People Hate These 5 Stocks But They'll Be Wrong with Jonathan Boyar
Jonathan Boyar discusses why stock picking has become increasingly difficult, with only 23% of top 500 stocks beating the S&P 500 over 10 years. He analyzes several undervalued stocks across sectors including Broadridge, Booking.com, Pool Corp, Burger King, and MGM, arguing that AI-driven basket selling has created irrational opportunities for patient, fundamental investors.
Summary
The episode opens with discussion of how difficult stock picking has become, with data showing only 23.2% of top 500 US stocks held for 10 years beating the index. Boyar argues that 'buy and hold' is not a strategy but a result of good stock picking, requiring continuous re-evaluation of both business execution and valuation. He emphasizes that successful stock picking requires concentration, patience through underperformance periods, and willingness to look different from most investors.
Boyar discusses how the investment landscape has changed dramatically from his father's era in the 1970s, when cigar-butt value investing worked. Today's market structure rewards quality companies disproportionately, making traditional deep value investing ineffective. He notes that stocks like Microsoft and Apple have become such large index components that beating the market is increasingly difficult.
The conversation shifts to current market dynamics, particularly the phenomenon of 'basket trading' where stocks get punished irrationally when grouped with competitors facing disruption threats. Examples include the 'consumer inertia' basket created after AI assistant launches, which irrationally included companies like New York Times, Schwab, and Booking.com despite having no real disruption risk. Boyar argues this computerized trading creates opportunities for investors who understand the fundamentals.
The hosts discuss Uber as an example of a high-quality business trading at an unjustifiably low multiple (12x earnings) despite 20-30% annual growth and $10 billion in expected free cash flow. Despite insider buying and CEO stock purchases, the market refuses to reward the stock, illustrating the difficulty of timing even good investments.
Boyar's 'Fresh Looks' report identifies 14 stocks worthy of reconsideration, focusing on companies with significant multiple compression but stable or improving businesses. These include Broadridge (80% of proxy voting market, 63% recurring revenue, trading at distressed valuations due to AI fears), Booking.com (suffering irrational AI-driven selling despite strong competitive moats), and Pool Corp (down from $500 to $167 despite annuity-like maintenance revenue from installed base).
On Broadridge, Boyar notes it's a monopoly-like tollbooth business handling 80% of proxy votes and has extensive cross-selling opportunities, yet faces unfounded concerns about token-based trading disruption. For Booking.com, he argues that AI agents like Muse cannot replicate booking capabilities without inventory relationships, citing failed attempts by Google and ChatGPT to disrupt the space.
Pool Corp represents a value trap turned value opportunity—it sold for 55x earnings during COVID when investors believed everyone would install pools. Now trading at 15x earnings (comparable to financial crisis valuations), it maintains strong annuity-like maintenance revenue despite construction collapse. Boyar wrote it up in 2009 at $20 and recommends patience despite continued declines.
Boyar praises Patrick Doyle's turnaround of Burger King, noting it's in the middle of a recovery after addressing franchisee economics and same-source sales deterioration. Unlike competitors crushed by GLP drugs and beef inflation, Burger King trades cheaper and has clearer path to recovery.
On MGM, Boyar highlights the 2031 Japan market opportunity where MGM will have exclusive casino licensing for 4-5 years with revenues potentially matching Las Vegas operations—a catalyst analysts aren't pricing in. The stock has declined from Diller's $48 bid to $33 following his withdrawal, creating value despite near-term sector headwinds from China concerns and sports betting competition.
The discussion emphasizes that position sizing matters when managing risk and that trim decisions require careful consideration of capital gains taxes and reinvestment returns. Boyar advocates for taking 2-3 year views on investments and avoiding 'catching falling knives' by waiting for technical capitulation signals, while recognizing that waiting risks missing rapid reversals.
About this episode
On episode 261 of The Compound and Friends, Downtown Josh Brown and Michael Batnick are joined by Jonathan Boyar of Boyar Asset Management to discuss why stock picking has gotten so difficult, the dangers of buy-and-hold investing, market concentration, AI-driven stock selloffs, and where value investors are finding opportunities today. They get into Uber, Broadridge, Booking Holdings and Airbnb, Pool Corp, Burger King, Comcast, MGM and the casino business, the pressure on sports betting stocks, plus why seemingly great companies can still be terrible investments at the wrong valuation. This episode is sponsored by: Grayscale and Federated Hermes. To learn more, visit https://www.grayscale.com/ Explore their full ETF lineup at https://federatedhermes.com/ Sign up for The Compound Newsletter and never miss out: thecompoundnews.com/subscribe Instagram: instagram.com/thecompoundnews Twitter: twitter.com/thecompoundnews LinkedIn: linkedin.com/company/the-compound-media/ TikTok: tiktok.com/@thecompoundnews Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Grayscale Disclosure: Grayscale is the world’s largest crypto-focused asset manager based on AUM as of 12/31/2025. For other companies in this category, AUM is considered as of most recent public disclosure. AUM is subject to change. Investing involves risk, including loss of principal. For more information, visit grayscale.com Federated Hermes Disclosure: ETFs are subject to risk and may lose value. Federated Securities Corp., Distributor. Before investing, carefully consider the fund's investment objectives, risks, charges, and expenses. Read this and more information in the prospectus or summary prospectus available at FederatedHermes.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
Key Insights
- Boyar argues that only 23.2% of top 500 US stocks beat the S&P 500 over 10-year periods, with hit rates declining over time, suggesting stock picking has become progressively harder due to market concentration in mega-cap stocks.
- He claims that 'buy and hold' is a result of successful stock picking rather than a strategy itself, requiring continuous re-evaluation of both business execution and valuation to determine whether to maintain or exit positions.
- Boyar states that successful stock picking requires concentration in positions, willingness to underperform in certain years, and accepting that most investors dislike looking different from the market consensus.
- He argues that computerized basket trading creates significant opportunities because stocks get grouped and sold irrationally regardless of actual competitive threats, as exemplified by the 'consumer inertia' basket where New York Times and Schwab declined despite no real disruption risk.
- Boyar contends that Muse and other AI agents cannot replicate Booking.com's functionality because they lack inventory relationships with hotels and proprietors worldwide, making the disruption thesis fundamentally flawed despite the stock's 40% decline in September.
- He claims that Pod shop hedge fund structures with monthly scrutiny and forced reductions on 5% monthly losses exacerbate selling pressure in dislocated stocks, creating opportunities for longer-term oriented investors.
- Boyar states that Pool Corp's decline from $500 (55x earnings) to $167 (15x earnings) represents a buying opportunity because the installed pool base generates annuity-like maintenance revenue largely independent of new construction cycles.
- He argues that Patrick Doyle's turnaround of Burger King mirrors his Domino's success by addressing franchise unit economics and improving same-source sales, positioning it ahead of competitors facing GLP drug and beef inflation headwinds.
- Boyar claims that MGM's exclusive Japan casino licensing starting in 2031 represents a 4-5 year head start generating revenues potentially matching Vegas operations, a catalyst that analysts are not pricing into the stock.
- He contends that insider buying by Uber's CEO and CFO (totaling $15 million), combined with buyback announcements, signals management confidence despite the stock's refusal to re-rate upward despite 20-30% growth and $10 billion free cash flow.
- Boyar argues that catching falling knives requires waiting for technical capitulation signals where bad news no longer drives declines, indicating seller exhaustion rather than pure fundamental analysis.
- He states that tax-sensitive investing requires a 25% outperformance threshold to justify selling appreciated positions due to capital gains taxes, making position trimming mathematically challenging even when valuations become elevated.
Topics
Transcript
Curious about crypto and not sure where to start? Start with Grayscale. Grayscale is the world's largest crypto-focused investment platform and has been in crypto for over a decade. That's a long time when you consider how early we still are in crypto adoption. In markets like these, education matters more than ever. Grayscale provides research, insights, and long-term perspective to help investors better understand digital assets and the evolving crypto ecosystem. Whether you're exploring crypto for the first time or looking to deepen your knowledge, let Grayscale be your guide. This episode is brought to you by Federated Hermes. Active ETFs are changing the way portfolios are built, giving advisors more flexibility for their clients, but not all ETFs…
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