In this recent interview with Barron’s Roundtable, famed value investor Bill Nygren discusses how his firm, Oakmark Fund, hedges against the secular changes to traditional value investing. Here’s an excerpt from the interview:
Q. You’ve had a great long-term track record, but the last couple of years have been tough. Do you every worry about the kind of secular change that might have disrupted some of the companies in your portfolio?
Bill Nygren: Well, we do worry about that, but I think our portfolio has a lot of disrupters in it. We own Alphabet, which has YouTube, one of the fastest streaming viewership growth rates. We have Netflix, one of the fastest streaming growers. So I don’t think our portfolio is full of companies that are likely to be disrupted.
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Bill Nygren: When we look at Netflix we see a similarity to the cable industry thirty years ago where they were losing a lot of money. Had a lot of debt on the balance sheet. Negative book value. But subscribers kept trading at a price of something like $1000 or higher.
Bill Nygren: When AT&T bought Time Warner, we think the implied valuation of HBO was at least $1000 a subscriber. If you look at Netflix it has a market cap of somewhere around $150 Billion. They’re adding 25 million subscribers a year. If those subs are worth $1000 a piece, it’s only six times the value that’s being added right now.
You can watch the entire interview here:
(Source: Fox Business)
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