Portfolio Construction

Modern Portfolio Theory

Our opinion on how to construct a portfolio is quite different from those held by most money managers. Every portfolio we create is tailored to fit a client’s unique needs and risk tolerance. Our portfolios typically concentrate only on our best 20-40 ideas, and we do not match our sector weightings to correspond with the major indices. In addition, due to the long-term nature of our investment philosophy, we have historically generated tax-efficient results for our clients.

The Number of Companies in a Portfolio

We have significantly more confidence in our highest conviction ideas than we do in our sixtieth-best investment idea. Thus, we are strong believers in a concentrated portfolio with a large percentage of the portfolio consisting of our top 10 investment ideas. Our performance may not correlate well to the major indices, but over time our approach, we believe, will lead to superior investment results.

Sector Weighting

We believe that if our clients wanted to mimic the major indices, they would invest in an index fund. Clients come to Boyar Asset Management because we act on our best ideas. This approach typically results in our portfolios looking very different in terms of sector weightings than the major indices. One outcome of this contrarian style is “lumpy” results that seldom match any of the stock indexes used as benchmarks for other investing styles.

This approach can be frustrating in exuberant bull markets. However, we believe well-researched portfolios of undervalued businesses lead to superior long-term capital appreciation potential and reduced risk in flat or declining markets.

Tax Efficiency

Boyar Asset Management is extraordinarily tax sensitive for taxable accounts. After all it is not what you make; it’s what you keep – Taxes are potentially the biggest expense an investor will experience.

• By holding stocks for long periods of time, you postpone paying taxes, which we believe positively impacts long-term returns.
• Buying and holding stocks for long periods may sound stodgy, but it postpones the payment of capital gains taxes with the added positive effects on the compounding rate. Since profit taking involves transactions, it obliges you to take the IRS in as a partner. With profits not taken, there is a future tax liability, but all the money is still working for its owner. No transactions, no tax.
• Boyar Asset Management believes that holding well-researched undervalued stocks for long periods of time is the best way for an investor to create wealth.