The Boyar Value Group’s 3rd Quarter Letter 2023

Boyar Asset Management's Q3 2023 letter argues that the market's headline gains mask a deep valuation divide: large-cap growth stocks in the Russell 1000 trade 3.6 P/E points above their long-term average, while small-cap value sits 16% below its 20-year average P/E multiple. The firm sees the most compelling opportunity in small-cap value, citing Fama-French data showing annualized returns more than 400 bps above large-cap growth since 1926, and historical evidence that small-caps have beaten large-caps by over 16% in the 12 months after each of the past 11 recessions began. The letter also warns that long-duration bonds have suffered losses rivaling the worst equity bear markets in U.S. history — bonds maturing after 10 years have fallen 46% since March 2020, and 30-year bonds are down 53%. On the macro side, Boyar flags rising mortgage rates (8% by mid-October 2023, the highest since 2000), a personal savings rate of 4.2% versus an 8.6% long-term average, and a jump in high-yield defaults to $26 billion through July 2023 versus $18 billion in all of 2022 as pressure points worth monitoring. The S&P 500 ended Q3 2023 at 17.8x forward earnings — above the 25-year average of 16.8x — while the equal-weighted index traded at a more modest 14.3x. Boyar's connective thread is that concentration risk, stretched growth valuations, and bond losses all point toward the same conclusion: patient, bottom-up stock selection in cheaper market segments is the more durable path.