Parsad

Jake Taylor of Farnamstreet Capital did a terrific little segment called "5GQ's With Pabrai & Spiers". Cheers!

Can someone tell me your estimated intrinsic value for PDH and how you came up with that value? Does that mean that PDH has an attractive P/E (specifically, Parsad/Enterprise) ratio? If Premier is a nine-inning baseball game, you've only seen one pitch so far in the entire game! The last six months have been busy, but you've seen nothing yet. Premier five, ten, fifteen, twenty years out will look very different than what it looks like today. Only the name will have any discernible similarity, as will my compensation! Cheers!

The funny thing is when you guys talk about Festivus, Google Adsense puts out a "Seinfeld" ad on the message board. So, Festivus is obviously a target word. Cheers!

Would you take a photograph of my nephew with Santa? ;D Merry Christmas and Happy New Year to you all! Cheers!

Well, BVPS has grown at a CAGR of 20% in 2011, 2012, and 2013, while remaining flat in 2014. The stock price performance has been poor? Yes. Should it be conclusive? No. The strategy imo is still sound. I need to change my mind on the quality of the business as a whole, before deciding to get rid of any investment of mine. I have done so many times in the past. I will do it again in the future. And rest assured BH won’t be an exception! The fact is what you say about BH doesn’t convince me: SNS is doing fine and with great future prospects, investments are doing fine, net debt is low, and all those other “accusations” sound always the same… Operating cash flow has decreased over the last four years...free cash flow has decreased as well...capex spending has increased dramatically. This was what previous management of SNS was guilty of. Overall leverage at BH is "low", but what is the leverage like at SNS? Could the increased leverage and interest payments have anything to do with the decreased profitability? Sincerely, I don’t see what this has to do with rights offerings… Because far more capital is flowing into Biglari's pockets now due to the compensation agreement and structure, then they did in the past when the Lion Fund was a part of SNS. The rights offerings have less impact on a per share basis now than before, as a portion of any gain in book value is paid out in an incentive fee. But that doesn't concern you, so it shouldn't matter. Cheers!

Well, you should look at Same-Store Sales results in 2013 and 2014 and consider the Number of Company Stores at Year-End is still lower than it was in 2008… Sales have always increased, costs have basically remained the same… Result: a lower profitability than in 2012?! Surely not!… A lower profitability + domestic and international franchisees who have committed to opening a total of 239 units! I am not saying it will become truth, but I am saying that I like it. And I will judge results as they come. Gio, can you explain your explanation? If number of stores has remained the same between 2012 and 2014, but sales have increased and costs remained the same, then how is profitability lower in 2014 than 2012? I will surely change my mind if the evidence requires it. But there simply is no evidence, just because 2014 had been sub par! Business simply doesn’t work that way. And if you know BH, you also realize the reasons why 2014 has not been a good year, and you realize those reasons don’t change the soundness of its long term strategy at all! Ignore the compensation agreement changes; ignore the two classes of shares; ignore selling the hedge fund to BH and then buying it back to reap the incentive fees; ignore the licensing agreement; ignore the complaints by franchisees; ignore the comments by those that consulted and worked at SNS; ignore long-time shareholders that were there from Western Sizzlin or Lion Fund; ignore Biglari Design and SNS by Biglari crap; ignore the deteriorating performance at SNS; ignore the increasing amount of leverage at BH and its subsidiaries; ignore the stock price which is lower than when I sold it four and a half years ago; ignore all of that which has been oft-repeated to you...doesn't the retaliatory purchase of AIRT and ISIG share prices well above where they were trading concern you in the slightest? Sardar was concerned with saving $600K a year by removing the red coloring on the styrofoam cups after taking over Steak'n Shake, but now you and other shareholders are perfectly fine excusing several million dollars spent needlessly on two companies where BH activists are sitting? These activists would have had zero chance of replacing him several years ago. Now they have a moderate chance because of the way he's alienated people. Whose fault is this? A complacent board and those shareholders who get sucked into this vortex! Finally, I don’t agree about rights offerings: my average cost before the rights offerings of the last two years was around 1.4 x BVPS. Today my average cost, after taking advantage of both subscription and oversubscription rights is around BVPS. I like them. They are a great way to increase my investment in BH. And I hope in the future Biglari will make more of them. If he does, I have no doubt my investment will get larger and my average cost will get below BVPS. My cost was $87 and then I sold those shares at an average price of $350 four and a half years ago. That's roughly where the price is today. In the meantime, my fund went up 78% and that was with me sitting on 30% cash on average. BH would have to be at $625 today to be at just the same place! How are the rights offerings looking now? And more importantly, how are they being spent compared to the past? Cheers!

Looks like they are buying only up to 62,000 shares. Cheers!

I apologise in advance if im being completely dumb about this. Also I have not read anything about SequantRe and the comments below are not about SequantRe but just ILS, or insurance-linked securities in general. To me this seems very similar to banks making loans and then passing them off to Fannie/Freddie and keeping a fee. The more loans banks made the more money they made and they didn't keep the risk. This seems similar but with insurance. Since the people writing the insurance have keep no risk, how do one make sure of the quality of the insurance that is written? The motivation for an ILS company seems to be to write as many contracts as possible to maximize profits. ILS companies would have to write more contracts the lower insurance rates got. But if an insurance company is not getting the premiums to cover the risk it should be writing less insurance? The way SequantRe is structured, is that it gets a percentage of the profits from any investment gain from the underlying collateralized capital. That only happens two ways...good investments and good underwriting. If you have poor underwriting, that can easily wipe out any investment gains. Thus we are incentivized to make good underwriting decisions. Cheers! I'm trying to understand this as well and if there is any moral hazard here. So you are limiting you're risk to having zero gains, but you can not have underwriting nor investment losses? Doesn't this still give a lot more incentive for bad/risky underwriting than if loses could be realized as well as simply not having gains? You could view writing a lot of contracts as a good asymmetrical bet, if it goes one way you win, if it goes the other you don't lose. I'm not saying you or SequantRe would think that way, but a someone in the same business or some future management could. No, you're not trying to limit your losses to zero gains. You want to maximize underwriting profit and investment gains...that's how you are compensated...by those two components. If you take shortcuts in either side, it comes back to bite you in future profits. Cheers! That's another way of saying management is extremely important. Therefore, SequantRe isn't a business any idiot can run (long term anyway). Correct! We've got two very smart people with a lot of experience running Sequant...Guy & David. They understand risk, they are actuaries deep down, and are principled. Cheers!

Wow, over 260 views and not one comment?! Are you guys saying, "If it ain't broke, why fix it?" Cheers!

I apologise in advance if im being completely dumb about this. Also I have not read anything about SequantRe and the comments below are not about SequantRe but just ILS, or insurance-linked securities in general. To me this seems very similar to banks making loans and then passing them off to Fannie/Freddie and keeping a fee. The more loans banks made the more money they made and they didn't keep the risk. This seems similar but with insurance. Since the people writing the insurance have keep no risk, how do one make sure of the quality of the insurance that is written? The motivation for an ILS company seems to be to write as many contracts as possible to maximize profits. ILS companies would have to write more contracts the lower insurance rates got. But if an insurance company is not getting the premiums to cover the risk it should be writing less insurance? The way SequantRe is structured, is that it gets a percentage of the profits from any investment gain from the underlying collateralized capital. That only happens two ways...good investments and good underwriting. If you have poor underwriting, that can easily wipe out any investment gains. Thus we are incentivized to make good underwriting decisions. Cheers! I'm trying to understand this as well and if there is any moral hazard here. So you are limiting you're risk to having zero gains, but you can not have underwriting nor investment losses? Doesn't this still give a lot more incentive for bad/risky underwriting than if loses could be realized as well as simply not having gains? You could view writing a lot of contracts as a good asymmetrical bet, if it goes one way you win, if it goes the other you don't lose. I'm not saying you or SequantRe would think that way, but a someone in the same business or some future management could. No, you're not trying to limit your losses to zero gains. You want to maximize underwriting profit and investment gains...that's how you are compensated...by those two components. If you take shortcuts in either side, it comes back to bite you in future profits. Cheers!

I apologise in advance if im being completely dumb about this. Also I have not read anything about SequantRe and the comments below are not about SequantRe but just ILS, or insurance-linked securities in general. To me this seems very similar to banks making loans and then passing them off to Fannie/Freddie and keeping a fee. The more loans banks made the more money they made and they didn't keep the risk. This seems similar but with insurance. Since the people writing the insurance have keep no risk, how do one make sure of the quality of the insurance that is written? The motivation for an ILS company seems to be to write as many contracts as possible to maximize profits. ILS companies would have to write more contracts the lower insurance rates got. But if an insurance company is not getting the premiums to cover the risk it should be writing less insurance? The way SequantRe is structured, is that it gets a percentage of the profits from any investment gain from the underlying collateralized capital. That only happens two ways...good investments and good underwriting. If you have poor underwriting, that can easily wipe out any investment gains. Thus we are incentivized to make good underwriting decisions. Cheers!

For all of you attending what has now essentially become a three-day event, I kind of wanted to get some feedback on how we can improve some of the events for attendees. Please answer the following questions: In 2015, we will have four speakers, a terrific buffet, silent auction, cash bar, nametags & registration, coat check, handheld Visa/MC keypad for silent auction purchases, photographer, and then off course, the main event with Prem and all of the Fairfax managers and executives. "How can we improve the annual dinner we hold?" "Do you want more silent auction items?" "Any specific speakers you would like to hear?" In terms of the Fairfax AGM, we can naturally provide some suggestions as we have done in the past. With their expansive AGM, including investee company booths, shareholder gift cards, food, drinks, access to the managers before and after the AGM, Prem's Q&A, etc. Unfortunately, the buses to and from Fairfax companies was not such a success. "How could they improve on their AGM?" "What would shareholders like to see from investee companies?" "What type of interactivity would you like to see from investee companies?" "What do shareholders expect more of out of the Fairfax investee companies?" "What was good and bad about the buses?" "Should Fairfax bring retail items from their stores to the AGM, or continue busing shareholders?" "Do shareholders like the gift cards, or would they prefer a straight discount like Berkshire does...say 10%?" Thanks very much for your feedback! Cheers!

I'll give you the simplest explanation, but as you know, nothing is necessarily as simple as it sounds! ILS, or insurance-linked securities, are essentially securitized products based on underlying insurance contracts. Unlike normal reinsurance companies, that use a significant amount of asset to equity leverage and other reinsurance products to offset risk, insurance-linked securities are fully-collateralized...thus the brokerage has very little...virtually no...insurance risk. Where the brokerage makes money is by taking a percentage of the gross premiums as an underwriting fee and on any gain in the underlying capital collateralizing the insurance risk. The downside to ILS is the lack of use of leverage and float, but the upside is no exposure to underwriting risk and unlimited capacity to underwrite risk. That being said, as an ILS brokerage builds its book of contracts, and generates significant annual income, it can set up another insurance subsidiary that is fully-capitalized by its retained earnings, that could eventually underwrite reinsurance risk directly like any other reinsurer. Thus benefiting from asset to equity leverage and the long-term benefits of insurance float. Again, it's a lot more complex than this, especially what SequantRe is trying to do, but this simplifies it a bit. Hope it helped! Cheers!

$100K salary, and 10% of the outperformance of the S&P500 on a rolling five-year basis. And he doesn't even control the company...go figure, eh Gio! Cheers!

They also pretty much replaced the entire board of directors! That's just plain crazy. Cheers!

Why?... Simply because it was false! Biglari has never been Western’s largest stockholder… Instead, his investors in the Lion Fund were! He behaved like a Buffett, a Malone, a Watsa, or a Marks, without really owning nor controlling his company… With the benefit on hindsight it was an obvious mistake! To really get to own a large portion and therefore to achieve control over BH, Biglari needed to be paid for his services and still needs to. Gio, you are reinterpreting statements that were made when you were not even involved with the company. I was there, as were a number of other investors, and you disregard our first-hand knowledge of the events...even discount them...so as to justify your reasons for ignoring behavior. Sardar would have been handsomely compensated over time. All he had to do was continue to work hard, garner more loyalty and trust, and the world would have been his oyster! Instead, he chose to renege, renegotiate, alienate and subjugate his loyal shareholder base. Flip-flop, flip-flop, flip-flop...my way or the highway...yes like Buffett, no not like Buffett...we are not the company for you. Cheers!

Here you go...read the latest press release: http://web.tmxmoney.com/article.php?newsid=72335807&qm_symbol=PDH:CNX http://www.artemis.bm/blog/2014/12/16/sequant-re-launches-ils-platform-aims-to-ease-investor-access-to-risk/ http://mobile.royalgazette.com/article/20141216/BUSINESS04/141219781&template=mobileart Cheers!

We are working on the annual report as we speak...goes to the audit committee in the next week, and we expect to file before Christmas. You'll also see some more disclosure on the insurance business shortly. Cheers!

The comment that some shareholders get diluted ignores the fact that those shareholders received two very valuable things for the dilution. Those non-participating shareholders received: (1) a one-time large cash dividend and (2) a cash-richer company. 1) is only true if the warrant is tradeable, and the shareholder sells the warrant in the open market...that is very different than a cash dividend. Some 80-year old pensioner, who doesn't pay attention regularly to shareholder mailings would not benefit from this. 2) is also only worthwhile as you said, if the company can generate reasonable returns on the additional cash...and those returns would have to compensate for the decreased equity by issuing stock below book. But would a company like Coca-cola or Costco really benefit from increased cash? Their return on equity would probably drop with a large influx of cash. Obviously share repurchases are a different animal then what we're discussing here but my point is that the fact that Buffett did not engage in Rights Offerings does not end the debate. Warren Buffett is my investing hero and while his playbook does not contain bad investing/business decisions, but his playbook does not contain the entire universe of good business decisions. You're correct. But it should make you stop and think, especially as Buffett is your investing hero...that the reason Buffett didn't do that, was because as he's always said, he didn't want to take advantage of his shareholders...including that 80-year old pensioner who doesn't always read his/her mailings. For Buffett, ethics trumps returns...which has turned out to be the greatest business decision for him...since it is what has garnered his loyal shareholder base and why business owners want to sell their life's work to Berkshire. Cheers!

You own the same amount of pizza, but you've given up some cash to get back what you already owned. Hi Richard, your thesis is correct, but just one little correction: "You own more pizza, but you've given up some cash to retain the same percentage ownership." Instead of one pizza, there may be one and a half pizzas now...you just own the same percentage. Effectively, if you participate, no harm, no foul. If you don't participate, then you do hurt the shareholders who cannot afford to participate. NBL0303's comment that it is pro-shareholder isn't exactly correct either...it is only pro-shareholder for those that participate. The remaining shareholders get diluted and some of their pizza is redistributed to others. Those shareholders are effectively being told that if they don't have the money, some of their pizza has to be given to those that do. Issuing stock below book is done for only 2 reasons: You want to raise money quick and you want it to be fully subscribed. Otherwise, it never makes sense to raise money below book if you truly are pro-shareholder! The easiest way to end this debate is to simply ask yourself...how many times has Buffett issued stock below book or intrinsic value?! Cheers!

He said the opposite... if you think we are due for "de"flation, you should sell your stock... Ian & Joe said the same thing 4-5 years back. They are more levered to inflation than deflation. Arent both of you saying the same thing ? Yes, they are! :) They just haven't figured it out yet. Cheers!

As long as there are no publication or distribution restrictions on the letter, it should be ok to go ahead and post it. Cheers!

Sanj, You haven't changed a bit. You've always been well grounded. My favourite post of yours was one that you made on the Canadian board of the Motley Fool about 14 or 15 years ago when you sarcastically observed that Nortel at the time was worth more than the five big Canadian banks combined, along with a dozen or so other large Canadian companies. Some of us listened and reflected, while others dismissed you as a silly, old-school yokel. Well, I'm happy to say that I'm a silly, old-school yokel too! SJ Stubble, Over those 14-15 years, everything that has happened to me has sprung from one well...Ben Graham! You cannot be anything else, but old-school yokel, when things work that well like clockwork! You always get people saying why doesn't Prem adapt like Buffett and buy quality. Because buying cheap works just as well if not better! Prem doesn't need to guess about moats and competitive advantages, as we've seen how many moats collapsed in the last 12 years due to the internet. While the internet itself didn't affect investing fundamentals espoused by Ben Graham, it did damage alot of competitive advantages! Who would have thought the Washington Post would have collapsed as it did? What about Kodak? Dell? Sears? But you still could have made money when buying those various companies cheap and then selling when dear. Old school yokel only makes sense! :) Cheers!

20% sold in less than 24 hours! Cheers!

All I can say is that it is a new era! Things are fundamentally different...take a look around us: - Online shopping - Electric cars - Drones - Social media - Biotechnology P/E's don't matter. P/B doesn't matter. Debt is cheap. With this new paradigm and disruptive technology, investment managers have to be fleet of foot...adapt...Sun Tzu! It's about the alpha, not the beta. It's about using words like "superfluous" and "aggrandize". A new world era! Cheers!