giofranchi

Ahahah!!!! Great quote!! ;D Cheers, Gio

Of course, that’s another great way of using BH’s large pile of cash! ;) Let’s see what happens actually. Cheers, Gio

--Andrew Carnegie Gio

Well, many people on the board would say that is just another way for Biglari to entrench himself more and more using shareholders’ money… I would answer that your points from 1) to 4) are beneficial to all shareholders. ;) If I were in his shoes, I would do exactly what you have suggested. Cheers, Gio

Where are you getting that? From memory, I thought shareholders equity is around 730 million? Treasury shares are outstanding and are therefore used to calculate market cap. BV is equity + treasury shares. Cheers, Gio

Yes, I agree - this is the method/bias in presenting - make conservative assumptions, etc. And that's why I have found it to be so convincing! ;) Gio

At the end of Q1 2015 BH had a BV of $834 million, while its market cap today is $750 million: a multiple of 0.9x. Cheers, Gio

But Mr Bigs will claim that you are asinine for saying that, because the 'intrinsic value' of the business went up. ;D I still have to understand which is the case: 1) You have never managed a business and don't have a clue what it means to manage one, 2) You are just trying to be sarcastic... Adjusted for $4 million lost by Maxim and $6 million invested in the sns franchise effort, BVPS increased 2.4% in Q1 2015. A mediocre result, but: a) Investments earned only 2.1%, far below average, b) The franchise effort is still costing money, instead of earning money, c) Maxim is still costing money, instead of earning money. The number of franchise openings is a disappointment. To open new stores, though, is a long process and it takes time... Let's have some patience and monitor how this thing evolves. Cheers, Gio

No, no! Debt is still a concern of mine! And that’s the reason why I won’t make VRX a position much larger than 10% of my firm’s portfolio. Imo with debt above 4xEBITDA Pearson must not make any major mistake, in order for VRX to keep going along smoothly (regardless of the macro environment!). And of course I can never be sure Pearson won’t commit a major mistake… But there is a difference between watching from the sidelines and a 10% position! ;) Cheers, Gio

This I am sure I had explained quite well in my previous posts about VRX: what made me watch VRX from the sidelines for a while was my inability to judge how already existing businesses were doing. I don't think that is the case anymore. Cheers, Gio

Years!!... Ahahah!! Did I really speak of “years”??... Well, that’s why you shouldn’t take what’s written on a public board too seriously! ;) I had in mind to wait, because I had thought that was VRX plan as well. After the failed attempt to purchase Allergan, it seemed to me they were not inclined to make another major acquisition soon, and wanted to concentrate instead on their existing businesses + some bolt-on acquisitions. Evidently, I was mistaken… Anyway, they now show organic growth in each quarterly results very clearly, and in 2014 it has been much better than I had expected. I cannot know if such a trend will go on (of course, I hope it will!), but now I have all the information I need to be comfortable with my judgement of VRX business results. Cheers, Gio

Ahahah!!!! ;D Well, truth be told, Pearson also played a meaningful role... when he started declaring organic growth results that were truly unexpected! ;) Cheers, Gio

I would like to understand better, coc: the issue you are pointing out is that Biglari in 2002 shouldn’t repeat what Buffett has already written in 1965, or that Biglari shouldn’t complain about being compared to Buffett? Gio

Actually, I have found Ackman’s valuation so convincing that I have just doubled my investment in VRX, and increased my investment in PSH. ;) Gio

Ah! The evidence of what I am monitoring right now (things that I have numbered from 1) to 5) some posts ago) hopefully will become clear much sooner! ;) (Therefore, I won't be stuck for long with this investment, if I don't like what I see.) Cheers, Gio

original mungerville, basically I don’t see meaningful flaws in Ackman’s assumptions. Do you? Cheers, Gio

This is exactly what ragu has been saying all along, and what I believe is the most rational explanation of Biglari’s past and future behavior. But who really knows, right? Therefore, like I have always said, I will take the evidence as it comes. Cheers, Gio

Thank you for sharing your thoughts, Gopinath... and the picture! ;D Cheers, Gio

I have done so. Nothing to add. That’s exactly what I am saying: the first time I see a truly “irrational” business choice, I am gone! That’s absolutely not beside the point. But, if you think Biglari behaved irrationally during those years you have watched him, we simply judge business development and results differently. Gio

I agree. Moreover, I don’t understand what’s the point in saying such a thing: the market is pricing BH so low precisely because it already agrees Biglari might not be reliable. Imo the so-called “Biglari discount” is already priced in. Today’s valuation simply cannot be explained any other way. Finally, I suggest the reading of [amazonsearch]Crazy Is A Compliment[/amazonsearch] by Linda Rottenberg, founder and CEO of Endeavor: she has worked successfully with entrepreneurs all over the world… And yes! In the Middle-East too! ;) Cheers, Gio

DavidVY, I think that’s a generalization… And one thing I am sure of: you cannot invest nor do business basing your judgements on generalizations. You know what will happen if your generalization applies to Biglari as well? Sooner or later he will charge BH’s shareholders more than the average competitor for his services (right now he is charging far below the average competitor). That will not be a generalization, it will be evidence. And, as I have always said, I will take the evidence as it comes. Cheers, Gio

The way I see it Watsa has built FFH to thrive in an environment in which we will have both very low stock prices and very low bond yields. That’s a very rare occurrence, and the last two times it happened were in the US during the ‘30s and in Japan during the ‘90s. Otherwise, like Buffett and Tepper say, very low bond yields justify higher stock prices. If the environment Watsa is preparing for never materializes, FFH won’t compound at 15% annual for many years to come… Its results might be much lower than that! So what would I do? 1) If you are sure that the environment Watsa is preparing for will never materialize, I would invest only in FIH. 2) If you are sure the environment Watsa is preparing for will materialize, I would invest only in FFH. 3) If you have no certainties regarding the environment Watsa is preparing for, like me, I would invest both in FFH and in FIH. Cheers, Gio

I agree: that is worrisome… and also the reason why I am ready to admit I might be wrong and change my view on BH. I’ll watch BH as an hawk and I’ll take notice if business results start to disappoint. I will be much more demanding of Biglari than any other person I invest with: no irrational business decision will be tolerated. Much work, but I think it might be worth the effort. In the end, though, only business results will eventually change my mind. Certainly not a parable, nor a proverb! By the way, the last time I checked Gabelli still owned 195,024 shares! ;) Cheers, Gio

From Wikipedia: In your opinion then Biglari is “fundamentally vicious”… Have you ever met him? Have you ever talked to him? Have you ever spent some time with him? I refrain from giving such kind of judgements of people with whom I spend a large part of my life with… Gio

Thank you Dazel, and it is no secret you are among the board members I have the most respect for. You know another thing I admire a lot about Biglari? He is extremely well read. I think I spend a lot of my working time reading… but probably very little compared to what Biglari does. I was surprised when I heard him quoting Security Analysis by heart… Something I could never do! (I must admit I have never read the whole book… just lots of passages). And he reads not only about value investing: I remember I have read “Creativity” because he had suggested it, and I have found it to be a great book! These are just two examples. Don’t you think Biglari knows the “honesty is the best policy” line? Don’t you think he believes to be honest? Don’t you think that a compensation agreement significantly lower than the average competition, both for the operating side and for the investment side of the business, could be deemed honest? He changed his compensation agreement… And that is a problem… But BH is evolving quickly… In 2008 investments were worth $6.9 million, at the end of 2014 they were worth $766.6 million. For the first two years operating earnings were much more important than investment earnings, the reverse is true today. Therefore, I ask: when such a large change happens in a company, a change in compensation for its CEO is something to be so much despised? I admit I have great difficulty in answering that question… Because on the one hand I like agreements carved in stone… but on the other hand, if I put myself in Biglari’s shoes, I am not sure I wouldn’t have done exactly what he has done… And, of course, no one likes to think of himself as a dishonest person! Cheers, Gio