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Bill Nygren: The Formula for beating market returns

During one of the latest meetings at the Columbia Student Investment Management Association (called CSIMA), Bill Nygren discuss the three key features he looks for in his potential investments. Nygren invests in companies with these three key features:

  1. Significant discount: Buys stocks at a price significantly below their estimated business value, typically around 60% of that value.

  2. Market-matching return: The company’s expected growth in Earnings Per Share and dividend yield should combine to at least match the overall market return. This ensures a decent return even if it takes time for the market to recognize the company’s true value

  3. Shareholder-friendly management: The company’s management should be focused on maximizing long-term value for shareholders, not just short-term profits

So S&P today might say has maybe six or seven percent expected earnings growth, 2% dividend yield. So something like an eight or nine percent total return.

We don’t care whether it’s got a dividend of 9% and no growth, or 9% growth and no dividend, but that combination we want to at least match the market. Because if it’s not then time kind of becomes your enemy.

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The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.

Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk

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