Investment firm president says this stock is 'gushing cash'

Key Concepts

• Private Equity Approach to Public Markets: Applying the rigorous valuation and investment strategies typically used in private equity to publicly traded companies.
• Trophy Asset: A highly desirable and valuable asset, often unique or scarce, that holds significant prestige.
• Enterprise Value (EV): A measure of a company's total value, often used in acquisitions, calculated as market capitalization plus debt, minus cash and cash equivalents.
• Noun and Verb Stocks: Companies whose names are also common verbs, suggesting broad utility and integration into daily life.
• Autonomous Vehicles: Self-driving vehicles, a technology with significant implications for industries like transportation and logistics.
• Garment Rental Company: A business that provides uniforms and other textile services on a rental basis.
• Family Controlled Business: A company where ownership and control are primarily held by members of a single family.

Investment Criteria and Approach

Jonathan Boyar, President of Boyar Asset Management, outlines his firm's investment criteria, which involves taking a "private equity approach to public markets." This means they look for companies selling at a "significant discount" to their intrinsic value or what they would be worth if acquired. The core philosophy is to identify undervalued assets and acquire them at a favorable price.

Atlanta Braves: A Trophy Asset Opportunity

The Atlanta Braves are presented as an epitome of a "trophy asset" and a rare opportunity for individual investors, not just billionaires, to potentially own a piece of a sports team. Despite the stock's recent decline, Boyar sees "tremendous opportunity." He notes the stock is trading around $40 per share, while the team is worth significantly more. The potential sale of the team is further incentivized by anticipated changes in tax laws in 2027, making a sale more probable.

• Specific Detail: The Atlanta Braves stock is currently trading around $40 per share.
• Key Argument: The current stock price represents a significant discount to the team's actual worth, especially considering potential future tax law changes.

Madison Square Garden Sports: Undervalued Assets

Madison Square Garden Sports, which owns the New York Knicks and the New York Rangers, is highlighted as another compelling investment. The current enterprise value (EV) of Madison Square Garden Sports is $5.5 billion. Boyar contrasts this with the recent sale of the Lakers for $5 billion and estimates the Rangers alone are worth $4 to $5 billion. This suggests that for $5.5 billion, investors are acquiring approximately $14 billion worth of assets, making it a "no-brainer" investment.

• Technical Term: Enterprise Value (EV) is used to assess the total value of Madison Square Garden Sports.
• Fact/Figure: The EV of Madison Square Garden Sports is $5.5 billion.
• Comparison: The Lakers were acquired for $5 billion, and the Rangers are estimated to be worth $4-5 billion.
• Key Argument: The market is undervaluing the combined assets of the Knicks and Rangers under Madison Square Garden Sports.

The Sphere: A Surprising Success

While Madison Square Garden Sports previously owned "The Sphere" in Las Vegas, Boyar expresses a wish they hadn't divested it, acknowledging that it has "turned out to be a big success." This indicates a recognition of the venue's unexpected profitability and appeal.

Uber: A "Noun and Verb" Beneficiary of Autonomous Vehicles

Uber is presented as a "terrific company" that fits the criteria of being both a "noun and a verb," signifying its widespread use and integration. Contrary to the belief that Uber would only become profitable with autonomous vehicles and would struggle with driver payouts, Boyar asserts that Uber is "gushing cash" and will continue to do so. Furthermore, he argues that Uber will be a "beneficiary" of autonomous vehicles, not a victim, implying that the transition to self-driving technology will enhance its business model rather than hinder it.

• Key Concept: "Noun and Verb" stocks are favored for their broad utility.
• Key Argument: Uber is already profitable and will benefit from autonomous vehicle technology.
• Counter-Argument: Addresses the misconception that Uber's profitability is solely dependent on autonomous vehicles and that driver payouts are an insurmountable obstacle.

Uniform Rental Company: A Hidden Gem

The final company discussed is the third-largest garment rental company in the United States, which rents uniforms. The stock is trading at approximately $170 per share. Boyar draws a parallel to Cintas, a larger competitor, which had previously offered to buy this company for $270 per share.

• Specific Detail: The company is trading at $170 per share.
• Fact/Figure: Cintas previously offered $270 per share for this company.
• Key Argument: The company is undervalued, especially considering a past acquisition offer.
• Caveat: Boyar notes it's a "family controlled business" and advises caution, but highlights that there's no family member running day-to-day operations. He anticipates a potential sale to Cintas.
• Business Quality: Described as a "good business, not a great business," with a "cash rich balance sheet" and a "great place to hide."
• Dividend: The company pays a "very small" dividend, with the potential for significant increases.

Synthesis and Conclusion

Jonathan Boyar's investment philosophy centers on identifying undervalued public companies by applying a private equity lens. He highlights opportunities in "trophy assets" like the Atlanta Braves and undervalued sports franchises such as Madison Square Garden Sports. Boyar also expresses confidence in companies like Uber, which he believes are poised to benefit from technological advancements like autonomous vehicles. Finally, he points to a seemingly mundane but potentially lucrative opportunity in a uniform rental company, emphasizing the importance of thorough due diligence and a contrarian approach to investing. The overarching theme is the identification of assets trading at a significant discount to their intrinsic value, with a focus on long-term potential and strategic advantages.