The ideal investment is one that you will never sell. When you don’t sell, you’ll pay less tax and make managing your portfolio, no matter how big, a lot easier. In addition, researchers have found that even professional investors have difficulty making sales decisions. So why is it part of your investment process at all?
The problem is, there are few companies that fall into the never-sell category. It takes strong management, a long-term time horizon and uninterrupted business models. There are two stocks that meet these criteria Boston Omaha (NASDAQ: BOMN) and Nelnet (NYSE: NNI). Here’s why.
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Boston Omaha came into its current form when current co-CEOs Adam Peterson and Alex Rozek bought a controlling interest in REO Plus, a real estate company based in Houston, Texas. After taking control in 2015, Peterson and Rozek reorganized the company as a conglomerate with the aim of buying holdings or entire operational businesses with permanent cash flow. Peterson and Rozek decided to rename the company Boston Omaha because they are from those cities – that has nothing to do with the companies they run.
Since 2015, Boston Omaha has invested in a myriad of different companies. These include a billboard advertising company called Link Media, a group of deposit insurance companies, and controlling interests in two fiber and broadband companies called Airebeam and Utah Broadband. These operating businesses have developed well under Boston Omaha and sales have increased steadily over the past few years.
The most exciting part of the business, however, is likely to be its involvement Dream seeker houses (NASDAQ: DFH), a real estate company that only went public in January. Boston Omaha invested $ 22 million in DFH in 2017 and 2019. Based on DFH’s current share price of $ 25.03, that proportion is now $ 120 million. These spectacular returns won’t be repeated with every investment, but it’s an example of Rozek and Peterson’s keen investment skills.
With operations producing cash, an emerging insurance company, $ 190 million in cash on balance sheet, and other outside investments that could be the next DFH, there’s a lot to like in Boston Omaha. If you believe Rozek and Peterson can perform well with a decade-long time horizon, this is a share that should never leave your portfolio.
Nelnet is another conglomerate based in Lincoln, Nebraska (what is Nebraska about?). It’s a bit older than Boston Omaha – it was founded in 1996 and went public in 2003. At the core of Nelnet’s business is a group of student loans that earn interest every year.
The great thing about these loans is that the downside risk is almost entirely mitigated by the federal government which guarantees at least 97% of principal and interest payments to Nelnet. Nelnet estimates it will make $ 2.3 billion over the life of this loan book, including $ 1.5 billion over the next five years.
Unfortunately, it is not possible for Nelnet to provide new student loans as the federal government took this internally about a decade ago. However, it collects its interest payments and sets up other companies or takes minority stakes in companies.
It owns 45% of ALLO Communications, a broadband company it just sold a stake in for $ 197 million, an education technology and payments company that generates $ 66 million in annual operating income, and an undisclosed stake in it Hudl and other smaller subsidiaries.
Nelnet currently has a market cap of $ 2.86 billion. With the slowly amortizing loan book, the other operational businesses and a management team that has tightened Book value At 17% since 2004, there’s no reason to sell shares in Nelnet anytime soon.
Why these companies are different
The difference between these two stocks and others on the market is that you are not betting on any particular business or industry, but rather two phenomenal ones administration Teams. To like Berkshire Hathaway Over the past few decades, the underlying businesses of Boston Omaha and Nelnet may change over the years, but as long as current management stays in control, you can sleep well at night knowing that your hard-earned money is in responsible, smart hands is.
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Brett Schäfer has no position in any of the stocks mentioned. The Motley Fool owns and recommends Berkshire Hathaway (B shares), Boston Omaha, and Nelnet and recommends the following options: short January 2023 $ 200 puts on Berkshire Hathaway (B shares) and long January 2023 $ 200 calls on Berkshire Hathaway (B -Shares .) ). The Motley Fool has one Confidentiality Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.