Nelnet (NYSE:NNI) is a little-known conglomerate based out of Lincoln, Nebraska. When looking at its 2020 annual report released on Feb. 25, you might get the impression that the company doesn't do anything special. But if you take a deeper look, you'll realize that the unique structure of Nelnet sets it up to grow -- with little downside -- for many years to come.
Here's why investors should consider Nelnet stock as a potential addition to their portfolios.
Steady cash flow from student loans
Nelnet started out as a purchaser of student loans, and now owns a large portfolio of loan assets. With the government deciding to bring all loan origination in-house in 2010, Nelnet has struggled to grow its loan portfolio, only growing it by buying existing loans from other financial institutions. However, the existing loans still generate millions in cash for Nelnet each year. Management estimates it will get $2.3 billion in future cash flow from its existing portfolio, with $1.51 billion coming within the next five years.