Growth stocks and large-caps led the market in 2023. That suggests the best bargains now reside among value and small-cap names.
That’s the view of Jonathan Boyar, head of Boyar Value Group, a New York–based asset management and research firm that compiles an annual list of 40 undervalued stocks with potential catalysts for a turnaround. “There are a lot of good opportunities in small-caps today, but you have to be choosy,” Boyar says. “Almost half [of small-caps] are unprofitable, and debt maturities are coming due.”
Boyar Value has put together the “Forgotten Forty” over the previous 30 years. Over the last 15 years, the portfolio has returned 9.9% yearly on average, while the Russell 3000 Value index has returned 8.4%. However, throughout that same period, it has underperformed the S&P 500’s 11.8% average yearly increase.
Boyar and Barron recently discussed five concepts from the 2024 edition of the Forgotten Forty.
Medical device manufacturer Medtronic has seen rough times recently due to supply-chain interruptions and poor results from its diabetes control division. Investor excitement over a new class of weight-loss medications caused the stock to take a blow recently; their acceptance is likely to diminish demand for various medical procedures and technologies.
Boyar Value has put together the “Forgotten Forty” over the previous 30 years. Over the last 15 years, the portfolio has returned 9.9% yearly on average, while the Russell 3000 Value index has returned 8.4%. However, throughout that same period, it has underperformed the S&P 500’s 11.8% average yearly increase.
Boyar and Barron recently discussed five concepts from the 2024 edition of the Forgotten Forty.
Long-term tailwinds for the sale of medical equipment and technologies, according to Boyar, include ageing populations in affluent nations and rising medical care standards in emerging markets. He points out that Medtronic has a promising robotic-assisted surgery system with lots of room for expansion.
At $84, Medtronic’s shares have dropped over 40% from their peak in mid-2021. Boyar uses the expected EBITDA for the fiscal year 2025 as a multiple of 17 times the five-year average enterprise value to EBITda (earnings before interest, taxes, depreciation, and amortisation). This results in a price forecast of $121 per share, representing a potential gain of 44%. That is prior to a 3.3% dividend yield. Medtronic has increased its payout for forty-six years running.
Boyar believes Comcast stock, which has increased 16% in the last year, offers a good risk/reward combination. The company’s NBCUniversal Media division has the finest financial sheet among traditional media businesses, and its Xfinity cable business is extremely successful.
