Comcast, Atlanta Braves, and 3 Other Forgotten Value Stocks With Potential to Grow
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 compiled the so-called Forgotten Forty for the past 30 years. The portfolio has gained an average of 9.9% annually over the past 15 years, versus 8.4% for the Russell 3000 Value index. But it has lagged behind the S&P 500’s 11.8% average annual gain in that same span.
Barron’s recently spoke with Boyar about five ideas from the 2024 edition of the Forgotten Forty.
Medtronic, a maker of medical devices, has been buffeted in the past few years by supply-chain disruptions and the underperformance of the company’s diabetes-management business. The latest hit to the stock came from investor excitement about a new class of weight-loss drugs; their uptake is expected to dent demand for various medical procedures and devices.
Boyar sees aging populations in developed countries and improving standards of medical care in emerging markets as long-term tailwinds to the sale of medical devices and equipment. Medtronic has a promising robotic-assisted surgery system, he notes, with a lot of growth potential.
Medtronic shares have fallen almost 40% from their mid-2021 high, and now trade around $84. Boyar applies a five-year average enterprise value-to-Ebitda (earnings before interest, taxes, depreciation, and amortization) multiple of 17 times to fiscal 2025 estimated Ebitda, to yield a price target of $121 a share—a prospective gain of 44%. That’s before a dividend yield of 3.3%. Medtronic has lifted its payout for 46 consecutive years.
Boyar also sees a favorable risk/reward for Comcast stock, up 16% in the past year. The company’s Xfinity cable business is highly profitable, and its NBCUniversal Media unit has the best balance sheet among traditional media companies.
Although broadband subscriber growth has slowed, Boyar says Comcast has been able to continue growing due to price increases. Network investments should yield more subscriber growth in the future. NBCUniversal has generated cash from the sale of Comcast’s Hulu stake to Walt Disney. Meanwhile, its theme parks are performing well, and losses are shrinking at the Peacock streaming service.
All that means plenty of free cash flow to direct toward Comcast’s dividend—current yield: 2.7%—and share buybacks. The company has returned more than 20% of its market value since the start of 2021. Boyar calculates an intrinsic value estimate for Comcast of $70 a share, up 63% from the stock’s recent $43.
Atlanta Braves Holdings is a holdover from the 2023 Forgotten Forty, but it is a different stock today. Until July 2023, it was a tracking stock representing ownership of Major League Baseball’s Atlanta Braves, whose parent was John Malone’s Liberty Media.
After a spinoff, the Atlanta Braves is now a stand-alone, public company. That paves the way to an eventual sale of the team. Sports franchises are trophy assets that trade on prestige and scarcity value, not business fundamentals or team performance—with valuations seemingly climbing ever higher.
Boyar values the Braves at nearly $3 billion, a 15% premium to Forbes’ valuation of the franchise. He assigns another $356 million in value to real estate holdings around Truist Park, the Braves’ home.
Adjusting for cash and debt, Boyar gets an equity value of $3.4 billion for the Braves, or about $55 per share, compared with the stock’s recent $42. It just might take a sale of the team to get there.
IAC’s portfolio looks set for a strong year in 2024, Boyar says, with improvement in the fundamentals and the option of monetizing holdings. The Barry Diller–founded holding company owns shares of publicly traded Angi and MGM Resorts International, plus stakes in Dotdash Meredith, Care.com, and Turo.
Boyar expects revenue and earnings at Angi and Dotdash Meredith to improve in 2024. A Turo initial public offering would be another positive catalyst. IAC owns about 30% of the car-sharing platform, which it carries on its balance sheet at a total-company valuation of about $1.3 billion. More recent purchases of Turo equity have been at a valuation closer to $3 billion. An IPO could help close the gap.
Shares are too cheap given the sum-of-the-parts value of IAC’s holdings, Boyar says. Its stakes in MGM and Angi are worth $2.8 billion and $1 billion, respectively, at recent prices, and it has $619 million in net cash. Added together, those figures exceed by more than $150 million IAC’s recent market value, before considering the value of any of its other holdings, which Boyar puts at around $1.5 billion. The sum-of-the-parts math gets to $69 per IAC share, 33% more than the stock’s recent $52.
Interactive Brokers Group is a unique player in the online brokerage industry. It is smaller but faster-growing and more international than peers. Compare IBKR’s 2.5 million accounts—growing by more than 20% a year—with Fidelity’s 43 million or Charles Schwab’s 35 million.
Unlike major U.S. online brokerages, which have moved to zero-commission trading, 95% of IBKR clients pay fees. That is largely a function of the international user base: Payment for order flow, which supports the zero-commission trading business model, is already or soon will be banned in Canada, the U.K., Australia, and Europe.
The result is a highly profitable business: IBKR generated $2.1 billion in pretax earnings on $3.1 billion of revenue in 2022. IBKR also has a “fortress” balance sheet, Boyar says, with more than $9.4 billion in excess capital. He values the stock at 20 times 2025 expected earnings—versus a 10-year average multiple of 26 times—or $124, representing 43% upside.
The 2023 Forgotten Forty had some notable winners, including Uber Technologies, highlighted in Barron’s and up 123% in the past 12 months, and Booking Holdings, up 62%. If investors embrace more value-oriented and small-cap stocks this year, as Boyar expects, the latest list of names will be forgotten no more.