Although Boston Omaha might have incurred a recent rebound, the company didn’t exactly have an amazing 2020. The stock market price for this fledgling holding company is 21% lower than what it was in January 2020. This shows a dramatic underperformance after having a gain of almost 5% with the S&P 100.
Nevertheless, something must always be taken into account- the Boston Omaha isn’t really invested for the short term. Most of the managers of this stock market company always make decisions which are based on the long-term results for the company and their investors. Therefore, the question stands- should one add the Boston Omaha stock market company to one’s portfolio at a discount?
Boston Omaha: The short version of this Stock Market Company
To put it simply, the Boston Omaha is a holding company that has a few businesses in the subsidiary sector- along with minority shares in a few other businesses. But if a closer look is warranted, Boston Omaha has three businesses that it owns completely. The largest business among them is billboard advertising. The company’s Link Media Outdoor subsidiary keeps contributing majorly to the company’s revenue- just last year it contributed almost 70%. The parent company also owns a business of surety insurance, along with being a provider of broadband internet services for the rural areas. Boston Omaha also has several minority investments as a real estate brokerage, a home builder, and business of asset management.
The main idea is to ensure attractive economies and a continuous cash flow through the company’s businesses. This cash flow would then be invested somewhere else. As an example, Link Media usually invests in billboards which are static- they might not bring huge amounts of cash into their treasury, but they are extremely easy to maintain. While not immediate options for cash, they can be extremely valuable in the long run.
Boston Omaha- A time-tested model that could pay off tremendously
The Boston Omaha has the same modus operandi that Berkshire Hathaway follows. If you are wondering as to how good it really is, remember- Berkshire Hathaway used to be a struggling manufacturer of textiles. Now, it is a conglomerate worth half a trillion dollars. The approach is simple- earn from Business A to invest in Business B. The entire cycle will keep repeating itself for decades on end.
Boston Omaha is also the owner of an insurance business which could further the connection it shares with Berkshire. This has allowed the company to start investing in someone else’s money and not just their own. Usually they use insurance premiums which have been collected but remain unpaid- for they can be invested.
Not a sure thing, but risk-reward looks attractive
Currently, Boston Omaha is not even 0.1% of the size of Berkshire, but it already has a market cap of $450 million. So, there are obviously a lot of execution risks when willing to build a conglomerate that is of multi-billion dollars. Let’s just say that Boston Omaha actually gets successful, you wouldn’t still expect it to return around 2,000,000% of its initial stock market cap.
Nevertheless, progress has been quite phenomenal. The managers of Boston Omaha have been working to build an asset collection which should definitely produce a steady flow of income for the next few years. To add to that, this stock market company is also using sustainable and smart growth strategies to bring out the full potential of their fledgling business.