Some Companies Are Built Different

Most companies play by the same rules. They follow Wall Street’s demands, give quarterly guidance, and focus on short-term results. But every now and then, you find a company that’s different—a company built to deliver exceptional returns over decades by ignoring the noise and focusing on what truly matters: running a great business.

One example of this is NVR. A homebuilder in the U.S., NVR has outperformed the market for years, thanks to its unique business model, disciplined capital allocation, and shareholder-focused approach. Companies like this are rare, but when you find one, the best move is to buy it and hold it for the long term.

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The NVR Playbook: Asset-Light and Efficient

NVR is a homebuilder with a market cap of around $30 billion. At first glance, it might not seem all that special. But look closer, and you’ll see why NVR has been able to compound shareholder wealth for decades.

In the 1990s, NVR went bankrupt. After restructuring, the company adopted a new business model that flipped traditional homebuilding on its head. Here’s how it works:

• Traditional Homebuilders: Most homebuilders buy land upfront, hold it as inventory, and build homes as buyers come along. This requires a lot of capital, adds risk, and ties up cash flow.
• NVR’s Approach: Instead of buying land, NVR pays for options—small deposits, often 10% of the land’s price—to secure the right to purchase it later. If NVR doesn’t find a buyer for the home, they simply walk away from the option, which minimizes risk.

This asset-light strategy has made NVR more efficient than its competitors. It avoids holding large amounts of land inventory, freeing up cash flow and reducing exposure to downturns in the housing market.

Additionally, NVR focuses on key geographic areas where they have an expertise. It allows the company to be very efficient when it comes to its assets.

The Numbers Tell the Story

NVR’s unique model translates into exceptional financial results. Over the past decade, the company has delivered consistent growth in revenue, net income, and free cash flow—while keeping debt low.

Here are some standout metrics:

• Gross Margin: above 20%.
• Net Margin: ~12-15% (NVR was profitable even in 2008).
• Free Cash Flow Margin: above 11%.
• Return on Invested Capital (ROIC): Consistently above 20-30%. During particularly strong periods, ROIC has even exceeded 60%.

These numbers are not normal for the homebuilding industry. While other companies struggle with high debt and low margins, NVR’s efficiency and discipline allow it to generate healthy returns year after year.

What Does NVR Do With All That Cash?

Here’s another way NVR stands out: its capital allocation.

Many companies waste cash on things like expensive acquisitions or paying out dividends. Not NVR. Instead, they use their cash to buy back their own shares—and they’ve been doing it for over two decades. The results are staggering, the number of shares has been reduced by roughly 80%.

These buybacks are not just occasional. NVR has repurchased between 3-10% of its shares annually, depending on market conditions. This makes it what some investors call an “uber cannibal”—a company that continuously invests in itself by reducing its share count.

Ignoring Wall Street

What truly sets NVR apart, though, is its approach to Wall Street. Most companies are eager to please analysts and investors, providing earnings guidance and participating in endless calls. Not NVR.

• NVR does not give earnings guidance.
• The company rarely speaks to analysts or the media.
• It focuses solely on its operations and shareholders—not short-term expectations.

Instead of chasing quarterly results, NVR focuses on what matters: running its business well, staying efficient, and rewarding long-term shareholders.

This approach also keeps away short-term traders and speculators. With NVR’s stock price now around $9,000 per share, it’s not exactly a “hot stock” for day traders. That’s by design. As they say, companies get the shareholders they deserve. At $9,000 per share, the company attracts serious investors who understand its business and are willing to hold for the long haul.

Other Companies That Ignore Wall Street

NVR isn’t the only company that ignores Wall Street and focuses on the long term. Here are a few others:

• Berkshire Hathaway: Warren Buffett’s company doesn’t provide earnings guidance or hold frequent analyst calls.
• Constellation Software: This Canadian software company avoids publicity and lets its performance speak for itself. Like NVR, they focus on disciplined capital allocation.
• Fastenal: Another example of a company that prioritizes operations over Wall Street noise.
• AutoZone: Known for its consistent buybacks and disciplined management.

These companies share a common theme: they avoid distractions, stick to their strengths, and deliver outstanding long-term results.

What Investors Can Learn

Finding companies like NVR isn’t easy, but it’s worth the effort. Here are a few lessons investors can take away:

1. Look for Unique Business Models Companies that operate differently often outperform their peers. NVR’s asset-light strategy is a perfect example.
2. Follow the Numbers High returns on capital, strong margins, and consistent free cash flow growth are hallmarks of exceptional businesses.
3. Pay Attention to Capital Allocation Share buybacks, when done at reasonable valuations, can create enormous value over time.
4. Avoid the Noise Companies that avoid Wall Street’s short-term focus often deliver better long-term results.
5. Think Long Term The best returns come from holding great businesses for decades. As NVR has shown, patience pays.

Conclusion

Some companies are built differently. They operate with discipline, ignore Wall Street’s demands, and focus on creating long-term value. NVR is a prime example of this—turning a unique business model and smart capital allocation into decades of compounding returns. Finding these companies isn’t easy. But when you do, the best move is simple: buy them and hold them for the long term.

Author

This Newsletter's Author

This newsletter was written by Christophe Nour. You can find him via YouTube, LinkedIn, view his portfolio on eToro, and join his investing coaching program on Skool.

Additionally, if you have any questions about this newsletter, you can send him an email at: [email protected]

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