SKYH

Sky Harbour Group

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-$4.75 -56.89%
Boston Omaha September Idea Competition
For this stock idea competition, I chose Boston Omaha. My bullet point analysis is below and a full deep dive is linked at the bottom:

Run by Co-CEOs Adam Peterson and Alex Rozek since its founding Boston Omaha ($BOC) went public in 2017. The holding company spans many sectors, but they try to focus on ventures that have 1-3 variables to optimize and then go and optimize them.

Let's break it down:

  1. Billboards
The biggest business and one of the best cash-flowing branches of Boston Omaha is the billboard business. The company owns Link Outdoor Media the 4th biggest billboard brand with ~7,400 faces

  1. Broadband/Fiber
One of the fastest growing branches of the company. They own AireBeam, Utah Broadband, Fiber Fast Homes, and InfoWest (fiber/broadband companies). Between them they have 40k users that have a LTV of $3,000-$7,000.

  1. Insurance
General Indemnity focuses on Surety Insurance a type that insures a “promise” made from one party to another in the event that one party doesn’t follow through.

  1. SkyHarbour $SKYH
A fast growing REIT for private jet hangars. The company holding is from the Yellowstone SPAC which was sponsored by Boston Omaha as well as a holding of warrants in the company.

  1. Boston Omaha Asset Management
Boston Omaha has BOAM to hold many of its other investments and ventures including a significant Dream Finders Homes holding. Also build for rent venture called “Build For Rent”, 24th Street Asset Management (Real Estate), Crescent Bank, Logic Commercial Real Estate, and breezeway.

  1. Stocks
Boston Omaha has an equity portfolio that is not disclosed because it is under $100mm, but with some research it can be deduced that the only holding (and there is only one) Nelnet $NNI. This is a very interesting company that deserves its own deep dive (no spoilers).

  1. Check out the deep dive on $BOC here

  1. Bringing it together
This is very much a bet on management (Adam and Alex). They are still newish, but they have demonstrated strong capital allocation skills and have kept debt to a minimum. They follow the most if not all the pillars and profits have already begun.
Nice and concise, great work!

I know one of the reasons investors like Boston Omaha is the diversification & portfolio approach. They have a 'Berkshire Hathaway' vibe in that respect. How would you respond to the critique that there perhaps isn't enough focus on any one aspect of the business for it to be truly great?
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Boston Omaha Break Down
Run by Co-CEOs Adam Peterson and Alex Rozek since its founding Boston Omaha ($BOC) went public in 2017. The holding company spans many sectors, but they try to focus on ventures that have 1-3 variables to optimize and then go and optimize them.

Let's break it down:

  1. Billboards
The biggest business and one of the best cash flowing branches of Boston Omaha is the billboard business. The company owns Link Outdoor Media the 4th biggest billboard brand with ~7,400 faces

  1. Broadband/Fiber
One of the fastest growing branches of the company. They own AireBeam, Utah Broadband, Fiber Fast Homes, and InfoWest (fiber/broadband companies). Between them they have 40k users that have a LTV of $3,000-$7,000.

  1. Insurance
General Indemnity focuses on Surety Insurance a type that insures a “promise” made from one party to another in the event that one party doesn’t follow through.

  1. SkyHarbour $SKYH
A fast growing REIT for private jet hangars. The company holding is from the Yellowstone SPAC which was sponsored by Boston Omaha as well as a holding of warrants in the company.

  1. Boston Omaha Asset Management
Boston Omaha has BOAM to hold many of its other investments and ventures including a significant Dream Finders Homes holding. Also build for rent venture called “Build For Rent”, 24th Street Asset Management (Real Estate), Crescent Bank, Logic Commercial Real Estate, and breezeway.

  1. Stocks
Boston Omaha has an equity portfolio that is not disclosed because it is under $100mm, but with some research it can be deduced that the only holding (and there is only one) Nelnet $NNI. This is a very interesting company that deserves its own deep dive (no spoilers).

  1. Check out the deep dive on $BOC here

  1. Bringing it together
This is very much a bet on management (Adam and Alex). They are still newish, but they have demonstrated strong capital allocation skills and have kept debt to a minimum. They follow the most if not all the pillars and profits have already begun.

  1. If you want to share your thoughts on $BOC in this forum here
Buy The Dip - $BOC
It's no secret I have been fascinated by Boston Omaha over the past few months. So it makes sense to make the incredible compounder my Buy The Dip choice.

So what makes this relatively unknown company so compelling?

I think in short it's the incredible interconnected web of businesses the company is assembling.

Of course, to start at the beginning requires traveling back to 2015 when Alex Rozek and Adam Peterson took over the struggling real estate business. Their involvement saw the company selling off its real estate in favor of buying billboards.

Billboards in particular have incredibly high margins. Using the cash flows from this business segment is what has allowed Boston Omaha to acquire and build out the various other businesses it would start over the years.

The second line of business BOC would enter would be insurance. General Indemnity Group would be formed with the intent of acquiring other insurance companies.

Most of the insurance firms that would be acquired would be those dealing in Surety Bonds which is certainly an interesting, yet niche field.

These two high-margin businesses are what allowed Boston Omaha to begin its intricate plan to interconnect all of their businesses.

Next would be a series of acquisitions of broadband providers to form Fiber Fast Homes. An internet provider that would install fiber internet to all homes built by...

Dream Finders Homes is a company that Boston Omaha invested in a few months after the broadband acquisitions. $DFH is an asset-light home builder that is one of the fastest-growing home builders in the nation.

Dream Finders Homes and Fiber Fast Homes would form a partnership called Dream Fiber Homes. This entity is controlled by $BOC and means every new home built by DFH comes with the option of Fiber Internet.

With this Boston Omaha avoids a lot of direct exposure to the cyclical housing market and instead gets the benefit of the recurring revenue should new home buyers engage with their services. Along with this BOC has been selling their stake in $DFH for a large profit, ideally to completely remove exposure to home builders.

Boston Omaha's most recent ventures have been primarily through their new asset management branch. Some of the investments include:

1.) 24th Street Asset Management
• Acquired in 2018
• Invests primarily in Commercial Real Estate
• Offers loans to Commercial Real Estate

2.) Logic
• Acquired in 2016
• Also invests in Commercial Real Estate, heavily focused in Las Vegas, Reno

3.) Crescent Bank
• Acquired in 2018
• Deals mostly in Auto Loans in almost every state across the US

Arguably their largest deal came when BOAM launched their SPAC Yellowstone Acquisition Corp. This SPAC would merge with SkyHarbour giving $BOC a ~30% stake in the company.

$SKYH is another interesting business whose ownership is split between $BOC and its CEO Keinan Tal. As of their most recent 13f, Boston Omaha appears to own about 50% of the business.

So you have read all this and maybe thought all this is cool but what's the actual pitch. Well, I'm glad you asked.

That is the pitch. Boston Omaha is building an interconnected web of incredible businesses while limiting its exposure to individual cyclical businesses. Boston Omaha is a bet on the CEOs of the business being able to effectively invest capital to get the best returns for investors. So far I think the track record is solid and will continue to prove itself over time.

But I also said CEOs, yes to the observant one there are actually two CEOs that run Boston Omaha. Alex Rozek and Adam Peterson share the role of CEO and make many of their investment decisions together. In one of their Annual Letters they talked about this:

An Interesting offhand statement to make that gives me more confidence that the CO-CEOs will be able to make effective decisions. Another interesting statement they make is about how if they are right you would know it.

Interesting bit of honesty from management saying they have nowhere to hide in terms of performance across time, it always shows up somewhere.

I also want to highlight this statement from their second annual letter.

"Hold Our Shares Forever." This was when Boston Omaha was first listed on OTC markets under BOAM, before their transition to the Nasdaq.

Moving forward you may be wondering if Boston Omaha can continue the hot streak. I am fairly certain they can and allow me to explain why.

First is the mountain of cash they are sitting on. $BOC has more than 30% of its market cap in cash on the books.

This compares well with their almost non-existent debt. Only $166m in debt compared to $235m in cash, easily enough to sustain the business in case of a slowdown.

Finally to revisit their annual letters, in their most recent one for 2021 they reiterated their framework for running their business and it is as follows:

Personally, I think all this combines to make a compelling company to #buythedip and hold, not for just the next year, but forever.
post mediapost media
Job well done, Dollars and Sense! Out of the three value drives management highlighted, two are not looking great for $BOC. Free cash flow per share and diluted EPS are both negative in TTM. Their growth in book value per share has risen pretty steadily over the past 5 years.

Why do you think their EPS and cash flow per share are down?
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