Chris Mayer Returns: The Investor’s Odyssey, AI as a Junior Analyst & Life on a Public Board

[Jonathan Boyar] (0:04 - 1:11)

Important disclosures and disclaimers apply to this episode. Please listen to the end of the episode for the full disclaimer. Today on The World According to Boyar, is Chris Mayer.

Chris wrote 100 Baggers, one of my favorite investing books, and he just published a new one, The Investors Odyssey. We talk about what he's learned from three years of being on the board of a public company, how he uses AI as a junior analyst, and what it actually feels like when a position gets cut in half. How he responds, and how he re-evaluates it.

And stick around after we say goodbye, because Chris and I keep talking stocks. And with his permission, that conversation is in the episode two. Welcome to The World According to Boyar, where we bring top investors, best-selling authors, and business leaders to show you the smartest ways to uncover value in the stock market.

I'm your host, Jonathan Boyar. Today's guest is Chris Mayer. Chris is the Portfolio Manager and co-founder of Woodlock House Family Capital.

Chris was also the very first guest in the history of The World According to Boyar. Chris, welcome back to the show.

 

[Chris Mayer] (1:12 - 1:16)

Hey, Jon. It's good to be back. Yeah, the first guest.

I remember when you started.

 

[Jonathan Boyar] (1:16 - 1:32)

To be honest, I tried listening to it last night. I couldn't. It was so bad.

You were good. I was so bad. It was unlistenable.

I'm sure you're being overly harsh. One good thing is, I'm not saying I'm the best podcaster in the world, but at least I've improved.

 

[Chris Mayer] (1:34 - 1:43)

Glad to be on with you. Good to talk to you. And yeah, thanks for having me on.

Ever since that first interview, you've got a lot of illustrious guests, so I'm joining a good roster now.

 

[Jonathan Boyer] (1:44 - 2:11)

Yeah. It's been a lot of fun. I've learned a lot.

I'm glad to have you back. And when we recorded it was 2008, at the time you were running the Bonner family office, managing money for one person. You hadn't started your fun yet.

And before that, I hate to use the term you were a newsletter writer, which I think has a bad connotation. You were very different than the average one. How has been managing outside capital changed you as an investor?

 

[Chris Mayer] (2:12 - 2:58)

Well, that's a good question, because when I read my newsletter, I had a very well-defined and articulated investment style and philosophy there as well. That's really carried over to how I run the fund. So, it's the same sort of themes.

If you were a reader of mine back then, you knew my emphasis on owner operators and skin in the game. So I think those kind of principles are the same. Otherwise, I think managing money, you have to pay much more attention to the portfolio, obviously, construction of the portfolio versus when you have a newsletter, you just have sort of recommended stocks and things that you're following.

So that's been different. But I have great partners. So almost all my partners were readers of mine long ago.

So they get how it works and it's been really good that way.

 

[Jonathan Boyar] (2:59 - 3:07)

Psychologically, though, is it different? It's one thing to say, buy this or whatever, then the other thing to put real money behind it.

 

[Chris Mayer] (3:08 - 3:54)

Yeah. Psychologically, it's very different. Psychologically, it makes the losses much more painful.

It's just much greater pressure to perform, because when you write a newsletter, your performance isn't that relevant necessarily, because people are not buying everything, They just kind of cherry pick like a lot of people. They don't buy anything that you recommend. They just like to read the newsletter and they get ideas or whatever for other things.

Every once in a while, they might cherry pick one or two. So as long as the overall performance is kind of in deep realm of decent, you're going to probably be fine. As a money manager. It's much different.

You have that track record and that's what your investors are looking at. A lot of the pressure is self-imposed. I want to do well for them.

I really like my partners. I like them. This is people.

They're nice people. I knew we're talking to them and we really want to do well for them. So it's definitely different.

 

[Jonathan Boyar] (3:55 - 4:27)

As someone who writes and also manages money, the pressure other people, their significant portion of their net worth or one, even if it's not, the pressure is different and The Investor's Odyssey , honestly, which I really like, I recommend people buy it. You say something interesting, which I had thought about before too, is you can't really understand the stock unless you buy it.

I know that's true. I don't know why. Maybe you have thought about it more than I have because I'm kind of curious of your thoughts on it.

 

[Chris Mayer] (4:27 - 5:29)

I'm glad you picked up on that because that's something I've told people before and it's hard to explain why because there are stocks where you say, I follow it. So yeah, you're looking at the earnings reports when they come out. It's among those stocks that you follow, but it's somehow different when you own it.

Even if it's a small position, when you own it, the level of focus is entirely different. It's much more in your mind and you're much more attuned to things going on about it and around it. So I always say that when you own it, somehow you learn more.

One thing I like to do now, which I didn't do so much earlier is that I'm much more willing now to take a small position in something like a very small position. How much is a small position? I'd say like two, three percent, but I'm very small, two percent, maybe just to start and then continue to learn and research that name and even if it takes a year before you really decide to ramp it up or not.

But in the course of that year, you'll see a full year of earnings, you'll pull your calls and it'll just be a different level of experience than following it, but not owning it. I don't know that I really answered your question exactly, but I know what you mean and it's hard to articulate it really.

 

[Jonathan Boyar] (5:29 - 5:43)

I know it's true. I just can't understand why in that year or however long what makes you get more comfortable from going from, let's say, two percent to five percent, six percent or whatever a full position is for you. What do you have to see?

 

[Chris Mayer] (5:43 - 6:30)

Some of it is just learning more about the business. So you have an initial idea and then as those earnings reports come in and you're still doing research on the name, you're talking to people who used to work there, you're talking to competitors and you're picking up little things. So you're really looking for things that confirm your thesis, things that might prove your thesis wrong and you're just getting more comfortable with it, more comfortable with the sturdiness or robustness of your idea, your thesis.

That just takes some time to build. I think it's just not something you can get by doing one research report on it and saying, yeah, this is something I want to own and you're there. It just takes more time to really build that level and understanding and that level of commitment and you can't get around it.

It's almost like, I don't know what a good analogy is, but like you're growing tomatoes or something. It just takes a certain amount of time. You can't rush it.

 

[Jonathan Boyar] (6:31 - 6:42)

What percent do you think make the cut to a five percent and what percent of yours you kind of wash out? Because you're even more of a reluctant seller than I am. I'm pretty wild.

Yeah.

 

[Chris Mayer] (6:42 - 7:10)

I'm very reluctant seller. I mean, so far I would say it's a very high percentage to get from the two to going to five actually. But again, this is something that I've only started to do more recently.

I wouldn't say it's a good maker empirically because there's also possibly some downside that comes from two percent, which is then that the endowment effect kicks in and you already own it. So you're maybe more reluctant to get rid of it. So you have other cycling devices to come into when you own something as you know.

 

[Jonathan Boyar] (7:10 - 7:35)

Going to the book, one of the things that I really enjoyed about it is you do a lot of analogies. Obviously, that was the reason for it and one is tying yourself to the best to prevent bad behavior. I found that fascinating and can you tell us some of the behaviors that you do to almost save yourself from yourself in investing because that's the hardest thing for an investor to do or one of them.

 

[Chris Mayer] (7:36 - 8:45)

It definitely is. One of the more important ones would be to really find what the essential factors are for whatever business you're invested in. Usually it's you can boil it down to a handful of things that are really critically important and the rest are sort of noise.

So you got to have a good handle on what those things are and then really focus on those things and sort of relate to that managing how you consume news is important as well. I talked about that in the book in a variety of ways, but don't even expose yourself to a lot of the frantic blow by blow on the market and then news. So over the years, I've cut way back on what I consume in terms of financial media.

And I think that helps too. You have to sort of guard against what do you expose your mind to. One idea similar to this is like advertising.

The best advertising is meant to push certain buttons in you and get you to want certain things. It's just not even expose yourself to add. There's one way to prevent that, is somewhat similar here.

We know that you're going to respond to dramatic narratives. You're going to respond to price movements short term. So don't even try, limit your exposure as much as possible.

I mean, those are two, I think, that are important.

 

[Jonathan Boyar] (8:46 - 9:00)

Let's unpack that. The first you're talking about simple things that you make that these are simple. You talk about something called Sosnoff and I could be butchering his name, Sosnoff law, which I found really interesting and agree with.

I'd love to maybe talk about that.

 

[Chris Mayer] (9:01 - 10:14)

Yeah, I love that. Martin Sosnoff who wrote, he wrote a couple of books I really like. I mean, they're right on a print.

One was called Humble on Wall Street, a really good read. You know, it's like 60s and 70s investing. And he wrote another one called Silent Investor, Silent Loser.

He's a good book. And he's got New York earnings, got a certain attitude, a sort of cynical, sort of street smart attitude to him. I really like it's fun to read.

But he has this idea that the return you get on investment varies inversely with the thickness of the research file. This is the old days of paper, of course. But the idea is that the more you spend on a name, the more time you spend trying to justify kind of the worse you do, and that the best ideas are really the ones that are just super simple.

And I'm fascinated by that too. And I see it happening being validated multiple times in my own investment experience, where kind of troubled position you start spending a lot of time on it, those rarely work out. It's your problem child, versus the ones where the thesis is really clean and where you're not updating it, you're not really spending that much time on it.

You're checking in on every now and then earnings or whatever. But otherwise, those ones you tend to do well. So I found that to be fascinating as well and sort of validated my experience, which I guess maybe you're saying as well.

 

[Jonathan Boyar] (10:15 - 10:45)

It certainly is. I mean, you have certain names that you're just spending in an ordinary amount of time. And they're probably big tractors from your portfolio and probably best just to cut them.

But it's certainly easier said than done. Absolutely. You had mentioned that you're following it through the quarter each quarter.

Like, what are you looking for in? You're someone who wants to hold something for 10 years. That's your stated goal.

10 years, that's what, you know, you're 40 quarters. What are you looking for in those reports?

 

[Chris Mayer] (10:46 - 11:43)

Every business I have kind of, there's like a band of expectations, how it should perform. I'm just looking for something reasonably within that band.

I just want to make sure that the thesis is on track. Now, this is, again, something that's easy to say. And then when you get into trenches and some company surprise you with a weak quarter in one way or another, this is where it can be difficult to kind of separate.

Well, is this really just a one off or is the business somehow fundamentally impaired? Is it somehow not do what you thought it could do? That gets trickier.

But I actually kind of de-emphasize a little bit the quarter and spend much more time kind of at the end looking at the year of the whole, comparing the years as a whole and past. But even then, you know, companies, great companies can have off years. And that's where it gets very difficult too kind of determine.

Well, is that off year just because of some macro reason that's incidental or what? But that's basically what I'm looking for.

 

[Jonathan Boyar] (11:43 - 12:10)

So how do you do that? How do you tell? And I guess the current live example is Constellation Software.

You've been very public with the name. It's obviously had a tough time of it. I went back.

I may be wrong because there's been a lot of spinouts. It's had a huge drawdown. But since you started the fund, it's up about 300%, which significantly outperformed the S&P 500.

So even with the drawdown, your investors have been well served. Like, how do you in your mind think about that?

 

[Chris Mayer] (12:10 - 13:35)

Some of it is thinking about it in a negative way. Like, you don't want to see them go off track in some way. So if, you know, companies telling you they're not going to shoot shares and then something to do, or they've made some sort of statement about boy, they're going to do things.

And then they go against that. That's going to be a red flag too. One of the things that's so interesting about Constellation Software is that if you only looked at the quarterly numbers through all this, you would never guess the stock would be down by half.

It's just continued to perform pretty much as an asthma foreign for any number of quarters now. But there's just outside narrative about AI. And I mean, you could make the case that as with all these stocks, valuations can get stretched a little while, then they pull back, then they swing sometimes below, and then they come back.

There's always that narrative with every stock. Valuations would fluctuate depending on the expectation. So in this case, AI is the new wrinkle that we have to assess and worry about.

I don't think so far that AI derails what Constellation Software does. In some ways, it could well enhance what they do and lack their story. And we'll have to wait and see whether that actually manifests itself in some way that through higher organic growth rates or higher margins or something.

But so far, I think that thesis is still very much alive. In fact, they're reinvesting capital now at a higher rate than the error app. So it seems like they're still finding plenty of things to do.

 

[Jonathan Boyar] (13:35 - 13:52)

Either in Constellation or something else. Like, what would you need or see to change your mind say, hey, it was a great run. Let's spell out taxes be damned.

What would you need to see? Because it's hard to prove a negative. I was just kind of curious for that.

It's a narrative is well known.

 

[Chris Mayer] (13:52 - 14:58)

Well, I think when Constellation Software specifically, you know, big part of it is them being able to reinvest their cash flows and attractive returns. So if that were no longer true, and that would be my biggest concern with that name before, and you'd say, I stop after that was always the thing. Well, can they reinvest?

You need to look at the cash flows and keep increasing, increasing. Can they reinvest those cash flows? And so far, they've continued to find ways to do it even now.

So that would be a big red flag. Like suddenly, if they started piling up cash or if they went back to paying special dividends or something like that, would be a flag, hey, the reinvestment is coming down. And so maybe you can't model 90% reinvestment rate or wherever.

Now you got to take it down and that brings down the rate of compounding quite a bit. Where you start seeing it in incremental returns are not as good. That's an example one possible red flag.

I think other things you could see if Constellation's always been an organization where it's very steady, like all the long-term executives have been there a long time. So if you start to see like a lot of turmoil there, that might get you concerned. Like there was some sort of indication that there's some sort of cultural change.

Those are a couple of ideas that come to mind.

 

[Jonathan Boyar] (14:58 - 15:35)

In a lot of ways, the way you're talking about it reminds me of one of our largest holdings, and it's been my problem child. It's been a great stock, but recently is Uber. This is a stock that's 25% off its highs roughly.

We're recording this on August 27th. And AI or more autonomous driving is fueling that. But the results, like Constellation, are fantastic growing 30% year on year, profitability.

Everything is going gangbusters, but it's hard to prove a negative. They're saying autonomous vehicles are going to kill them. I don't know what's going to make the street change its mind.

 

[Chris Mayer] (15:36 - 16:56)

And in the same way, yeah, there's certain group of people just say AI is going to destroy software, and whatever you say, well, this is protected because of X and Y. They'll say, well, that's the way it is today. But in the future, yeah, it's going to be able to figure out a way to do it.

Where you're talking about you can't prove a negative. It's impossible to win that argument. Anything that you put out, they will say, well, eventually it can do that in the future.

And of course, we're not there, and we don't know what will happen. That's a tough spot to be in for these companies. And I think maybe the only thing that will eventually win the market over is continued good performance.

And then if they show the ability to actually harness AI to make their businesses better, then that will flip the narrative very quickly. We'll see. Also reminds me a little bit investing in the late 90s when you had the old economy stocks kind of got left behind and there was a whole internet wave.

And if you were at all perceived to be in the way of the internet revolution, you were left for debt. But of course, some of the biggest beneficiaries of those world, old economy stocks that were able to harness the internet and suddenly make their businesses better. I mean, look at Walmart and other businesses that have huge online operations now.

So I think maybe in the future too, that we'll see something like that, where a lot of these businesses will have AI only a significant part of their business. And it will be ubiquitous. And everybody will have it.

 

[Jonathan Boyar] (16:56 - 17:19)

You said before that you've taken away your diet of listening or reading newspapers, etc. Do you think that helps you during these times of negative narratives, where you're seeing that every day? Because that's what the Wall Street Journal says every single day, CNBC.

AI is going to eat your lunch. Is that why you did it? I think so.

 

[Chris Mayer] (17:19 - 17:44)

I can't go back and move it per se and have another version of me listen all that stuff and see if I can still get through it by think so. Because I don't feel that's quite the same panic. I'll feel that quite emotional ups and downs that all those outlets bring out, takes some superhuman effort to be seeing that every day and being just cool and collected and hold onto it.

That has an impact.

 

[Jonathan Boar] (17:45 - 17:52)

So how do you do it though? When you have a position that's drawn down 30, 40, 50%, I've had them too. Certainly.

What do you do?

 

[Chris Mayer] (17:52 - 18:31)

I go for long walks. I think I do something different. It's funny.

During that meltdown, I talked to Chuck Akre and I asked him kind of the same thing. He's like, what do you do? Yeah, this stuff's just dropping every day in big chunks and there's all this fear.

He told me, yeah, do your yoga or whatever you do. Yeah, go for the long walk. You basically put it out of your mind.

And it's another one of those things where it's easy to say, but that's what great investors figure out a way to do. They separate themselves from that. So some of it is not putting your attention there.

Focus on your work, do something else. Don't sit there and watch the stock prices going down three, four, five percent every day for six months, which seemed like what happened there for a while.

 

[Jonathan Boyar] (18:31 - 18:41)

Perhaps that's why he lives in Virginia and Warren lives in Omaha. You don't get that constant pressure. Yeah, I try to keep things calm here.

 

[Chris Mayer] (18:41 - 19:14)

I mean, I don't have EVs on one computer and look down here and green hills sky. And so, yeah, some of it, you create that atmosphere for yourself. And when you visit, I remember my visit, it operates his office like a library. And then you go there are quiet books all around. It's a nice little town in Middleburg.

So yeah, definitely these investors have a way of creating their environment that's conducive to being calm long-term thinker. And also, I would say, as a professional, it depends on your partners as well. They're calling you panicking all the time.

That makes it extremely difficult.

 

[Jonathan Boyar] (19:14 - 19:19)

How often do you speak to your partners? How often will someone call you? Very rarely?

 

[Chris Mayer] (19:19 - 19:40)

Yeah, again, email maybe once a month. Somebody has a question or something like that and they want to ask. But I have quarterly letters.

And then I usually would do like a call for my investors in the spring or the fall. So it's like, you know, six times and I'm sort of telling them what's going on. This is probably too much, but seems to satisfy everyone.

So I'm really lucky that way.

 

[Jonathan Boyar] (19:40 - 19:59)

How do you spend your day? I mean, you are not focusing on the day-to-day movements. You're probably looking at your stock prices once or quite today.

Yeah, open and close. Open and close. What are you doing?

You're not really monitoring the positions if you're doing a 10-year. So what do you do? I've asked this a lot of money management too.

 

[Chris Mayer] (19:59 - 20:40)

I ask them to question this way. I'll say, on a typical day or a week or just say month, how much time do you spend on your existing portfolio versus looking for new names? I think most of the people I talk to, more effort is spent on looking for new names.

And for me, I would say it's probably like 80, 20 existing names, new names. I mean, there's always stuff to do with existing names. There's transcripts, there's experts, there's other competitors you're looking at and trying to get a sense for.

It just seems to me like of those names, it's always stuck to read and learn about or things to pursue. And that's why I spend probably most of my time still on the existing portfolio. And the rest of the time, yeah, you're just looking for new ideas.

 

[Jonathan Boyar] (20:40 - 20:43)

And have you found those expert networks helpful?

 

[Chris Mayer] (20:44 - 21:14)

Yes, but I think you have to be pretty careful with them too, because you're talking to people who used to work there. And sometimes they have their own agendas, they were let go. So maybe they're bitter, you get a certain view.

Every once in a while, it's like anything else. Maybe 80% of it's not really worth anything. And then there's 20% of it that's worth it.

So I think every once in a while, you get an expert who's really good. And they give you some really good depth and some good ideas about how the business works and how it runs. And that makes it worth it.

 

[Jonathan Boyar] (21:14 - 21:34)

One of the things I'm curious and I've been asking a lot of smart investors, how they incorporated, is AI. Obviously you use it for summaries. You talk about that in The Investor's Odyssey.

But how else? What are you doing harnessing the power of AI? Is it like a junior analyst for you or are there other things that it's doing?

What are the main use cases?

 

[Chris Mayer] (21:34 - 22:29)

It's like a junior analyst. That's a good now. That's how I thought of it too, because I could give it a name and I have a prompt that I've been developing over time.

And it's probably a page and a half long now that I upload and have it fill out and do. And what comes back is pretty good. It was kind of a first wash through a name.

I mean, I think it takes it like less than 15 minutes and it does something that I think a junior analyst would take a couple of weeks to put together. I find it very useful for that. Putting it other questions sometimes, it's just helpful.

Explain this in more depth if you have certain questions about things. It can be a good first pass. You have to be careful with that too, because it makes mistakes, makes things up, whatever.

There's all kinds of things that can happen with it. Go to junior analysts. It got so kind of junior, you know, it's actually right.

So I have it site sources and sometimes the sources at sites are not in various sources. So that's the primary way I use it. How do you do it?

Are you doing anything different than that?

 

[Jonathan Boyar] (22:30 - 22:59)

I've been using it a lot for writing in terms of for my quarterly letters. What I do is for Claude, I uploaded my last 20 letters in there. For me, writing my letter, the hardest thing to do is getting started.

I do the 20 points I want to make. And I say, please put it in my style, these points, which I've already independently verified. Because we 70% of the way there, but it's getting me started.

You don't have to stare at a blank page, which is the worst.

 

[Chris Mayer] (22:59 - 23:04)

I haven't used it for writing because I like writing. I don't use it that way, but I can certainly see where that would be useful, yeah.

 

[Jonathan Boyar] (23:04 - 23:37)

Use it for writing. And I also just to learn more about things. I think it makes it super helpful in asking it to do the bear case for you.

And it's just a good sounding board. It's funny. I use Claude, whatever the pro is and then chopped GPT, the pro.

And I tear them against each other. Me too. You had different answers.

I've done that as well. You went to school studying accounting. You were a business major now with Claude and chat GPT.

Probably less important going forward. Obviously you have to know accounting.

 

[Chris Mayer] (23:38 - 24:05)

But you're right. You could send AI to financials, look for red flags. I mean, you know, I have it combed through proxies and you could certainly have it.

Do all those things. I remember you probably remember this too. Like there used to be specific programs you would get that would compare this 10k to the last 10k and give you the red line and what was changed was that I mean, that kind of stuff kind of obsolete because you can just put it all dumping in chat and say, tell me the differences between two filings or something like that or a flag.

So it can be helpful that way for sure.

 

[Jonathan Boyar] (24:05 - 24:20)

But what do you think are the skills that are going to make a great investor going forward? Because now that's not that you don't have to know it, but you don't have to know it in the intricate detail. Like what's going to make a great investor over the next 10, 15 years?

What skills?

 

[Chris Mayer] (24:20 - 25:02)

To your point, some of that raw analytical skill will not be as important. But still putting together pieces, kind of having the almost intuitive, creative outlook on what companies can do is still important. Because again, the AI is only processing things that are already out there and a great investor is still someone who has some vision about how things can happen.

So is it judgment? Yeah, it's a judgment or maybe a kind of wisdom and maybe AI can eventually get there. But that's a big question in there.

Yeah, it certainly is. Eventually, we won't be needed. We'll just have some hedge fund that will be John Boyar, but it will be an AI John Boyar.

 

[Jonathan Boyar] (25:02 - 25:18)

I mean, running in his style at all in a lot of Madison Square Garden Sports. In terms of wisdom, I mean, you discussed it with me a while ago, you joined the board of a company, Swedish company. Have you got wisdom from investing based on being on that board?

 

[Chris Mayer] (25:19 - 27:01)

I think it's sort of changed the way I think about it a little bit. Yeah, because I think being on the board of a public company, number one, you know about this beforehand. There's a gap between what people of the board know and typical outside investor knows.

We all believe we know what that gap is, but now I've seen it. And I can see sometimes people commenting, whatever, on X or commenting on their own write-ups and I can see where they are wrong. But I can see why they think what they think.

And I can also see what they don't know. And on the company side, it can be frustrating because there are certain things that they can't really disclose, but you wish they would. And there are competitive reasons to not disclose certain things.

They have their own legal counsel and accounts and all those other people say, you know, why you can't say this? Why you can't say that? So it's this constrained environment.

It's communications going on between the company and the public. And sometimes a gap effect between those two can be pre-wide. So I have a greater appreciation for that.

What we think from the outside could look very different on the inside. That's probably the biggest takeaway. And then just getting in that particular, as you just see, and again, we know this from our own working in different places, we know our personalities can have a big impact.

Sometimes as outside investors, we have this thought that management teams are rational. They're making these decisions the way we would want them to be made. But sometimes it's personalities involved.

Some people don't get along. One's got to go, you know, whatever. There's all these sort of things that human beings working together.

And when you're on the board and see it behind the scenes, you get a better sense. I would love to be on the board of all my companies, actually. And you'd really get a good idea of what life's going on.

Of course, they need to be restricted and you wouldn't be able to do anything, but that would be in education.

 

[Jonathan Boyar] (27:01 - 27:05)

Your view on activist investing changed because of being on a board?

 

[Chris Mayer] (27:05 - 27:55)

I think I have more respect for it and how difficult it is. I just can't imagine it trying to influence the board, trying to get them to do things. I just have great appreciation for the ones who are successful and managed to do it.

How did you become on this? What did they invite you? Did you ask?

How does that work? I was invited to go on. I was another large investor who put my name in the hat initially, so it wasn't my idea.

Management was receptive to that. I had a lot of discussions back and forth with them. Or they'd be flattering about it.

I'd say that they liked what I had to say and what I maybe brought. And then I was eager to do it because, yeah, I thought, well, you don't often get a chance to be on the board of a publicly traded company. And I thought there were some things I could maybe help with, that it would be good for me as an investor and good for my partner.

So it's been an interesting experience for sure.

 

[Jonathan Boyar] (27:55 - 28:16)

Getting back to your book, it opens up. It really draws you in where you're talking about an experience going to the Berkshire Hathaway annual meeting. And sat next to a lady who, I guess, was bumped from first class, like you as a value investor sitting in coach.

Can you walk us through it? I thought it was a great way to start the book.

 

[Chris Mayer] (28:16 - 29:46)

So I was on my way to Omaha for a Berkshire meeting. And I was sitting in the first row after business class, and it was an MDC next to me. And this woman was bumped from business class.

There was some sort of mix up there, I don't know, overbooking or something. And she sat next to me. I got to talk with her a little bit and it turns out she was obviously on our way to the Berkshire meeting.

That was sort of what opened the conversation. But it turned out she was an investor in the Buffett partnership way back when she knew Buffett and she rolled the money in the Berkshire Hathaway. And she basically was left it there.

And she became very rich. I mean, when I was talking to her, she was living in Nantucket. And she was giving away shares of Berkshire to her grandchildren.

And that really struck with me because I just remember thinking a lot about it. Like, wow, here it is. This woman, she's got a track record and beats 98% of all active money managers who were doing something vastly different than what she did.

She bought this one stock, the Warren Buffett. She attended all meetings. I remember telling me stories about like the early meetings were basically like dinners.

There's small dinners that you'd have with Buffett there giving you the update. And she held it and became very rich. I thought, wow, that's kind of the ideal experience to have as a long-term investor.

A lot of the book grew out of taking that experience apart, what she did, and to do something like her. What would you have to do? Be able to get there where you could hold a stock that long, even find a stock like that and hold it for that long.

So it was an interesting way to kind of open the basic question of the book.

 

[Jonathan Boyar] (29:46 - 30:01)

It's funny, it's a professional money manager. Even with the best of intentions could never do it as a fiduciary. Let's say you got to 30% of a portfolio of Berkshire.

I don't know what the rules on mutual funds are, but I imagine you'd have to sell.

 

[Chris Mayer] (30:02 - 30:46)

I find I have a hard limit of 25%. I've thought about that too with this book that really into an investor, that's where they have a big edge because they could just leave it alone. They don't have to worry about that.

But for money managers, yeah, and there's plenty of stories. I forget if I have it in this book or not. But I remember this story with, I think it was New Horizons Fund, where they had invested in a Walmart early on and it was a small cap fund.

So Walmart, it was like in the 70s and 80s, Walmart's just constantly butting up against there, you know, the top percentage they had to name, and they were just constant sellers of the whole way. And then someone did the analysis, well, if they just held on to their Walmart stake, it would be worth more than their total AUM today. That certainly happens.

But let's face it, that's a high class problem. We'd all love to have that problem.

 

[Jonathan Boyar] (30:47 - 30:52)

I would absolutely love to have that problem. You posed a question, is she a great investor? I don't know.

 

[Chris Mayer] (30:53 - 31:24)

I love that question because most people would probably hesitate, think about it. Well, what is a great investor? What are we talking about?

Because the other example that I like along those lines is when we talk about entrepreneurs, people don't typically think of Sam Walton as a great investor because he just owned his own business and held that stock for a very long time. But entrepreneurs still own their own stock for a very long time. I mean, are they great investors?

And maybe the better question is asking what can we learn from those kinds of people? Do you act more like an entrepreneur holding a stake in a business that long or like that lady from Nantucket?

 

[Jonathan Boyar] (31:25 - 31:38)

Do you think taxes, in a lot of ways, also play a role in that? In the sense that people try to avoid paying those taxes. Exactly.

You have to pay 25% or whatever it is right away. Do you think that plays a role?

 

[Chris Mayer] (31:39 - 31:46)

I think so. Individual investors, they're very tax sensitive. They don't want to pay tax bill from your fund every year because you're cashing out on your winners.

 

[Jonathan Boyar] (31:46 - 31:53)

Would you invest differently if you had an overseas fund and it was tax exempt like you think your holding period would be shorter?

 

[Chris Mayer] (31:54 - 32:34)

I don't think so because like I have IRA money and I invest the same way. I just sort of leave it there. I am not trading it or anything.

So I would say maybe that's evidence then the taxes are not the primary motivation for doing it this way. Main reason is I do think that's a way to earn higher returns and me doing other things. There's always exceptions with this right because I think of people who are like just brilliantly intuitive and they're good traders and they do things that I could just not do.

I know those limitations that way and for me the best path is to do it this way. The Thomas Phelps chuck off right away buying free business and hanging on to them and give a portfolio of those hopefully two or three of them really start to take over.

 

[Jonathan Boyar] (32:34 - 32:39)

Anything else about the book that I've missed that you think would be interesting to talk about?

 

[Chris Mayer] (32:40 - 33:59)

I mean the book has lots of little snippets and things of research I've done over time or that and even collected research from other people. So it's hard to talk about it summarized in that way. I think there's some interesting bits in the end that people might like when I talk about the question.

Well, are you a good investor? I think it's important sometimes because people can get too hung up on whether they're beating the S&P or not. I had this bottom the other day actually I was thinking if you manage your own money and you did it for 20 or 30 years and yeah you were behind.

Let's say S&P did 10% a year and you only did eight. You and I know that that difference is huge over 25 or 30 year period time. But if that person can also say that they really enjoyed the process, that they learned a lot about business and how the world worked, that they were really engaged following those companies that they owned for all that time.

Was that a bad of a thing? Should it just be reduced automatically to they didn't beat the market so they're no good? So I have some parts at the end of the book that I think might be important for people just to think about why you do this at all.

That's of course we want to make money we want to do well, but there are other reasons to do it. Your own personal journey could be a good part of that. The most important things in your life are probably not related at all.

How much money you ask. One of my favorite characters I talked about in the end of the book is Celic Stennis. He was an obscure magazine owner.

 

[Jonathan Boyar] (34:00 - 34:03)

Exactly. What a strange dude. Can you tell us about him?

 

[Chris Mayer] (34:04 - 34:46)

Yeah well I mean he got rich like you say with magazines and I forget all the magazines he published, but he wrote a book called How to Get Rich. Before he got rich. Yeah and he tells you about what it's like to sacrifice to make it.

So I like that book because it feels like it's honest and blunt and he tells you, you're just not having many friends and you're like he tells you all this stuff like you really have to do to get rich. And then at the end he's pretty honest about like is he happy because of that and he flat out tells you no. The best things he likes to do are things that don't cost any money at all.

You know whether it's just taking a walk or his cat or writing poetry or you know different things he does. I like that because it's something you don't get out of that genre very much.

 

[Jonathan Boyar] (34:46 - 35:03)

Chris thank you so much for your time. I hope I did better this time than last. It's a very very low bar.

I recommend people read The Investors Odyssey. I'll put the link to it in the show notes. You can get it for wherever books are sold or whatever they say.

Thank you so much for being on the show.

 

[Chris Mayer] (35:03 - 35:10)

Thank you very much for having me. It was a good conversation, went by very fast. So there you go.

A credit to your questions.

 

[Jonathan Boyar] (35:11 - 35:26)

After Chris and I finished the episode we started talking stocks. Luckily, the record button was still on. It was too good to leave on the cutting room floor.

So with Chris's permission, here it is. Have you looked at the Pool Corp recently?

 

[Chris Mayer] (35:27 - 35:45)

It's not very recent. That was one of those businesses that I look at with envy that why I didn't own it. When it filled all those years where it was just seen like it was straight up into the right.

I looked at it a little while ago probably in the last six months and the main guy who was responsible for building that is no longer there. But the board is.

 

[Jonathan Boyar] (35:45 - 35:47)

They have a really really strong board.

 

[Chris Mayer] (35:47 - 35:50)

I remember that was one turn off because I felt like the guy who built it was no longer there.

 

[Jonathan Boyar] (35:51 - 35:52)

And his new competition.

 

[Chris Mayer] (35:53 - 36:03)

That's right. There was like a Home Depot. They bought a competitor which scares me.

Me too. That was a scary thing. Do you want to compete with Home Depot?

It's one of those that hangs around the watch list.

 

[Jonathan Boyar] (36:03 - 36:12)

We started looking at it. I'll send you what we have on it. I still haven't pulled the trigger but it's a really good business.

I mean it's just steady.

 

[Chris Mayer] (36:13 - 36:19)

And you're probably getting in at a point where all the air has sort of come out of it because a little while there's this huge premium to it right.

 

[Jonathan Boyar] (36:19 - 36:30)

It's a below market multiple now. It's like in that quality compound or bucket that's gotten destroyed and the post COVID tie is gone. Now I'm starting to look at it.

 

[Chris Mayer] (36:31 - 36:41)

A lot of these names had that sort of premium built in and now that's burned off. So a lot of these are while you say below market and not like below market multiple but well below their own history. Extremely.

 

[Jonathan Boyar] (36:42 - 36:57)

You ever look at Uber? Yeah. For what you wrote about it.

It's an interesting name. It's trading it including share based comp which is the real method of a trade. 18, 19 times it's growing 30% and it's pretty much the name on that.

 

[Chris Mayer] (36:57 - 37:16)

No, it's a verb. It's a verb. Yeah.

That's when you know you made it. People say they're going to Uber even when they're not Uber. Well, I guess that might be the problem.

There's a bunch of those kind of things. Another investor used to tell me why you can't kiss all the girls. Bull in Uber.

There's trouble out there. They're interesting. I know you've written about what's gone before.

That's the one that's always hung around my list and never pulled the trigger.

 

[Jonathan Boyar] (37:17 - 37:28)

We got lucky in our timing on Universe. That was a good one. The Universe was the other one.

Because we bought it right at the end of last year and kind of rattled the cage.

 

[Chris Mayer] (37:29 - 37:32)

And you did Brown and Brown. What was your entry on that?

 

[Jonathan Boyar] (37:32 - 37:46)

I haven't bought it but we wrote it in February. My problem, curious your thoughts on it, is there was a whole history of consolidation and they were able to buy these at such depressed multiples.

 

[Chris Mayer] (37:46 - 38:46)

That's been something that's been in the air since I've owned it. And I've owned it since day one of my fund. So if you talk to them they tell you there's so many of these things out there.

And one thing that's changed since I've owned it is they have much more international business. They didn't have anything really when I first bought it. Now it's like 15% of the revenue comes from the UK.

You're so you got another like sleeve to L.K. Capital and consolidate. But there's a lot more competition too about like it's just them. And even before when I bought it, the PE stuff was rumbling.

But it wasn't nearly as big now. If you look at the top 50 brokers, the average size of them is so much larger. It's been so much more consolidation and especially PE.

And for a little while there I think there was a private broker that had leaped from Brown and Brown and they bought a session. So for a little while, if you were to do the top five brokers, one of them was actually a private company. Was it NFP?

No. Who was bought by ion? No, it wasn't them.

Was somebody like a sureant or somebody like that? I don't remember.

 

[Jonathan Boyar] (38:46 - 39:00)

Have you looked at Markel recently? No, it's unbelievably cheap. And as an activist, Jan has involved.

Oh, okay. And they're telling they should solve ventures, which I don't know if that'll actually happen, but they've been very skimpy on the buybacks.

 

[Chris Mayer] (39:00 - 40:20)

I like to see Brown Brown's bought back stock. I did like 250 last quarter to 50 the quarter before that. I think I have good confidence that they all L.K. Capital rational. I think what will happen is eventually the cap probably marked overbound and then Brown Brown's gonna sizzle again. But maybe underestimated when things were going well, underestimated how much property markets could swing. I don't know if you've seen, but even Brown Brown's last call, they were talking about some of the price and they see his role back to where it wasn't 2016.

That's insane. And it's done it in a matter of months. And he was talking about like the size of the cash to me that you would need to wipe out the excess capital.

It was a big number. So we haven't had a cat, really. Big catastrophe and nothing last year, nothing so far this year.

So that's hurt. That's weird because I don't really want that to happen. Yeah, of course.

I have a stock that would benefit if that did happen. What about WRB? Yeah, I mean solid.

I haven't really looked that much to the insurers. I've been much more focused on the brokers. I remember I looked pretty carefully, maybe picking up Ryan, because that was another one that got really crushed.

They're more leveraged. They're really specialized in excess surplus ENS, which is the more volatile sexy part everybody likes, but it's more volatile. And I didn't do it.

I think it's bounced quite a bit. Berkeley, it's pretty solid. I mean, what can you say?

 

[Jonathan Boyar] (40:21 - 40:42)

Check your boxes. It's family run. It's net cash balance sheet and their duration is very short.

So if rates rise, you have an edge, they're going to benefit significantly on that. And they do like super specialty kind of stuff. What about Rollins?

Have you looked at that one? No, no, I think that's worth taking a look at.

 

[Chris Mayer] (40:43 - 41:17)

It's been hammered again. It's another one of those Orkin pest controls. One of those is just like this up until the right three years and years, and it's had a pretty severe drawdown.

I won't say it's cheap, cheap, but against its own history, it's way cheap. It's interesting to take a little look at it. Cool.

Maybe next quarter it might be weak numbers again, and maybe it'll be kind of puked out one more time, and we get a chance to get at a really good price. But that's a really good business. It has all about route density, and if they add like a new cussed client on an existing truck route, their incremental margin is huge.

 

[Jonathan Boyar] (41:18 - 42:21)

I hope you enjoy the conversation with Chris. Please check out his new book, The Investor's Odyssey. The link is in the show notes.

And stay tuned for the next episode of The World According to Boyar. Until next time, this podcast is for informational and educational purposes only, and should not be considered investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. The views expressed by guests are their own, and do not necessarily reflect the views of Boyer research or its affiliates.

Boyar research, its affiliates, employees, and accounts managed by its affiliates may own, shares of companies mentioned in this episode. Our views are subject to change at any time, and we are under no obligation to update listeners for our opinions or positions change. Investing involves risk, including the possible loss of principle.

Listeners should do their own research and consult with their own financial tax or legal advisors before making any investment decisions.