“We're not going to invest in flying taxis or cryptocurrencies”

Jun 7, 2022

Redacción Mapfre

Redacción Mapfre

“It’s a hard time to invest in the United States.” And in the rest of the world. Joking in an interview with EXPANSIÓN, Jonathan Boyar is CEO of Boyar Value Group, the U.S. manager that MAPFRE hired three years ago to advise it on the management of the MAPFRE AM Forgotten Value fund. Although it fell a bit more than 6% between January and April, it significantly outperformed Nasdaq, which dropped 22% during the same period, and the S&P, with a decrease of nearly 14%. For this very reason, Boyar is more optimistic than ever and believes that now is the perfect time to invest. However, he advises investors to be cautious and choose their investments wisely.

How does the volatility in the markets affect the fund and your partnership with MAPFRE?

We are very proud of our partnership with MAPFRE. So far it has been a wonderful experience, as we share the same investment philosophy. They’re not looking for short-term results for the next quarter or the coming year, and that’s how real money is made. MAPFRE is a company with a great balance sheet and the patience to navigate an environment like this one. That allows us to make good decisions based on long-term thinking. For this very reason, we would like to expand our collaboration with MAPFRE. Our area of ​​expertise is small and mid-cap stocks, which have been unfairly punished in this environment. So, we see it as an opportunity: some of these names are selling at ridiculously low prices, and I think they’re going to be incredible investments for the next two or three years.

Which assets do you think have the most potential?

In our portfolio we have big names, such as Bank of America and CVS, one of the largest pharmacy chains in the U.S., and others that are less familiar. I’m excited about The Scotts Miracle-Gro Company (a company specialized in gardening products and grass seed). Their products are flying off the shelves because they are benefiting from people relocating from the city centers to the suburbs. Young people want homes with gardens. I also love the large consumer franchises, because they have power when it comes to deciding prices and thus offsetting, even partially, the impact of inflation. Furthermore, in the case of Scotts, the CEO has 26% of the capital, and it has a good dividend distribution policy.

You also have a lot of exposure to the sports sector.

Yes, we have a stake in Madison Square Garden Sports, which in turn owns the Knicks (basketball) and the Rangers (hockey). A company valued at nearly $4.8 billion (€4.45 billion), they are buying two teams. The Knicks alone could be worth $6 billion. In fact, I wouldn’t be surprised if we saw private equity entering the club in the future.

Do you see opportunities in other sectors?

The retail sector is going through hard times. I like Levi's. It’s a fact that after the pandemic, 40% of the population has changed waist sizes, and office attire is becoming more casual. It’s also an attractive asset because it's trading at 12 times its earnings (P/E) and is compatible with ESG investing.

What about tech assets?

We're not tech adverse, but we are looking for good businesses at reasonable prices. For example, IAC. This company, chaired by Barry Diller, specializes in migrating businesses from the offline world to the digital environment. There are many buying opportunities in that segment. What we’re not going to do is invest in flying taxis or cryptocurrencies, because that works until it doesn't.

What about companies specialized in that area, like Coinbase?

To paraphrase Warren Buffett, in the stock market, just like in baseball, “you don't have to swing at every pitch.” Maybe there's an opportunity there, I don't know. I just prefer to take a chance on companies like Scotts, Levi's, IAC, or Bank of America because I know they’ll still be around in five or ten years. The most important thing for me is not to lose money.

Is now a good time to take positions given the current volatility?

It’s a good time to buy if you have a long-term horizon. However, and although there are fantastic opportunities, I would do so gradually. Throughout history there have always been bad times, some worse than others, but the U.S. market has always bounced back spectacularly. You have to be careful; it may drop 20% more. Who knows? And keep in mind that some assets are not a bargain just because they’ve fallen 50%, because they can still drop another 50%. You have to look at the good businesses, such as banking, which will perform well in this environment of interest rates hikes.

Do you think a rapid increase in interest rates could lead to a higher delinquency rate?

In general, the environment is going to be good for the banking business, as long as a deep recession is not triggered. I’m not an economist, but I don't think that's going to happen. As an investor, the key is to hold on and not panic.

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