Parsad

Wow, that's an incredible recommendation. I have read his letters and looked at his results, and I think he is the real deal, but I'm going to have to think about increasing my position, given your views. And frankly buying at 5 or 15 for a future of 20% compounded is almost, but not quite immaterial. So what do you think elevates him to such a degree? Is it the combination of investment, operational and ethics? (Can you bottle it and spare a drop for me ?) Seriously though, that is quite a recommendation. I have no idea! But it's in there...gobs of it. I probably know Prem better than anyone on this board that isn't directly related to Hamblin-Watsa, a friend for 20 years, or his family. But it's in him as well! I can't quantify it...but it is certainly a combination of skill, confidence, ethics, integrity, intellect, determination and leadership. Think Tiger Wood's making that 40-foot putt to win the Masters by one stroke...how do you quantify that? Luck or skill? If he did it once...luck. If he did it fourteen times? And before someone decides to misread my post...no, I'm not saying Sardar is on the same level as Woods, Buffett or Prem. Just that he seems to share some very important traits. They never tip their hands. They don't need second opinions if they believe their analysis is correct (a big problem with alot of investment managers and private investors - they lack conviction). Generally they are great capital allocators and smart businessmen. They learn quickly. They rarely make the same mistake again. They act quickly and efficiently. They are fiercely loyal to those that share the same principles and work hard for them. They let things go, but never forget. Their compensation is almost always in alignment with shareholder interests. I'm probably missing many other things. I'm in no way, shape or form advocating that anyone pay $11.50 or more for Steak'n Shake, nor what your annualized return will be going forward. I can just tell you that it won't ever hit $4-$5 again. Cheers!

Dual, how about you do the analysis yourself and report back to the board. Would that not add substance to my PR-like heading?

You mentioned all his funds were up > 3% when compared to S&P 500. Is the 3% annualized or total? Also, how many years are his funds in business? Thanks in advance for your comments. Yes, even with the huge loss last year, and then the subsequent rise, all of his funds have at least a 3% annualized margin above the S&P500 TR since inception. So if you invested from day one, you would have grown at a minimum of 3% better than the S&P500 TR when annualized. In fact, I believe PIF2 has something like a 18% annualized differential since day one. Can't one roughly granulate through 13Fs filings? Yes, you can but I'm not about to do the work for anyone. Cheers!

He didn't mention how many positions he has at this point. Only his partners will know at year-end when they receive audited information and his annual letter. Cheers!

Question, if you may: Average cost of <$4 means you aggregated most of the position in less than 2 weeks in 11/2008. Would you say you were more lucky or more skillful? Very skillful. We purchased hundreds of $2.50 call options six months out because we estimated that Sardar would quickly implement cost savings and asset sales. He exceeded our expectations, as we did not expect him to add so much cash to the balance sheet in such a short period of time. The increased traffic and sales were icing on the cake, and those numbers also exceeded our estimates by quite a bit. Cheers!

PIF 2 - +112.5% YTD PIF 3 - +118.6% YTD PIF 4 - +113.0% YTD All three funds are now beating the S&P500 TR by 3% or better since inception. PIF 2 is beating it by over 17% annualized for the last ten years! He's still below his high watermarks, but at least he's moved enormously in the right direction. Assets under management are now back up to $460M, and Mohnish's stake is back up to $37M. The 2010 AGM's have switched places: California will be on September 11th, and Chicago will on September 25th next year. Cheers!

Hi David, You know, I wasted much of my eating opportunity in Chicago on Steak'n Shakes, but there are alot of great restaurants in that city. Next year I'll take it easy on the SNS, and eat a bit more at some of the other restaurants. Another great place in Los Angeles if you like seafood is Dukes in Malibu. Fantastic fish, comfy place and great atmosphere. Make sure you get a table near the windows at the back so you can watch the waves crashing about 20 feet from where you are sitting. Cheers!

Actually, Alnesh, my brother and I hung out a couple of times at "The Urth Cafe" on Melrose last September. That's where Vince and his crew usually hang out in the show. Very good coffee, dessert, pastries and sandwiches. I also took my Mom to The Ivy for her birthday. Nice atmosphere but the food is over-rated. Quite the snobby attitude from the servers as well. We had a very nice outside patio table to gawk at the celebrities. My favorite place to have a nice breakfast or lunch in Los Angeles is The Blvd restaurant in the Beverly Wilshire. The first time I went there was to meet Jonathan Dash for breakfast. Now when I go to Los Angeles, I always eat there. Very nice, but not pretentious. The food is surprisingly good for a hotel restaurant, and the prices are quite reasonable considering the location, hotel and atmosphere. The eggs bennie are one of the best, as are the Kobe beef mini burgers. Cheers!

I think Buffett's reputation was evident since the early 80s... so you might be wrong here. I'm talking about Buffett when he simplified his and Munger's holdings and then focused on Berkshire. People were still discrediting his abilities...six-sigma event...a flash in the pan. As for Google, chances are not that good to foresee "a Google" (or a Microsoft, etc.) 9 out of 10 times you get in early - thinking it's the next GOOG, MSFT, or Buffett - you get in wrong. Most times you would be correct. This one, I think virtually any shareholder of Berkshire had a heads-up. Google before their IPO said they were going to steal some ideas from Buffett and Berkshire. Buffett discussed this briefly in response to a question at the AGM just before Google's IPO. I was there, as were thousands of other Buffett disciples. We all thought those guys were a flash in the pan! A couple of wannabes! They even sent Buffett a letter and a copy of their owner's principles. On the other hand, in truly great businesses/situations, you have enough time/opportunities to get in... e.g. WeB getting into KO ~100 years after formation. That's true. Although Buffett has often mentioned that one of his greatest mistakes ever was not buying Walmart earlier. He is not going to get the same return today by buying Walmart at $45/share. Bottom line, it's a question of character... what do you prefer... loss of capital or loss of opportunity. It seems people low on capital are generally willing to favor the first and People high on capital prefer the last. I think you can make tons of money even when getting in late, if you are right about the business/opportunity and have some patience. Our average cost is less than $4 per share. I'm assuming that even those high on capital apparently missed this one. You won't get SNS at $4 per share ever again. p.s. Parsad, it's interesting, what brings you to place Sardar on the same theoretical level of WeB, Prem, Google, etc.? He has a head start on Prem by about seven years, and he's stealing the Buffett playbook. I know alot of young investment managers...lots! No one that I know, including myself (and I'm not young), has the same investment and operational skills Sardar has. Many have one or the other, but I have yet to meet someone who is exceptionally capable at both at that age. Cheers!

I believe it was in the late 90's. John Forlines used to be in charge. He's still the largest shareholder, but gave up the CEO position many years ago. Remember, a long string of successes multiplied by a zero is zero. Cheers! http://www.bankofgranite.com/page/81/90-remarkable-years.html

Joint venture between Berkshire and White Mountains, Symetra Financial, plans to raise up to $575M. Cheers! http://www.rttnews.com/Content/BreakingNews.aspx?Id=1085462&Category=Breaking%20News&SimRec=1&Node=

For those that remember the Bank of Granite, hard times have come along. Cheers! http://finance.yahoo.com/news/Bank-of-Granite-Signs-Order-iw-3439832419.html?x=0&.v=1

Interesting article on how Canadian banks are taking advantage of the current global malaise. Cheers! http://www.bloomberg.com/apps/news?pid=20601109&sid=aNaLwcGrz3.8

I don't think there really is such a thing as a value trap. Almost any good value idea is a distressed idea, or a business under pressure. The eventual outcome is a direct result of that business' economics, operations, competitive advantages and management. If any of them falters, there is always the possibility that the business could go under. Imagine if Coca-cola continued their shrimp farming business rather than expanding their global footprint or reinforcing their distribution system. Even Coca-cola could have gone under if management was stupid enough. So you will be correct on investment ideas and you will be incorrect on investment ideas...the goal is to get the big ones right most of the time! ;D Cheers!

It's not cheap. Cheap was at $5 when people were afraid they may break their convenants. At $11.50 it's a little closer to current fair value. The problem is that Sardar can do the same thing with overvalued stock that Buffett and Watsa did. He can use it to acquire cheaper companies and more intrinsic value relative to what they are giving up. There will be periods when the stock will be cheaper than it is now, but they probably won't be as often as people like. Cheers!

The business I just can't evaluate the business on the Internet. Seems to be in the Harvey's type of price point. Good prospect for the next few year but I would see it as a stable asset rather then a growing asset. How can someone evaluate Berkshire Hathaway or Fairfax Financial on the internet, which are very, very complex businesses, yet a simple restaurant business cannot be analyzed? There is absolutely no reason why you cannot value a business simply by reading the last three years of 10-K's. I invested in Steak'n Shake before ever visiting a location, yet visiting one had no impact on my decision to invest or not to invest. I just enjoyed eating the burger! I find that a CapEx of 5M per year is quite low if you consider the company owns 416 restaurants. Capex isn't fixed permanently. Sardar just said that he sees it at that level currently. As revenues grow and costs relative to revenues remain level, he will be able to allocate slightly higher amounts to capex to maintain stores and rejuvenate older ones. Also, most of the future growth will come from franchisees who will foot the bill for their own stores, including all future maintenance. The Manager Sardar seems good at reducing costs and optimizing profits. I like it. He eliminated LT debt. I like it. Possibly under estimates CapEx. Keep an eye. He has success into restaurant business but has not stated he will stay in his niche. Possible problem here. 10 Year experience running hedge fund, very successful. Private data, I'll believe it when I see it. Conclusion I don't have enough track record of Sardar to value his skills. The company has good potential and healthy finances. It's definitely worth keeping a look at but I would let the kid run a little bit for a while. At least until he does it's next financial move... This is what I always hear about virtually every successful manager. They said the same thing about Buffett, the same thing about the guys at Google, the same thing about Prem, and now the same thing about Sardar. By the time people realize what they have, they will have forgone considerable gains. Cheers!

The 2010 Fairfax Financial AGM will be held at Roy Thomson Hall, 60 Simcoe Street, Toronto Canada. It's about a block north of the Metro-Toronto Convention Centre where the 2009 AGM was held. The date has also been switched to a Thursday (April 22, 2010), as there is a large convention being held in the city around the same time. You would be wise to book your hotels and flights early this year. You can find more information at www.fairfax.ca. We will also be holding our annual Fairfax Financial Shareholder's Dinner at Joe Badali's again, and that will be at 6:30pm on Wednesday April 21, 2010. Directions to Joe Badali's can be found here: http://www.joebadalis.com . Last year's was fantastic with Sam Mitchell, Brian Bradstreet, Wayne Cadwallader and Francis Chou all attending and answering our questions. Cheers!

He's also aligned himself often with many of the Chanos', Morgensens, Greenbergs and Noceras of the world, so it is nothing unexpected. Cheers!

I meant I still relish the flavor four weeks later. ;D Really, it was a good burger, and I'm not saying that because I'm a shareholder. I can do without the chilli or the skinny fries, but the double Steakburger was amazing...especially for that price...ridiculous! Cheers!

Ragnar, I'm guessing that the fries will taste just as good with the cheese sauce. And I still can't reiterate how good a double Steakburger is for the money. I can still taste it four weeks later! Geez. With better fries, I'm drooling as I write this! Cheers!

He was off the radar when he took over WEST, and got onto the value investor's radar when he went after Steak'n Shake, but I'm pretty sure that there is a considerable amount of interest now in Sardar. I would be very surprised if he isn't running a billion dollar business in five years and alot of people will know his name in ten. Cheers!

If you just get back to 2006 earnings - cap ex (with a 5 mil buffer for repairs), and give it a 10x multiple, you are looking at ~$750 million in market capitalization... While there may be debate over that number, I have trouble understanding how anyone could ever make an argument that SNS is not undervalued. I don't think you'll see that for several years. Why? I think Sardar's chosen the path of high volume value pricing, thus net profit margins won't be as robust as the higher-priced menus of previous management. He's sneaking in higher price point items and that will bolster earnings, but you have to develop very strong brand loyalty first. He's working that part hard, which will assist with increasing franchisee interest, but we will probably see earnings increase organically through higher volume going forward, rather than just higher margins due to higher pricing or new company-owned stores...more comparable to McDonalds. But you are correct, SNS remains undervalued and he should be able to grow it 15-20% a year. Cheers!

I've lived here all my life, and the one thing I never grasp is exactly how high and how far Vancouver real estate prices can get. I thought it was considerably overpriced three-four years ago, yet it has gone up since. I consider it quite overvalued today as well, but unfortunately there is only so much land here, and the region is incredibly desireable. At some point we'll see a correction, but I have no idea when. Cheers!

I like "The Steak'n Shake Company." It's nostalgic, and representative of where the company came from and where it is going. You don't want to dilute the brand, as it is what Sardar is going to be building from here on out. Cheers!

I think you should expect $5-6M a quarter for the next fiscal year in earnings, and I would not at all be surprised to see $5M in earnings this year-end quarter. Add in the earnings from Western Sizzlin, and you've got about $27-28M in net profit each year. Give it a 15 times multiple, like most well-capitalized burger chains, and you get $405-420M. I expect SNS to finish this year at $14-15 per share. Cheers!