boyar valueinvestingcongress 131609

7/29/2019 Boyar ValueInvestingCongress 131609

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9th annual new york

value investing congress

September 16, 2013 New York, NY

Where do we go from here?

Mark A. Boyar, Boyar Value Group

www.ValueInvestingCongress.com


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Mark Boyar www.BoyarValueGroup.com

Where Do We Go From Here?Thoughts on navigating a stock

picker's market.



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Disclaimer

The statistical and other information contained in this presentation has been obtained from sources we

deemto be reliable, butwe cannotguarantee its entire accuracy or completeness.

The information presented is not intended to be an offer to sell or the solicitation of an offer to purchase

any security or investment product. This presentation may notbe published or re-distributed without the

prior written consent of Boyars Intrinsic Value Research LLC. Investors should bear in mind that past

performance of any investments described herein are for illustrative purposes only and are not

necessarily indicative of future results.

This presentation may contain, or may be deemed to contain, forward-looking statements, which are

statements other than statements of historical facts. By their nature, forward-looking statements involve

risks and uncertainties because theyrelate to events and depend on circumstances thatmayor maynot

occur in the future. The future of investment results of the investments described herein may vary from

the results expressed in, or implied by, any forward looking statements included in this presentation,

possibly to a material degree.

Affiliated companies, clients, and employees of Boyars Intr insic Value Research own shares in

MSG, and SKS. The presentat ion represents the views of Boyars Intrinsic Value Research as of

9/16/2013 and is subject to change at anytime without notice.


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About Mark Boyar

MarkA. Boyar has been a securities analystsince 1968.

Mr. Boyar began publishing Asset Analysis Focus in 1975.Approximately 40% of the companies profiled in this publication

have been acquired or liquidated the vast majority atsignificantlyhigher prices than when originally profiled.

Boyars annual Forgotten Forty publication advanced 28% in2012 and has outperformed the S&P 500 significantly over thepast 10 years.

Mr. Boyar began publishing Boyars Micro Cap Focus in 2010.The stocks contained in this publication have increased by anaverage of 78.5% compared to an advance of 28.8% for theRussell Microcapvalue index.

Since 1983, Mr. Boyar has been formally managing money forboth institutions and high-net-worth individuals through BoyarAsset Management.


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A LOOK BACK AT MY SPEECH

AT THE 2013 VIC IN LAS VEGAS

History Does Not Repeat Itself

But It Sure Does RhymeLessons learned from 40 years

in the investment business.


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LESSON #1:

You can purchase thebest company in the

world, but if you do notbuy it at a reasonable

price, you will not

compound your capital

at an acceptable rate

of return.


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Lesson #1

These were companies that were:

Impervious to any economic downturn

One decision stocks (buy at any price, no need to sell)

The 1960s produced a group of stocks thatwere affectionately dubbed the Nifty Fifty.

Examples of Nifty Fifty stocks included:


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Lesson #1

Nifty Fifty S&P 500

As these stocks advanced, more money

poured into them and their multiples expanded.

By 1972 the average P/E for this group

approached 42x earnings, compared

to the S&P 500s 18.9x.

The average dividend yield for these

stocks was significantly less than

many other large capitalizationstocks.


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Lesson #1

In the 1960s Polaroid was the quintessential growth

stock. It sold for approximately $140 per share, or almost100x profits.

By the end of the 1970s bear market itsshares sold for approximately $14 pershare.

More than 20% of the Nifty Fiftystocks never eclipsed their 1970s highs.


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Lesson #1

By the 1990s large-capitalization stocks were once againcommanding outsized multiples.

COMPANY 1990S PEAK

Ticker Company Name Date Peak Price Trailing P/E Ratio Annual Dividend Yield

GE General Electronic Company Dec. 99 45.41 43.39 1.03%

MSFT Microsoft Corporation Dec. 99 48.06 58.97 0.00%

JNJ J ohnson & J ohnson Nov. 99 52.13 41.40 1.07%

PFE Pfizer, Inc. Apr. 99 46.52 90.60 0.63%

DIS The Walt Disney Company May 99 41.33 40.30 0.50%

CSCO Cisco Systems, Inc. Dec. 99 47.78 154.10 0.00%

SYY Sysco Corporation Dec. 99 19.28 33.53 1.25%

INTC Intel Corporation Sept. 99 44.66 40.20 0.13%


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Lesson #1

Today the majority of those companies are currently commandingsignificantly lower multiples and have a higher dividend yield!

COMPANY CURRENT

Ticker Company Name Date Current Price Trailing P/E Ratio Annual Dividend Yield

GE General Electronic Company 9/4/13 23.10 17.1 3.3%

MSFT Microsoft Corporation 9/4/13 31.21 12.1 2.8%

JNJ J ohnson & J ohnson 9/4/13 86.86 19.3 3.1%

PFE Pfizer, Inc. 9/4/13 28.44 7.9 3.4%

DIS The Walt Disney Company 9/4/13 61.17 18.5 1.2%

CSCO Cisco Systems, Inc. 9/4/13 23.89 12.8 2.9%

SYY Sysco Corporation 9/4/13 32.20 19.3 3.5%

INTC Intel Corporation 9/4/13 22.76 12.2 4.1%


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Is there a multipleexpansion on the

horizon?


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LESSON #2:

Load up the truck


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Lesson #2

Usually after bear markets or unforeseengeopolitical events common stocks go on sale.

Major Examples:

1970s Oil Embargo, Vietnam War, Watergate

1987 Stock Market Crash

2001 September 11, 20012008 - 2009 Lehman Brothers, Bear Stearns, Financial Crisis


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LESSON #3:

NEVER EVERlisten to the Chairmanof the Board of a company


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Lesson #3

In the early 1970s Tiffanys share price exceeded $25 per share.

By 1975 the shares declined to around $7.50 per share.Shares outstanding: 2.3 millionMarket capitalization: 17.3 million

Earnings per share: $0.85Dividend: $.30 per share

Owned one of the most valuable pieces of realestate in Manhattan, which was carried on itsbooks for 3 million (mortgage 2.9 million).

We valued the company at over $30 per share.


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Lesson #3

Walter Hoving said he would NEVER

sell the company. He wanted to

remain chairman until he was 80

years old which was the age Charles

Tiffany retired.

November 1978 he sold the companyto Avon for $41.41 per share.


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LESSON #4:

Industry specific analystsknow a lot about companies

within their given industry,but can they make you

money?


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Lesson #4

Almost every retail analyst had a sell or

equivalent rating on Saks when it was

trading at $1.85 per share in 2009.They only focused their analysis on

same-store sales trends and did not

analyze the company the way a businessexecutive would. They did not factor

in that Sakss real estate holdings

were worth more than the entire

market value of the company.


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So Where Do WeGo From Here?


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So Where Do We Go From Here?

Months Months

CurrentBull Market

Average BullMarket Since

1921

Vs.

The current bull market is approximately 53months long and the average bull market

since 1921 has been 29 months.


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The averageprice increase

Jump in theS&P 500

Vs.

The average price increase from the bottom duringthe past 17 bull markets has been 153% vs. a 150%jump in the S&P 500 from 3/9/2009.


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The longest and strongest

bull market which ended

with the bursting of the tech

bubble lasted 113 months

and climbed 417%.


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Projected 2014earnings

Average P/ESince 1999

Six bull markets of the 17

that have occurred since

1921 have seen better

stock gains than thecurrent one.


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NASDAQ

Typically bull markets come to an end followinga period of extraordinary performance.


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Growth Value

The months leading to markettops share striking similarities:

Growth stocks outperformvalue stocks

Small capitalizationstocks outperform large

capitalization stocks


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Pay attentionto the yield curve!

YIELD CURVE

MATURITY

YIEL

D



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INVERTED YIELD CURVE

MATURITY

YIELD

Pay attentionto the yield curve!



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A look back at the granddaddyof all bull markets.


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I think the multiples of technology

stocks should be quite a bit lower thanthe multiples of stocks like Coke and

Gillette, because we are subject

to complete changes in the

rules. I know very well that in

the next ten years, if Microsoftis still a leader, we will have

had to weather at least

three crises.

- Bill Gates


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Its Dj Vu All Over Again!

Company Market Cap 3/7/00(In bill ions) 1999 PE

Cisco Systems$452 148.4

Oracle $211 152.9Sun Microsystems $149 119.0

Qualcomm $91 166.8

Yahoo! $90 623.2

S&P 500 $11,281 28.6

LARGE-CAP COMPANIES WITHPRICE/EARNINGS RATIOS OVER 100


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Its Dj Vu All Over Again!

Company Market Cap(in billions)

PE Ratio

Netflix$17 195x 2013

Amazon $134 382x 2013

Tesla $20 293x 2013

Zillow $3.6 189x 2014Linkedin $27 155x 2013

TODAYS HIGH FLYERS


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Did Yahoo Make The Same Mistake Again?

In 1999 Yahoo purchased

Broadcast.comfrom MarkCuban for $5.7 billion

This year Yahoo purchasedblogging site Tumblr ($14million in revenue) for

$1.1 billion


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Our Thoughts on China

One of our BIGGEST concerns is China.


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In August of this year, the final beam was hoisted onthe Shanghai Tower, which will be China's tallest

building. At more than 600 meters, it will be thesecond highest in the world.


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In December 1989 the

Nikkei hit 38,915; today

it trades at approximately14,000.

The real-estate value ofthe Emperors palace

exceeded the value of allthe real estate in California.


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J apan was expected to surpass the U.S. as the

leading economic power in the world. A number

of leading business periodicals had cover storiesentitled The Rising Sun.

The Setting Sun would

have been more accurate.

O Th h Chi


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Until recently, the consensus was that Chinawill inevitably surpass the U.S. as the leadingeconomic power in the world. With a populationof over one billion, that still may be the case.

However, do not make the mistake of

assuming there won't be significantbumps along the way. As a matter of fact:

There is a good likelihood that a

housing bubble of major proportionsis underway in China.

A Chi H i B bbl ?


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A Chinese Housing Bubble?

In 2007, we advocated to our research clients shortingthe merchant builders.

We believed it was different this time. We realize howdangerous those words can be.

Our thesis was it was not an interest rate problem, it was

an affordability problem. Homes were too expensive. There had been 4 or 5 years

of double-digitprice increases.

Historical returns are 2%-3%. We believed there wouldbe a reversion to the mean.

A Chi H i B bbl ?


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* WCI filed for bankruptcy on 8/4/08


Homebuilder Price Decline from J anuary 2007

Ticker Company Name

Price(1/31/07

Issue)

Price(9/13/11)

% Change(1/31/07-

9/13/11)

Price(12/18/08)

% Change(1/31/07-

12/18/08)

ITBDow J ones U.S.Home ConstructionIndex Fund

$42.66 $9.34 -78.1% $11.50 -73.0%

KB KB Home $54.22 $5.67 -89.5% $14.83 -72.6%

LEN Lennar Corp. $54.38 $13.33 -75.5% $10.12 -81.4%

MDC M.D.C. Holdings $58.27 $17.20 -70.5% $32.55 -44.1%

NVR NVR Inc. $692.52 $616.50 -11.0% $484.21 -30.1%

WCI WCI Communities * $21.65 $0.00 -100.0% $0.00 -100.0%

AVERAGE RETURN -70.8% -66.9%

A Chi H i B bbl ?


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China is now facing a problem similar to whatthe U.S. experienced. In our opinion there has

been massive overbuilding coupled with hugeprice increases.

A Chi H i B bbl ?


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AVERAGE PRICE OF AN

APARTMENT IN CHINASCAPITAL

In 2006 the average price of anew apartment in Chinas capitalwould cost $100kthe equivalentof 32 years of disposable incomefor the average resident.

By 2011, the average price hadmore than doubled to over $250K.It would take 57 years of saving for

the average resident to cover thecost of his home.

P ibl R ifi ti f Chi H i C i i


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Possible Ramifications of a Chinese Housing Crisis

A real-estate collapse inChina could cause a banking

crisis that would dwarf oursubprime problem.

A H f C d ?


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A House of Cards?

Source: NY Times

P ibl R ifi ti f Chi H i C i i


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CHINASSHADOW- BANKING

ACTIVITY

By the end of last year,

Chinas shadow-banking

activity was valued at $6

trillion. This is twice what it

was valued at in 2010 andcurrently equal to 69%

of Chinas gross domestic

product.

Possible Ramifications of a Chinese Housing Crisis

A House of Cards?


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A House of Cards?

Ultimately who is responsible for the loan is not

always clear, and thats where everyone starts

getting nervous.

If a wealth-management product ultimately fails

causing bank customers to suffer losses, it couldcreate a house of cards.

Think subprime on steroids.


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Madison Square Garden Inc.(Show us the Money)

Madison Square Garden Inc


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Madison Square Garden Inc.

Madison Square Garden was

initially probed in the March 2010

issue ofAsset Analysis Focus.

The stock price at the time of

publication was $21.91 whichrepresented/offered 112%

upside to our estimate of intrinsic

or private market value.

Madison Square Garden Inc


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Madison Square Garden Inc.

Asset Analysis Focus

published an extensive

update on MSG in its May2011 issue. The stock price

at the time of publication was

$27.51 which offered 69%

upside to our then-estimate

of intrinsic or private

market value.

STOCK PRICE OFMADISON SQUARE GARDEN INC.

Investment Rationale for MSG


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MSG boasts a number of trophy properties in the sportsand entertainment industry including the legendaryGarden arena, the NY Knicks and NY Rangers sportsfranchises, the MSG cable networks and Radio CityMusic Hall. In addition to its marquee assets, theCompany owns significant air/development rightsassociated with the Garden arena.



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Vornado has long talked aboutits desire to turn the MSG/Penn

Station area into a massive

mixed-use development. The

only thing that stands in its

way is the Dolan family, and webelieve MSGs air rights are

worth substantially more in

Vornados hands than theyare in the Dolans.

Prime Real Estate Location


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Prime Real-Estate Location

Madison Square Garden

(depicted as point Aon the

following map) is situated right

in the middle of a collection of

Vornado-owned properties. We

believe this to be extremelyimportant given that Vornado

has long held ambitious plans

for development in the area.

X

Y

Z

[\

]^

_

Map Source: Mapquest.com

Data Source: NY Observer

X 330 W. 34th Street

Y Moynihan Station (Potential Development)

Z One Penn Plaza

[Two Penn Plaza

\ Hotel Pennsylvania

] Manhattan Mall

^ 11 Penn Plaza

_ 7 W. 34th Street



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Furthermore, the Penn Station area is one of the fewareas in Manhattan that has not seen a majorredevelopment in recent years, and its proximity to amajor transportation hub is appealing to developers.



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According to the above chart, there is limited new officecapacity slated for Manhattan over the next five years,with no new supply targeted for midtown.

The Supply Demand Imbalance FavorsLand Owners Like MSG.



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We believe that despite the current supply/demand real

estate imbalance in Manhattan, the current environment

may present an opportunity for a long-term oriented (andpatient) investor such as Vornado.

Fears That MSG Will Be Forced to Move Are Unfounded


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City councilwoman and former

mayoral candidate Christine Quinn

would like to force MSG torelocate in ten years in order to

rebuild Penn Station. They are

attempting to do this by refusing to

issue MSG an operating permit

in perpetuity.



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An actual move is highly unlikelyto occur due to the tremendous taxpayer cost that would be involvedin transforming Penn Station, aswell as the enormous compensation

the government would have to payMSG if they forced them to move.

Remember MSG does not lease

the land it uses from the city,it owns it outright.


MSG is Sending Wall Street Mixed Messages


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In early September, Madison SquareGarden Co. announced it will set upan artist-management venture with

former Live Nation Entertainment Inc.Chairman Irving Azoff, agreeing topay $125 million (in addition to

providing a $50 million credit line)for half of the new company. Azoff, 65,will contribute his company and be

chairman and chief executive officerof Azoff MSG Entertainment LLC.




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As J ohn Malone, whom we believe to beone of the most astute investors around,once said of Live Nation:

Youre talking about rock musicians.

This is not my kind of thing. I dont

like a business where the assets

go up and down on elevators.

I like them to be fixed, hung

on poles or up in space

going around.




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In our opinion, MSG shouldnot consider itself to be a growth

company, and should divert themassive amount of FCF itgenerates back to shareholders.

Recent comments from CEOHank Ratner include:



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This is an exciting time for our

company and, looking ahead, we

feel confident that the successfulcompletion of these significant capital

investments, along with our strong

balance sheet, will leave us wellpositioned to pursue opportunities

to drive continued growth over

the long-term.AND



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Well, as weve been saying for

a while, our priority is growing the

company. Again, what we said, thatisnt necessarily mutually exclusive

with a capital return, and that we had

not made a decision as to whetherthere would or wouldnt be any capital

return, but emphasize and continue

to that the priority is growing thecompany.

Ways to Unlock Shareholder Value at MSG


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Ways to Unlock Shareholder Value at MSG

Investors are afraid MSG will use the companys freecash flow on money losing acquisitions (the historyof M&A at Cablevision during the J immy Dolan era

makes their fears justified).

We believe there are many ways to unlockshareholder value:

Announce a massive share repurchase;

Sell their valuable air rights and usethe proceeds to pay a special dividend;

Start paying a significant regular dividend;

Undertake a recapitalization of the company

Cablevision Sale?


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Cablevision Sale?

Cablevision Sale Could Provide Fundingfor the Dolan Family to Take MSG Private

Cablevision founder Charles F. Dolan (age 86), unlike hisprominent counterpart who heads Viacom/CBS, is under noillusion (at least publicly) that he will live forever. Accordingly,

we believe the elder Dolan will soon move to lock in/preservehis strong cable legacy by selling Cablevision in the not toodistant future. Such a move would likely help simplify estateplanning and address succession issues since we do notbelieve there is a Dolan heir apparent interested in runningthe Companys cable business.

Cablevision Sale?


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Cablevision Sale?

We believe Charles son J im

(President/CEO of Cablevision

and Chairman of MSG) is moreinterested in operating MSG than

managing a cable business.

Cablevision Sale?


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Cablevision Sale?

If J D and the Straight Shots gig(the band in which J im Dolan serves

as the lead singer) as the opening act

for the Eagles 2013 tour is notenough evidence that the affinity

of the next generation of Dolans

lies with the MSG entertainment/sports entity, then the J uly 2010

appointment of J im Dolans son

(Charles P. Dolan, age 23) to MSGs

board should remove any doubts.

MSGs Valuable Air/Development Rights


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MSG s Valuable Air/Development Rights

Excerpts from our March 2010 MSG Initiation Report

Given the Dolanshistory, it does not surprise us

that the Companys most valuable asset received

only a cursory mention in MSGs 248 page Form

10, which was filed with the SEC in connection withthe spinoff. The following are the limited details of

MSGs air/development rights, which are buried on

page 48 of that filing:

MSGs Valuable Air/Development Rights


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p g

We own the Madison Square Garden building, the

platform on which it is built and certain development

rights (including air rights) associated with the lot.Madison Square Garden sits atop Pennsylvania

Station, a major commuter hub in Manhattan, which is

owned by the National Railroad PassengerCorporation (Amtrak). While the development rights we

own would permit us to expand in the future, any such

use of development rights would require variousapprovals from the City of New York.



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Absent a Dolan takeout, we believe that the wide

discount (our current MSG intrinsic value estimate is

57% below recent levels) between MSGs market andintrinsic value will sooner or later catch the attention

of a potential acquirer. MSG's real-estate holdings in

midtown Manhattan sit right in the middle of a collection

of properties acquired by Vornado, a prominent real

estate developer.

S G ($ )


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Madison Square Garden Inc. Value ($MM)

MSG Media(12x FY 2013 AOCF; consistent with precedent cable networktransactions; would likely Command 15-20x in sale)

$4,188

Knicks/Rangers

Most recent Forbes values for Knicks and Rangers were $1.1billion (including 300 million attributed to the stadium) and$750 million ($233 million for stadium), respectively.

$1,250

Air Rights $750

EntertainmentLikely understated given transformed arena and recent LAForum purchase

$250

Net Cash/(Debt) No credit for FCF acceleration following renovation projects. $278

Equity Value $6,716

Diluted Shares Outstanding 78.1

Per Share $85.99

% Upside to Estimate of Intrinsic Value 57%


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ThankYou!For more information, please visit:www.BoyarValueGroup.com

Boyar Value Group35 East 21st Street, Suite 8ENew York, NY 10010Telephone: (212) 995-8300

Fax: (212) [email protected]

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