Bill Nygren, a widely followed value investor and portfolio manager at Oakmark Funds for 40 years, says the best trade of his career was the early '90s acquisition of Liberty Media, which he traded for 80x. He said it was time to make a profit. Nygren took advantage of a time when Liberty Media was undergoing a number of structural changes. He first bought the stock in 1991, when Telecommunications spun off a company that consisted of about 40 different assets. Watch the entire video above. “Back then, individual valuations and the sum of the parts weren't that common,” Nygren said on the latest episode of CNBC's Art of the Trade. “Most investors were looking at this Liberty Media spinoff and seeing it as a hodgepodge of investments, most of which were out of their control.” One of the industry's biggest challenges First, there was no single traditional metric that Nygren could use to evaluate the company as a whole. For example, for cable system assets, we evaluated EV to EBITDA. For cable programming companies, he considered pricing for subscribers. “Each asset had a different metric that we thought best represented its actual value to that type of company,” Nygren said. A key factor in such huge profits was low costs, allowing Nygren to buy Liberty stock for pennies on the dollar in a so-called redemption spinoff.
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