More than three decades after the money-winning trade, Bill Nygren still calls buying up shares of Liberty Media as it was spun off from Tele-Communications Inc. one of the best stock moves of his career. “We made about 20 times our money in Liberty, and it was one of our largest shareholdings in the Oakmark fund, and also at Harris Associates,” the value investor told CNBC during an interview Friday. When the spinoff occurred in 1991, the deal itself was complicated for investors to break down and analyze, Nygren explained. “Book value didn’t help you identify the underlying business value, earnings didn’t help you identify it, and for people that were long-term Tele-Communications owners, Liberty was pretty small relative to TCI and it required a lot of work to understand,” he said. That’s where Nygren saw a major value opportunity. CEO John Malone managed the company in a way that abided by Oakmark Funds’ value principles, Nygren said, adding that he and his team had long admired this. So they looked at an asset-by-asset valuation and determined that the assets inside Liberty were worth three times the cost of purchasing the TCI shares. The deal was structured so that TCI shareholders received the right to buy Liberty stock based on how much they owned. So, Oakmark set out to purchase stock from shareholders willing to part with it. And, because Liberty came out a more levered company, the firm ended up owning about 15% of it, Nygren said. Over the next few years, Oakmark held onto the stock as it underwent a transformation from a “hodgepodge of unrelated assets into a more targeted group of assets all with consistent themes,” Nygren said.
