'Investors should take a step back:' Analyst on election being a catalyst for a return to value stocks

Yahoo Finance's Akiko Fujita and Jonathan Boyar, Boyar Asset Management Principal & Portfolio Manager, discuss

Video Transcript

AKIKO FUJITA: Just a handful of stocks have helped fuel the S&P 500's returns, with the five largest companies representing nearly a quarter of the index. But could the upcoming elections be a catalyst for a return to value investing? Let's bring in Jonathan Boyar. He is Boyar Asset Management's principal and portfolio manager. And Jonathan, it's good to talk to you today.

Let's talk about that trade there. We've been talking to a number of guests who have been talking about this rotation coming out of tech in anticipation of the election outcome. But, you know, a lot of investors will say, look, it's hard to gain that right now because nobody really trusts the polls. We don't know exactly what the election outcome is going to look like or when we're going to actually get the results. How are you positioning yourself in the face of all of that uncertainty?

JONATHAN BOYAR: First, thanks for having me on the show. And yeah, that's a really difficult question. I mean, I think what investors really should do is take a step back and try and find stocks and companies that are going to do well regardless of who's living at 1600 Pennsylvania Avenue. I think that's really what we have to do, what any investor has to do, is know what you own, buy it at reasonable prices and hold through it.

I think investors should take advantage of any volatility to pick up shares on the cheap. I mean, the next couple weeks will probably be extremely volatile. And I think investors shouldn't get caught up in the day-to-day noise.

AKIKO FUJITA: So what are some of those names, some of those sectors that you think can still perform well, regardless of what the outcome is after November 3?

JONATHAN BOYAR: Well, I think you take a company like Coke. I know they reported today. It's a great company. It's a company that really has changed over the past decade from becoming a capital intensive business to an asset light business. It's a great business selling at a reasonable multiple. It's also getting really into the coffee business. And they've adapted really well.

That's a name that, regardless of who wins the presidency, should do well. Obviously, they're getting impacted because of coronavirus. But if you assume that at some point in time, we'll get back to a normal lifestyle, it should be fine.

AKIKO FUJITA: What about some of the names that we have seen see big gains during the pandemic, like the cloud names, like a Zoom technology, those who have really benefited on the back of this work from home move? How are you looking at that? I mean, it seems like that's a sector that will continue to grow, regardless of what Washington's policies look like.

JONATHAN BOYAR: They'll continue to grow, but the most important determinant of future returns is the price one pays. So you have to look, depending on the company, what is the local you're paying for that stock? I mean, Zoom, you're paying for growth. I mean, it's growing rapidly. But what's the multiple? And you know, history has shown if you overpay, most likely, you're going to lose money.

AKIKO FUJITA: And so, as we count down to the election, how do you think that investors should be gaming out certain scenarios? I know that's the wrong word, but there's been so many risks that we have had, a number of guests raised, whether it is the uncertainty around the outcome, a prolonged election potentially, not getting the results until a few weeks down the line, having a split Congress like we do right now, even if the Democrats take the White House. How are you looking at all of those scenarios right now in the context of the markets?

JONATHAN BOYAR: Yeah, I mean, I think the investors-- I mean, historically, Republicans, when they controlled both branches, they've had the best gains, Democrats, second best, and the worst is through divided government. So we have no idea what's going to happen.

And I think investors should just understand that there's really-- that's out of their control. There's always a reason not to buy a stock. You can always find a risk out there. But over time, if you buy really good companies at reasonable prices, you should be able to make money. So investors should really look at it through that prism.

AKIKO FUJITA: Jonathan Boyar, principal and portfolio manager at Boyar Asset Management.