Boyar’s Latest Opportunity Report has Been Released!
On Monday, we released our September 2024 Opportunity report featuring a media holding company that has undergone a radical digital transformation and that now controls a series of market-leading global businesses. We see continued growth ahead for the Company’s leading digital franchises, as well as several opportunities for management to unlock hidden value that we believe is obscured by the Company’s legacy and conglomerate structure.
Management has improved its past capital allocation and corporate governance shortcomings, including providing increased financial disclosure, greater shareholder rights, and increased capital return.
Fact of the Week:
Over all 12-month periods since 1970, the U.S. stock market has advanced 80% of the time, with an average return of 12.3%. It’s risen at least 10% in well over half of all 12-month spans and 20% or more nearly one-third of the time.
The Week That Was:
U.S. stocks edged higher this week, with the S&P 500 up 0.22%, the Dow adding 0.09%, and the Nasdaq gaining 0.10%. For both the S&P 500 and Nasdaq, this marked their fourth consecutive week of gains. The Russell 2000 lagged, however, ending the week down 0.54%. After a mid-week decline, markets rebounded sharply following a strong September jobs report that bolstered optimism around a potential soft landing for the economy.
Treasury yields surged, with the 10-year hitting its highest level in a month. Markets are now pricing in a 0% chance of a 50 bps rate cut in November—down from a 50% probability just a week ago.
WTI crude oil soared 9.1%, its biggest weekly gain since March 2023, driven by escalating geopolitical tensions in the Middle East. This fueled a rally in energy stocks, making Energy the top-performing sector with a 7.01% gain. Communication Services followed, up 2.20%, while Utilities rounded out the top three, rising 1.09%.
On the flip side, Materials was the worst performer, slipping 1.98%, followed by Real Estate (-1.88%) amid rising yields, and Consumer Staples, which lost 1.57.
Notable Reads:
Monday marked the end of the 3rd quarter. See our recap of the quarter that was:
Robotaxis Can’t Be a Solo Act
https://www.wsj.com/finance/stocks/robotaxis-cant-be-a-solo-act-9a787252
Robotaxis might not need drivers. But they still need passengers—lots of them.
That might seem to be stating the obvious. And yet, when Elon Musk announced in early April that Tesla was planning to unveil its own robotaxi, the first instinct of investors was to bail on a company that already had a platform of 150 million people using it at least once a month for rides and food delivery. Uber lost nearly one-quarter of its market value over the following four months.
The stock has since clawed back much of that ground, due in part to a smattering of deals Uber has signed with such robotaxi providers as Waymo and Cruise. Those deals help make the case that Uber’s massive platform of riders has value in a world in which expensive, driverless taxis need a steady base of passengers to make their economics work.
The deal with Waymo was particularly notable, as the company already runs its own robotaxi service in San Francisco, Los Angeles and Phoenix. Under that agreement, Uber will be the exclusive platform for booking rides in Waymo’s cars in Atlanta and Austin, Texas, when the service launches in those two markets next year. While Uber once aspired to build its own robotaxis, it has since decided to play to its strengths. “Generally, we want to build a marketplace, and we want to stay as pure-play a marketplace as we can,” Uber Chief Executive Dara Khosrowshahi said at a Goldman Sachs investment conference in San Francisco last month.
Our Take:
When Elon Musk announced in early April that Tesla was planning to unveil its own robotaxi, it sparked concerns that the electric car giant could disrupt Uber’s business model. The immediate impact on Uber’s stock was significant, with shares dropping nearly 25% following the news—though they’ve since mostly clawed back those losses.
While the idea of eliminating driver costs is certainly appealing, the economics of running a fleet of autonomous vehicles (AVs) are daunting. The upfront investment for an AV fleet is steep—think $150,000 to $200,000 per car—meaning Tesla would need a massive and loyal rider base to make it viable (although due to technological differences Tesla may be able to manufacture their AVs significantly cheaper). This is where Uber’s existing platform of 150 million monthly active users and its commanding 76% share of the U.S. ride-hailing market becomes a valuable asset. With partnerships already in place with AV leaders like Waymo and Cruise, Uber is not just along for the ride—it’s sitting in the driver’s seat.
Why Uber Still Looks Attractive
Uber’s strength lies in its role as an aggregator, serving as the marketplace for mobility, regardless of who owns the vehicle. Instead of sinking cash into building a robotaxi fleet from scratch, Uber has smartly positioned itself as a platform that any AV company can plug into. That strategy is paying off: Uber went from burning cash to generating $3.4 billion in free cash flow last year, with even stronger numbers expected this year, as we detailed in our recently released 2024 Fresh Looks report.
Deals like its exclusive partnership with Waymo in markets like Austin and Atlanta underscore Uber’s key advantage: it’s easier for AV companies to tap into Uber’s massive user base than to build a network of their own. While Tesla is still in the permitting stages in key markets like California, Uber is already integrating AVs into its system, giving it a head start.
Tesla’s Uphill Battle
Tesla’s dream of a pedal-less, steering-wheel-free fleet might sound futuristic, but building a network of this scale takes more than just technological prowess. Matching Uber’s $34 billion in annual U.S. gross bookings would require billions in investment and years of execution—something that could keep Tesla in the slow lane for a while. And the regulatory hurdles Musk faces in California and beyond suggest that we’re a long way from seeing a true Tesla-run ride-hailing network on the road.
Bottom Line: Uber Isn’t Going Anywhere
Tesla’s robotaxi ambitions might make a splash, but Uber’s entrenchment as the go-to platform for riders and drivers—both human and autonomous—makes it hard to beat. The real story isn’t just about who has the technology, but who has the riders. And on that front, Uber’s head start is a significant advantage. As the AV landscape evolves, Uber’s position as a platform for all players should help it thrive, while Tesla may find itself facing more red lights than green ones.
This Hedge Fund Legend Isn’t Buying the China Rally
https://www.barrons.com/articles/stanley-druckenmiller-hedge-fund-china-gold-073e3e89
Despite their recent rally, billionaire investor Stanley Druckenmiller said at Grant’s Annual Fall Investment Conference that he has no interest in investing in Chinese stocks.
Druckenmiller is a big deal in the world of investing. He made his name working for George Soros and running his own hedge fund, Duquesne Capital. He now manages money through a family office. Forbes lists his net worth at $6.9 billion.
The legendary hedge fund manager gave a peek into what he owns and likes at the Grant’s Annual Fall Investment Conference. Druckenmiller said he owns gold but not the miners because he was “stupid enough to sell them when they went up a bit.” Within equities—and AI—he named Coherent as one of the stocks he likes.
Our Take:
Legendary investor Stanley Druckenmiller literally made headlines at Grant’s Annual Fall Investment Conference by stating he has zero interest in investing in Chinese stocks, despite their recent rally unless there’s a drastic change in China’s leadership and a significant shift away from current policies (this certainly does not seem imminent).
Druckenmiller’s skepticism is rooted in long-standing concerns over Beijing’s heavy-handed economic policies, lack of transparency, and ongoing crackdowns on private enterprise. For him, the geopolitical risk and unpredictability of China’s top-down governance make it a market that’s simply not worth the trouble.
This is in sharp contrast to what hedge fund legend said last week on CNBC which we discussed in our most recent Sunday Digest. While Tepper may be proven to be correct, we reiterate our stance that, “[t]here are much easier—and less stressful—ways to generate returns without the potential headaches that come with Chinese stocks. So, while Tepper might be right this time, it’s one of those markets where it’s perfectly okay to sit on the sidelines.“
St. James Investment Company’s Quarterly Letter
https://substack.com/home/post/p-149465291
The Florida Land Boom of the 1920s stands as one of the most remarkable economic bubbles in U.S. history, as the Sunshine State became the epicenter of a speculative frenzy in 1925. Florida was once seen mainly as a farming state, but the 1920s ushered in a new era of prosperity and leisure. Many Americans now had the time and financial means to invest in real estate. For the first time in U.S. history, workers enjoyed paid vacations, pensions, and other benefits that allowed them to travel and invest. The automobile's arrival made Florida even more accessible for middle-class families seeking vacation and investment opportunities.
The promise of wealth and prosperity captivated millions of Americans during this era. The belief that anyone could become wealthy through the right investment was widespread, and Florida land was a compelling choice. Credit was readily available, and economic optimism was high, making investing in Florida real estate easy. The presidential administration of Warren G. Harding, with its policies of lower taxes and business prosperity, mirrored the state government of Florida, which sought to accommodate the growing number of visitors. Before 1920, Florida’s visitors were primarily the elderly, wealthy, or ill. However, the “Land Boom” attracted middle-class Americans and the state and cities borrowed heavily to improve infrastructure and public services.
Our Take:
We look forward to St. James quarterly letter and this one certainly did not disappoint.
Important Disclosures. The information herein is provided by Boyar’s Intrinsic Value Research LLC (“Boyar Research”) and: (a) is for general, informational purposes only; (b) is not tailored to the specific investment needs of any specific person or entity; and (c) should not be construed as investment advice. Boyar Research does not offer investment advisory services and is not an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) or any other regulatory body. Any opinions expressed herein represent current opinions of Boyar Research only, and no representation is made with respect to the accuracy, completeness or timeliness of the information herein. Boyar Research assumes no obligation to update or revise such information. In addition, certain information herein has been provided by and/or is based on third party sources, and, although Boyar Research believes this information to be reliable, Boyar Research has not independently verified such information and is not responsible for third-party errors. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Investing in securities involves risk, including the possible loss of principal.
Important Information: Performance Information. Past performance does not guarantee future results. The reports in this sample are for informational purposes only and the performance of the stocks selected is not indicative of the performance of all the stocks profiled in Boyar Research. The performance of the stocks selected and the performance of the stocks in Boyar Research may in fact diverge materially. Additional information regarding the performance of other companies featured in Boyar Research is available from Boyar Research upon request. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Clients of an affiliate of Boyar Research and employees of Boyar Research own shares in Uber.