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Here's a Small-Cap Company With Mega-Cap Potential

By Matthew Frankel, CFP® and Jason Hall – Updated Dec 3, 2021 at 7:41AM

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Could this stock be a home run for patient investors?

Boston Omaha Corporation (BOC 3.95%) isn't designed to produce rapid gains, but it could be a gold mine for investors who want gradual appreciation over time. In this Fool Live video clip, recorded on Nov. 15, contributors Matt Frankel and Jason Hall discuss why they both feel Boston Omaha is capable of generating massive returns for investors who measure their performance in decades. 

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Jason Hall: That's Boston Omaha, ticker BOMN. So, what do you have here? You have easily the smallest company of this group and it's not even close. You have the youngest company of this group and it's not even close. You have two co-CEOs who have heavy serious skin in the game, who are trying to build a much larger business. You just have to have trust in these guys and monitor that what they're doing is going to work. What are their core businesses?

Their core businesses mainly are advertising billboards, highway billboards, this boring business that you think, this is terrible, why am I  want to own a billboard business? Because it generates really steady cash flows and great cash margins. The margins on that business are very good. Then there's also some insurance operations. Those are the two main businesses. More recently, they've acquired some, help me out here, what's the Internet broadband?

Matt Frankel: Broadband Internet.

Hall: Broadband Internet, thank you. The word just fell out of my head. They've recently built a broadband Internet business. Again, this boring business that you're like, what are you buying here? They own something that these are predictable cash flow assets. They generate this cash flow and then you have these two co-CEOs that find opportunities to make something bigger with that money, invest it in equities, find other businesses to acquire. The one thing they've done recently is they've got a SPAC going, Dream Finders Homes (DFH 1.64%). This is a publicly traded home-builder. All of these things that they're looking to do, just to allocate that capital to generate better returns over time. I think the stock price is just beaten down right now. I'm counting on these two young guys, they have a pretty good track record of continuing to do it, and 40 years from now, I want this to be my biggest investment.

Frankel: Well, I can add a few things to that.

Hall: Please.

Frankel: Well, you mentioned the boring but great businesses. That broadband Internet business that you mentioned, the gross margin is about 90%.

Hall: It's insane.

Frankel: Once they have the infrastructure in place, the margin is about 90%. The SPAC deal should be closing either in the next couple of months or early in 2022. It's an aviation infrastructure company that I think is a really interesting business. They essentially lease up vacant land on airports and build these luxury hangers, then have fantastic economics. They just released their earnings last week, last Friday, and buried in the 10-Q is their fourth new business line. They said they bought a plot of land in Nevada. They didn't give any more details about the land, and that they're going to start building built-to-rent homes, meaning like town-homes and single-family homes because the rental market is just normally like that.

Hall: All are Invitation Homes (INVH -1.37%) here.

Frankel: Remember that they have a very good working relationship with Dream Finders, so they have a home-builder that's not part of their group, but they are a major investor in.

Jason Hall: Closely tied, yeah.

Matt Frankel: They have Infrastructure companies, the broadband, the fiber Internet could make it easier to make modern infrastructure in their neighborhoods. I mean, it's just all not asset-light businesses like I know Danny loves, but great gross margin businesses. They're high initial investment. Like their billboards, they focus on static faces, not digital because it's a high initial cost, minimal ongoing maintenance. Same with the broadband, high initial cost, almost no ongoing expenses. They like these heavy initial purchases that have fantastic long-term economics.

Jason Hall owns shares of Boston Omaha Corporation and Dream Finders Homes, Inc. Matthew Frankel, CFP® owns shares of Boston Omaha Corporation and Dream Finders Homes, Inc. The Motley Fool owns shares of and recommends Boston Omaha Corporation, Dream Finders Homes, Inc., and Invitation Homes Inc. The Motley Fool has a disclosure policy.

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