would. The one thing I would say is ... And I'm writing about it in our quarterly letter. One of the things that really does worry me is emerging markets and people are piling into them, even though they've kind of had a lost decade, they're chasing performance and it's something I would be extremely wary of. So I would stick to developed market stocks. I can't really comment on UK stocks, but looking statistically, they seem certainly a heck of a lot cheaper than US names.

Lauren R. Rublin: Okay. Technical question from Anthony who rightly notes that he sees two stocks for Atlanta Braves holdings. Are you talking about BATRK or BATRA and what is the difference?

Jonathan Boyar: The difference is one is a voting stock and one is not. I believe the BATRK is the cheaper one. I think in a sale, both people will ... Both classes of stock will be treated equally and hopefully, you won't have a Sherry Redstone type of situation. So I would just buy whatever's the cheaper one.

Lauren R. Rublin: Okay. We had a number of questions about rare earth stocks. I don't know if this is your bag, Jon, but if you can't answer, I'll turn to Ben. Carolyn wants to know what your view is on rare earth materials and rare earth stocks.

Jonathan Boyar: That is definitely a Ben question.

Lauren R. Rublin: Okay, Ben, fill us in.

Ben Levisohn: I can tell you what Al Root has told me. He looks at these stocks and there's good reason for them to have gained so much MP materials in particular, the US government has provided a floor, a price floor for it. And also, it basically is provided the investment for it to really up production. And so, if you look at what the earnings are expected to be, they're going to grow exponentially and you have this level of certainty that is extremely high. The problem is that all these stocks have ... anytime there's a little bit of an announcement, all these stocks have run, they've gained a ton. Even MP is maybe starting to look maybe even more than a little bit overpriced. The thing is that the US needs to have its own rare earth industry and I assume that these investments are going to get us there and maybe even faster than people might expect. But investments, I think at this point they're getting pretty speculative.

Lauren R. Rublin: All right, still a lot of interest in them. Thank you.

Ben Levisohn: Yeah.

Lauren R. Rublin: We have a number of questions about value traps, Jon. Adi asks, how do you avoid investing in value traps when looking for undervalued stocks? And Jamie asks, similarly, how do you avoid bear traps in deep value stocks?

Jonathan Boyar: I'll answer the first question first. In terms of avoiding value traps, we're extremely catalyst focused. So we're looking why is a stock going to ascend in value over a reasonable period of time to us, generally reasonable period of time is 2, 3, 4 years. So if you can find a reason that the stock will go up, that helps. It certainly doesn't make you immune from value traps, but it certainly helps. And in terms of the second question, while we do do some deep value stocks ... The firm was started by my father in the 70s and there were plenty of good businesses that were deep value stocks. Today, if you did a deep value portfolio, you'd have a lot of really bad mall retailers mostly. So we tend to stay away and look at business quality and be willing to pay a little bit more for a good business than to buy a bad business that is just extremely cheap. Plus the other thing about buying deep value stocks, that's a problem is you have to keep buying new ones. They generally ... If they work out, they work out relatively quickly and we want to hold these things for the long term. So we'd rather hold a business that's great for a very long period of time.

Lauren R. Rublin: And if they don't work out, you have big trouble.

Jonathan Boyar: Yes.

Lauren R. Rublin: So question from Kevin, related to this, how do you generate your ideas? What is the best resource for generating investment ideas and what valuation methodology do you use to value potential investment ideas?

Jonathan Boyar: We have a fantastic team of four analysts, plus myself and my father. But the four analysts are terrific, they're all seasoned professionals and they spend their days just looking for ideas, whether that's through publications like Barron's or whether it's through looking at 10 Ks, 10 Qs, it's just reading, being paid to read, being paid to come up with ideas and trying to look at companies. I mentioned Lowe's before, the insurance company that are not necessarily widely followed by analysts, I don't think there's any sell side analysts covering the name. So you look for names like that, you can find extremely good value, really good bargains. So that's another place to look, but it's just reading and being curious.

Lauren R. Rublin: Always, always good for an investor. So Lee has an interesting question. He notes that he's seen, McDonald's is in your fund's top 10 holdings and the stock sells in a market PE and it is challenged by beef prices and competition. And he wants to know what you see in the company, why you think it might go up from here.

Jonathan Boyar: Yeah. I guess if you look at some of our holdings, some of our biggest holdings might not be names that we would buy for new accounts right now because we're extraordinarily tax efficient. So most of our clients are taxable and if you sell something for a profit, you have to pay Uncle Sam 25% or so of your gain. So we have to find something that's 25% better. So our cost basis on McDonald's, which we bought I think in 2010 or so at significantly lower prices is very low. So there's big tax implications if we sell it. So if we can find this great business and allow it to compound tax deferred, that's a situation we like.

Lauren R. Rublin: That makes sense. All right. Ben, the next questions for you, from Hussain, what do you think about Taiwan Semi it's announcing earnings on Thursday, one we haven't talked about yet.

Ben Levisohn: Yeah, no, it's an interesting one. Largely, we all know that it's a big part of this AI chip race. It makes so many of the chips, it's actually incredible to see what happened on Friday and then look at the stock again today. It got clobbered but it's made back all those losses and then, some heading into its earnings report. I think a lot of it just comes down to how much they keep getting of this chip thing and at some point, does it get overbuilt or not? I think the expectations are pretty high. It's expected to produce a profit of $2.58 cents a share. That'd be up from $1.95. But the AI chip, the demand for that just keeps coming. And so as long as you see that happening, as long as they're increasing shipments and growth ... As the base gets bigger, I think growth has to slow some. But as long as it's still growing at a nice clip, it should do well. It's also getting a boost from foreign exchange rates and that helps. So there's a lot going right for it too. I think the only question is whether it's just gained too much, it's up 47% over the last 12 months, 22% actually might be higher than that after today. Maybe closer to 30% in the last three. You have to worry that maybe it's gained a little too much heading into the number.

Lauren R. Rublin: I'm glad we had a chance to talk about that. So good question. We're going to close with a question from Gordon. This is for you Jon. He is interested in hearing about high dividend payers who look like bargains. You mentioned Kenvue. Are there others you can think of?

Jonathan Boyar: I think investors have to be careful with the dividend payers. You have to be things that have too high of dividend yields. Sometimes it's signaling there's a problem in terms of dividend payers. Medtronics would be an example of one that has a decent dividend to look at. A restaurant brands. I know you mentioned McDonald's earlier. QSR has a decent dividend and is a good business and is cheap. So those are some that I would look at as well. Comcast is another company that is a good business. There's certainly problems with the business, but there is a decent yield, I believe.

Lauren R. Rublin: All right, I am sorry we don't have time for more questions today. We've got a lot of good ones, but I think we covered a lot of stocks. It's always fun to have you on Barron's live, Jon, and always fun to have you Ben as well. So thank you both.

Jonathan Boyar: Thank you for having me. It was a lot of fun and I hope your audience enjoyed it.

Lauren R. Rublin: I certainly did. Next week on Barron's live, Ben and I will be here. We'll be talking to Aakash Doshi, a specialist in precious metals and commodities at State Street Investment Management. We're really going to probe the gold market, what's been sending gold higher, how much more can it rise and why? And we'll talk about some other things related to precious metals and commodities. So please come back next week. Same time. Thank you everyone for tuning in today. Stay well and have a good week.