giofranchi

From the March 2015 Presentation: $417 million in cash and equivalents and marketable securities. + Impavido: $500k expected revenue, at a multiple of 5x it would be worth $2.5 million. + PHOTOFRIN: Upfront payments include $32.7 million cash consideration and $5M of CHI’s common shares. Total: $37.7 million. + ATryn: I don’t know how to put a value on this one, therefore let’s say it is a zero. + NeurAxon: $1.75 million. + CRH Medical: USD $30 million (a loan that bears interest at 10%). + Apicore: USD $6.5 million (a loan that bears interest at 12%). + Synergy Strips: USD $6 million (a loan that bears interest at 15%). + Origin Biomed Inc.: $0.85 million (a loan that bears interest at 15%). TOTAL ASSETS: $502.3 million. Debt is zero, I think… At least it was not even mentioned in the presentation. MARKET CAP: $772 million. If my valuation is right, GUD today is selling for 1.54 x NAV. With lots of dry powder to use should the right opportunity come their way. And a proven management. Am I missing something? Thank you, Gio Knight_Corporate_Presentation_Mar_2015.pdf

I get 7 hours of sleep from Sunday to Thursday, then I get 9 hours on Friday and Saturday night. I have voted 7 hours. Gio

muscleman, I have always wondered... You are not the guy in the picture, are you?!?! ;D ;D Cheers, Gio

Of course, take that away and no compromise is possible! ;) Gio

Very good question! ;) Here are mine: 1) Why a picture of yourself in each store? What do you think it could accomplish? 2) Managers we admire and respect a lot, like Warren Buffett, John Malone, Howard Marks, and Prem Watsa, practically work for their shareholders for free. Of course they all own a large percentage of their companies. As the percentage of BH you own increases over time, do you see your compensation and the incentive agreement coming down? 3) Rights offering: it is the second year in a row you have decided to issue rights and raise new capital from shareholders. What are the reasons behind such a choice? And what are shareholders to expect in the future? 4) Franchisees: in the 2014 AL you have written that in coming years domestic and international franchisees have already committed to opening a total of 239 units. Yet, recently we have heard some SNS franchisees complaining of too low, if not utterly non-existent, margins. Do you think this ill disposition of existing franchisees towards SNS might cause problems and ultimately decrease the number of new units that will be actually opened? If that happens, how are you going to deal with the matter? Gio

http://seekingalpha.com/article/3056556-key-issues-and-tangible-solutions-for-biglari-holdings-shareholders?auth_param=7i5hb:1aia92c:73da1ade39427fd492ee7ef99423b61f&uprof=25 I think this is a good enough article. With the exception of point 5, which I absolutely don't agree with, the rest of the compromise proposal seems sensible and well put together. I'd also add that it would be much easier to achieve such a compromise, if a double class shares structure be implemented soon. Gio

I will surely take a look at it! Thank you, Gary :) Gio

snowball, I don’t doubt it… But I would like to see it more clearly! How and why did they start the licensing business model? Why not before? It is not like it was brought in by a new management… Therefore, something else must have occurred. But what exactly? Was it just opportunistic behavior? Something good came their way, and they grabbed it in order to change the business model? Or was it carefully studied and planned for a long time, before it finally turned into reality? Did Mr. Goehrum already know the licensing business model, and already managed it for some other company, or is this the first time he is involved with it? Imo when you are paying a very high multiple of sales for a company, you must know the answers to those questions… at the very least! ;) Gio

And you would be wrong! Biglari has said G&A, adjusted to remove costs associated with S n S franchise initiative, have been 6.2% of revenue in 2014, instead of 8.3%. This means that at least $64.9 / 8.3 x (8.3 – 6.2) = $16.4 million have been spent for the S n S franchise initiative in 2014. Since 2011 almost $45 million have been invested, yet also expensed, in this S n S franchise initiative. ;) Gio

Well, you might have read a lot of this thread, but you have not read what I have written carefully. I have never said BVPS is not meaningful… Because BVPS and its growth are essentially all I am looking for! But: In 2008 and 2009 Biglari went from running an hedge fund to running a public company. If you want to really understand the job of value creation he has done, you should make the right adjustments. Otherwise, the picture you get simply does not reflect reality. Cheers, Gio

Ok! Thank you! :) That of course is the “understandable” part of the equation… And I like Biosyent’s business a lot! ;) Now I would like to know about the “repeatable” part a little bit more: you have read the last 10 years of filings, right? If so, could you tell us what happened from 2004 until 2009? 5 years of no revenue growth, nor any earnings to speak of… Then all of a sudden revenue start increasing at a compound quarterly growth rate of nearly 30%!… Why? Which are the changes Mr. Goehrum implemented? From the reading of those filings did you get the idea it was a well thought out and precisely executed plan, that just took some time to bear fruit, or something Mr. Goehrum encountered almost by chance? I would appreciate whatever color you could put on this story. Cheers, Gio

Well… I don’t know anything about acting… But I know that business is not a lottery ticket! Business, at least the kind that is investable to me, is a process that should be both understandable and repeatable. Those two features are required at the same time: - If it is repeatable, meaning it has a long and convincing track record, but I cannot understand it, I would never muster enough confidence in its future; - If I understand it, but it has no track record, I would never muster enough confidence its management could keep delivering outstanding results for a long time. To hit the jackpot, or to find a gold mine, are one thing… luck might have played a huge role! To deliver outstanding results for many years is a completely different story: of course, the longer the track record the smaller the role played by luck alone. In other words: have you a business process I can understand and judge very good? Have you already proven yourself for many years in the past? May I partner with you at a fair price? I need 3 YES! ;) Therefore, I ask again: how old is Mr. Goehrum? And no track record before 2010? Thank you, Gio

No! Simply because a fast-food chain is not supposed to increase BV at high CAGRs! What instead it is supposed to do is to provide steady and reliable cash to build on investments. Which is exactly what it did! Who cares! That simply is the reality of the business! Gio

Growth in BVPS since 2008 doesn’t make sense simply because Biglari bought S n S well below BV in 2008. And to understand the job done by Biglari of value creation, you should start with the price he paid to get control over S n S, not S n S BV in 2008. Furthermore, he needed time (two years, 2008 and 2009) to build up investments to the amount needed to meaningfully move the needle. So BVPS growth is the right metric to look at from 2010 onward. In 2011, 2012, and 2013 it grew at a CAGR of over 20%, while it was little changed in 2014. Gio

Great! Thank you! :) The question then imo becomes: why did it take Mr. Goehrum more than 10 years to switch from a bad horse to a good one? Gio

snowball82, how old is Mr. René C. Goehrum? And which kind of track record does he enjoy? I have seen he has been a director of BioSyent since 1996… Almost 20 years… How is it that BioSyent is still a small company ($120 million in capitalization)? Has Mr. Goehrum become a great compounder all of a sudden? Or has some structural change occurred that helped unleash his business acumen? Please, forgive me for the very basic questions, but I have started looking into RX just now. :) Thank you, Gio

I think you have hit the most cardinal nail on the head with this post. A chimpanzee could have generated 7% PA returns since 2008/9. Which then begs the question. Is Sardar's compensation worthy of that performance? The bulls like Gio will then argue that the 'intrinsic value' has increased far more. Since that lies in the realm of subjectivity, this debate will not be settled in the short term. I guess time alone will be the arbitrator. BVPS growth since 2008 is a completely wrong way to judge business results here. I have already said why many times in the past… And, sincerely, I am tired to repeat it! (To get an idea, just look at what investments were worth in 2008 and 2009!) Instead, what I would like to know is the following: if you really think what you have written is a sound analysis of business results, and of Biglari’s job of value creation, then why are you investing in BH?! The answer, I guess, might be: because it is cheap, and I will sell as soon as the gap with IV shrinks enough… The great majority of people on this board believe that buying cheap stocks and selling expensive ones, and repeating the process all over again many times, will yield better results than simply owning a great business purchased at the right price. Imo those people who are able to do better than a great business over the course of many years are very few… And almost all who try that game are likely going to be disappointed. Cheers, Gio

March 2015 Monthly Report Gio Performance-Report-March-2015-PSH.pdf

Richard, as I have often said, I look for great entrepreneurs in good businesses which I could purchase at fair prices… BH imo right now is the chance to partner with a great entrepreneur in a great business at a great price. I might have misinterpret what you look for… But I thought you weren’t a cigar but guy, nor a technical analysis guy, nor a macro guy, etc… It surely would be! But the fear of embarrassment doesn’t always lead to the most rational decision. Cheers, Gio

That of course might be true… We don’t run the companies we invest in… We cannot know every minutia of those businesses… We are all subject to misleading management… At least for a while! But I am confident that, given enough time, I recognize irrational choices and poor business results when I meet them… So far I couldn’t be more satisfied with BH’s results. ;) Cheers, Gio

And you keep confusing stock market returns with business results! ;) If, instead, you think business results have not been very good over the last few years, we simply see business differently. Nothing else to add. Cheers, Gio

Pershing Square: Herbalife Operates In Violation of China's Direct Selling and Pyramid Sales Laws Pershing Square responds to The Wall Street Journal article about Herbalife in China Gio China-Response-Release-4.1.15.pdf

For those who have not done it yet, I would strongly suggest to read [amazonsearch]The E-Myth Revisited[/amazonsearch] by Michael E. Gerber. If I know a company which perfectly fits Gerber’s description of an outstanding business, that company is BH. It is true Biglari has increased his compensation during the last few years, but I repeat what I have already said: as long as we (shareholders of BH) receive superior business results compared to what we give away, that’s fine with me. If things change in the future, I will change my mind. Cheers, Gio

10yr US Treasury Yield back below 1.85%. VersialleinNY has recently posted the following quote: --Charles Munger Know who predicted this?... Mr. Gary Shilling If you want to spend some time thinking about the macro picture, I would strongly suggest to read The Gary Shilling Insight… You probably don’t need much else! ;) Cheers, Gio

Thank you for posting this! :) Cheers, Gio