Boyar’s Intrinsic Value Research President Jonathan Boyar joins Yahoo Finance Live from Berkshire Hathaway’s 2023 Annual Shareholders Meeting in Omaha to discuss investing in small and micro-cap stocks, Warren Buffett’s buy and hold strategy, and consumer weakness.

Video Transcript

RACHELLE AKUFFO: Berkshire Hathaway is set to kick off its annual investor meeting at Omaha, Nebraska this weekend. But for all the Warren wannabes out there, it's not just about picking intrinsic value stocks, but getting ahead of the crowd. Joining us now to discuss all things Berkshire, Jonathan Boyar, President of Boyar's Intrinsic Value Research and podcast host of "The World According to Boyar."

Good to have you on this show, Jonathan. So for people who are trying to get their heads around this, there obviously are some companies that don't have a market cap that Berkshire can invest in. So as you're looking at some of these small caps, if you want to be a baby Buffett, as it were, starting with the energy sector, how would you approach it?

JONATHAN BOYAR: Yeah. First, thank you for having me. Yeah. No, there's a lot of opportunities. You know, Berkshire because of its size can't buy small cap stocks, and that's the cheapest area of the market. So individual investors have a big leg up on Buffett in that regard as there are plenty of stocks selling at significantly below intrinsic value. As for energy stocks, that's an area we generally avoid. We don't like commodity-oriented businesses. But there are plenty of names in small cap land that we find attractive.

RACHELLE AKUFFO: So give us your top five picks of the small caps that you find attractive.

JONATHAN BOYAR: There's a whole host of them. There's a company called Howard Hughes, which is controlled or is chairman is Bill Ackman of Pershing Square. He keeps buying back stock. Buying stocks personally, they own master plan communities, it's a great asset play. Company like Levi Strauss that's selling for 11 times earnings. It's rare to find a great consumer franchise that's so cheap.

I mean, you can really literally run down a list. There's Madison Square Garden Entertainment, which owns Madison Square Garden itself and the Beacon Theater and a whole host of other entertainment assets. So there are plenty of names that are selling significantly below intrinsic value that big investors like Buffett can't buy, but most other investors can.

RACHELLE AKUFFO: And so when you're thinking of the buy and hold strategy that Berkshire Hathaway tends to have here, can you still apply that same technique to some of these small caps as well, especially when you think of things like inflation and perhaps some consumer weakness that we might see at the end of the year?

RACHELLE AKUFFO: absolutely.? I mean, I think investors should always think long term, and buying and holding is a critical part of the investment process. You want to find great companies at great prices and hold them on as long as possible and allow the magic of tax free compounding to work.

RACHELLE AKUFFO: And so what are the benefits of trying to look at some of these small caps versus just investing in Berkshire Hathaway if you're an investor trying to figure out how to play this?

JONATHAN BOYAR: Well, it's just a law of large numbers. I mean, Berkshire Hathaway is a maker cap name. How big can it get? I mean, I think it's a great long term investment. But if you have a company that's a 2, 3, $4 billion company, it could easily be a 10x from there. But you have to find the right one. There are a lot of value traps there, so investors have to do their homework. They have to be careful and find stocks that they know and understand, and buy them correctly and hold them. And hopefully, things work out well.

RACHELLE AKUFFO: And for people who are trying to get ahead of the game, perhaps before some of these companies reach the cap size that would be attractive to a Berkshire Hathaway, what are some of the strategies that you use, any kind of formula that you use in really picking a good value stock versus one that's cheap and not necessarily going to go anywhere?

JONATHAN BOYAR: Well, it all comes down to the business. Is it a good business? Do they have a product or a service that people want? And can it grow? Is there a large total addressable market? And then it comes down to valuation. Are you buying it at a cheap enough price where you have a margin of safety? So whether you're analyzing a big cap stock or a small cap stock, it's the same way. Price is critically important as is business quality.

RACHELLE AKUFFO: And obviously, you're there in Omaha. We're wondering what your expectations are. What you're hoping to hear from Buffett and Munger this year?

JONATHAN BOYAR: I'm really looking forward to hearing what they think about the regional banks, about the banking system in general. And I would love to hear why of all the banks that they kept Bank of America and really sold all the other ones. And I'm curious why. I wonder if someone will ask them that question directly.

RACHELLE AKUFFO: And in terms of succession plans. Do you think we'll hear much about that? And in terms of the front runners there, who do you think would be best to carry on the legacy or perhaps change a bit of the direction of Berkshire Hathaway?

JONATHAN BOYAR: Well, I mean, I think the succession issue is pretty much decided. I mean, Greg Abel is there. They have a great team in place. And Buffett has done something really unique. I mean, he's built a company that could last for decades and decades. And I won't say it runs itself, but it's a conglomerate. And I think it's going to be a great company for many years to come.

RACHELLE AKUFFO: Well, certainly his strategy has worked for him, so far a success at Berkshire Hathaway. A big thank you for joining us. I hope you enjoy the conference there. Jonathan Boyar, President of Boyer's Intrinsic Value Research and podcast host of "The World According to Boyar." Thank you so much.