The Boyar Value Group’s 4th Quarter Letter 2023
boyarvaluegroup.com · 2023-12-31 · tier T2
Source: Letter · boyarvaluegroup.com dated 2023-12-31. Auto-generated factual summary. Not investment advice. Verify before acting.
Boyar Asset Management argued in its Q4 2023 letter that excessive optimism among both professional and individual investors warrants caution, noting that Wall Street consensus forecasts have been wrong two years running — badly underestimating 2023's 24% S&P 500 gain after urging investors into tech ahead of the Nasdaq's 33% decline in 2022. The firm flagged market concentration as a structural concern: the 10 largest S&P 500 stocks traded at 26.9x forward earnings as of December 31, 2023 — 38% above the rest of the market — and accounted for 86% of the index's 2023 gains despite representing 32% of its weight, a multidecade high. Boyar contrasted this with the equal-weighted S&P 500 at a more modest 15.7x forward earnings, and argued that with the 10-year Treasury near 4.11%, historical data favors value over growth: JP Morgan data shows value stocks returned 10% annualized in months when the 10-year yielded 4%–5%, versus 8% for growth. Boyar also made the case for small-cap value, which traded roughly 2.6% below its 20-year average P/E versus large-cap growth at ~39% above its 20-year average — though the firm cautioned that 41% of Russell 2000 companies are unprofitable and 38% of small-cap debt is floating-rate, making the asset class sensitive to the rate path ahead.
Citations · 6
“the 10 largest stocks by market capitalization in the S&P 500 were selling for 26.9x earnings (fwd.), against an average valuation (for the index's 10 largest stocks) of 20.2x since 1996”
p#1 · confidence 97%
“the consensus among Wall Street strategists was that a recession was imminent, and that the S&P would advance a mere 6%... the stock market (as measured by the S&P 500) would advance 24%”
p#1 · confidence 96%
“a December survey released by the American Association of Individual Investors showed that almost half of participants expect the market to rise over the next 6 months. Compare that figure with the start of November... when 24% of respondents were bullish”
p#1 · confidence 95%
“since 1979 there have been 98 months when interest rates were 4%-5%. During those times, value stocks' annualized total return was 10%, versus 8% for growth”
p#1 · confidence 95%
“large-cap growth shares (led by the Magnificent Seven) are trading ~39% above their 20-year average price/earnings multiple, JP Morgan reports that small-cap value is selling ~2.6% below its 20-year average”
p#1 · confidence 95%
“41% of the companies in the Russell 2000 are unprofitable... 38% of small-cap debt is floating-rate, so small-caps' interest expenses go up considerably in a rising interest rate environment”
p#1 · confidence 96%
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Boyar warns semiconductor speculation mirrors dot-com excess while arguing Magnificent Seven valuations have become compelling for the first time in years.
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