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Widely followed value investor Bill Nygren, portfolio manager at Oakmark Funds for 40 years, said the best trade of his career was when he made 80 times his money buying Liberty Media in the early 90s. Nygren took advantage of a period of time when Liberty Media went through a number of structural changes. He first bought the stock in 1991 when Tele-Communications spun off the company, which consisted of approximately 40 different assets. Watch the full video above. “Piece by piece valuations or sum of the parts just wasn’t as common back then,” Nygren said in the latest installment of CNBC’s Art of the Trade. “Most investors looked at this spinoff of Liberty Media, kind of a hodgepodge of investments, mostly which they didn’t have control over.” One of the biggest challenges of the trade was that there wasn’t one traditional metric that Nygren could use to value the whole company. For example, for the cable system assets, he valued on EV to EBITDA; for the cable programming companies, he looked at price to subscriber. “Each asset had a different metric that we thought was most representative of what value really was for that type of company,” Nygren said. A key factor for a return this huge was the low cost as Nygren managed to buy the rights to purchase Liberty shares for only pennies in the so-called redemptive spinoff.
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