Bill Nygren's Theory Of Analysis, Link Media Expands (Issue #40)
Hey, it’s Soren! This week we have a packed newsletter here are the bullets:
Bill Nygren’s views on what makes good financial analysis
Boston Omaha subsidiary Link expands
Portfolio Update
Meme, Insight, Thread Of The Week
If you want this newsletter read to you by Gwyneth Paltrow you can follow the link below where Speechify’s AI will read it to you in her voice. (More on Speechify below)
When Bill Nygren was asked what the role of an analyst is he said this:
I think too often, young analysts believe that the goal of an analyst is to demonstrate how much they know about a company and build a perfect earnings model. I don't think I've ever seen an analyst model their way to a great stock idea!
I view the goal of the analyst as developing conviction that the consensus is wrong about something important. Then their job is to communicate why they believe they are correct and the consensus is wrong and to compute the valuation impact. Once we own a stock, their job is to actively monitor new information to assess if their view or the consensus view is coming to fruition.
This reminds me of two ideas. First, the idea behind my old blog Lookout Investor. Great investors are not contrarians, but lookouts. Great investors see opportunities or discrepancies before others and capitalize on the “head start.” The second idea is from Aswath Damodaran who says, “valuation is where story meets numbers.” Both Damodaran and Nygren talk about using numbers and models to prove or reject theses. Key point here is that the numbers prove (or disprove) the thesis and not the other way around.
He goes on to talk about areas where discrepancies between the consensus and the truth:
There are a lot of important areas the consensus can be wrong: management quality, business quality, long-term potential differing from current results, valuable non-earning assets, and so on. To make excess profits, you need to hold a nonconsensus view and be right.
Recent Update:
Boston Omaha (NYSE: BOC — $ m) owner of Link Media—a billboard subsidiary—just announced the purchase of Elevation Outdoor Advertising (EOA). EOA is based in Knoxville, TN and operates 265 billboards 8 of which are digital displays. All of the billboards are in Knoxville and East Tennessee. This will be Link’s first venture into Tennessee and is a strong expansion opportunity at the company now operates 7,665 faces across 15 different states. Billboards is Boston Omaha’s legacy business, but it is still growing a meaningful amount year/year and producing strong cash flows.
Portfolio Update:
To view the entire spreadsheet and the linked deep dives go here.
Meme Of The Week:
Insight Of The Week:
Thread Of The Week:
If you listened to this newsletter with Speechify and want to listen to earnings calls, annual reports, or any pdf, text file, or a picture of text follow this link for 15% off with code: SOREN at checkout.
Until Next Sunday,
Soren