watsa_is_a_randian_hero Posted March 18, 2010 Share Posted March 18, 2010 sns overpriced? Any opinions? I am by no means an expert on this stock...but bought on the basis of recommendations on this board and my impressions of Biglari. Its run up quite a bit since. On face, it looks over priced to me. I'd be interested to hear other opinions from those who have done more in-depth analysis though. Link to comment Share on other sites More sharing options...
Myth465 Posted March 18, 2010 Share Posted March 18, 2010 I would like some shares, but feel the price is at fair value. The value doesnt include Sardar's talent though inmo. Its similar to FFH (slightly undervalued at book value depending on your thoughts of insurance), or FUR (slightly undervalued, without the value of Ashner in the stock). I would hold if I owned, but wont be adding unless he makes a good move on an undervalued stock (maybe using equity), or cash flows increase. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted March 19, 2010 Share Posted March 19, 2010 I think Fairfax is more than a little underpriced. For example, if you want a 12% return and you think that Fairfax will grow by 7% a year, then the company is worth $553. Link to comment Share on other sites More sharing options...
txlaw Posted March 19, 2010 Share Posted March 19, 2010 I wouldn't say that SNS is overpriced, but it certainly no longer qualifies for me to put new money into it. Link to comment Share on other sites More sharing options...
MartinWhitman Posted March 19, 2010 Share Posted March 19, 2010 I just took a quick look at their combined financials for fiscal q1 (though it should make more sense to analyse their holding company financials...): There is some leasing debt so on a net basis, the company operates with modest debt. Their EV should therefore be somewhere close to 600 mln. USD. If you annualise their EBITDA from last Q, this translates to about 70 mln for the full year. EV/EBITDA= 8x. If you assume 20 mln. for maintenance capex, I arrived at about 35 mln FCF (unlevered), which is just a 6 % FCF yield on EV. I tend to assume that capex is somewhat understated in the last year but it is too hard for me to assess maintenance capex. After that quick and dirty look I decided that the company is too expensive for me. Furthermore I dont like certain things by Biglari (naming the company after himself, doing the reverse split, raising his pay, etc.). Link to comment Share on other sites More sharing options...
frog03 Posted March 19, 2010 Share Posted March 19, 2010 >>> Furthermore I dont like certain things by Biglari (naming the company after himself, doing the reverse split, raising his pay, etc.). You are not the only one. Ethics are definitely not in the same league as Buffett and altogether may not be that much higher than the average CEO. T Link to comment Share on other sites More sharing options...
Rabbitisrich Posted March 24, 2010 Share Posted March 24, 2010 It seems like the choice of name, Biglari Holdings, offends investors more than the idea of a name change. Perhaps Biglari will resolve the dispute by changing the name to 'SNS Acquisitions' or something similarly themed. Link to comment Share on other sites More sharing options...
sdev Posted March 24, 2010 Share Posted March 24, 2010 sold half, it has the least margin of safety of all the things I own. Link to comment Share on other sites More sharing options...
returnonmycapital Posted March 24, 2010 Share Posted March 24, 2010 Buffett hasn't raised his $100,000 salary since it was first set there many years ago. I expect that it was seen as high at its initiation. Likewise, Prem's salary at $600,000 was high at the time it was instituted, but has not been raised since. Perhaps Sardar is taking a page out of these books. Perhaps he plans not to raise his salary and is pricing in future inflation - i.e. high real salary today but bargain real salary in a number of years' time. In terms of valuation, I have an IV of between $285 - $400 (talk about sitting on the fence). The $285 figure is based on GAAP earnings and the $400 is based on cash earnings ("Owner" earnings). I suggest an 8% growth rate in earnings from fiscal 2010 and a 7.5% discount rate. I am using 15 years and am adding the cash per share to the discounted earnings value. The growth rate may seem high, but I think he can allocate capital (BRK operating earnings are growing at 16% per annum by comparison). The real debate might be whether cash earnings gravitate towards GAAP, the other way around, or some mix of the two. At any rate, I am not expecting miracles and the stock seems reasonably priced - if a tad on the expensive side, given the market as a whole. Link to comment Share on other sites More sharing options...
KFRCanuk Posted March 24, 2010 Share Posted March 24, 2010 It seems like the choice of name, Biglari Holdings, offends investors more than the idea of a name change. Perhaps Biglari will resolve the dispute by changing the name to 'SNS Acquisitions' or something similarly themed. HA! maybe "Biglari Holdings" is a devious way to start a discussion about a name change! Ask for more than what you want and get what you want when someone asks to back down. Link to comment Share on other sites More sharing options...
elltel Posted March 24, 2010 Share Posted March 24, 2010 do you think Sardar reads these posts? hmmmmmm Link to comment Share on other sites More sharing options...
Guest Bronco Posted March 24, 2010 Share Posted March 24, 2010 SDev - what other investments do you find with a higher margin? Do share! Link to comment Share on other sites More sharing options...
Parsad Posted March 24, 2010 Share Posted March 24, 2010 sold half, it has the least margin of safety of all the things I own. We sold a third yesterday when our LT gains rate kicked in. It just made up way too much of the portfolio. We have no problem holding the rest at this point...it's a cash cow and it will go up moderately depending on what Sardar does going forward. It is not priced cheap, but it is not overvalued either. Cheers! Link to comment Share on other sites More sharing options...
sdev Posted March 24, 2010 Share Posted March 24, 2010 Bronco, Look at microcap stuff with a bit more illiquidity. Turn over enough rocks and you'll find some companies with a decent margin of safety. That being said, my cash balance is above 20% now which is indicative of me not being able to find compelling bargains. Might be me being too conservative or the market not throwing me a strike. Link to comment Share on other sites More sharing options...
sdev Posted March 25, 2010 Share Posted March 25, 2010 I guess also check out NRG Energy, at first glance it seems somewhat undervalued, but this might find its way to the "too complicated" pile. Link to comment Share on other sites More sharing options...
T-bone1 Posted March 25, 2010 Share Posted March 25, 2010 Sdev, to the best of my knowledge the earnings of all the independant power producers (IPPs) are heavily dependant on natural gas prices, because marginal power producers burn natural gas and set the price. While all of the IPPs are probably trading well under replacement value (particularly CPN), I think there are better ways to bet on a rebound in natural gas prices, without which these leveraged companies cannot earn to their potential. T-Bone1 Link to comment Share on other sites More sharing options...
JANBIL Posted March 26, 2010 Share Posted March 26, 2010 I understand the enthusiasm for SNS and Sardar, I'm just having a problem valuing the company. Based on what is knowable today, what would you say is the estimate of intrinsic value? How much would one be paying for the future growth/capital allocation skills? I know one can say that the BV ($207/share) is not reflecting the "real" intrinsic value...but then what is the more accurate BV? How many times is one willing to pay of BV for this company, knowing what we know and not what we don't? Based on today's market cap of $550m ($382/share) would you buy the company? If so, what type of return would you be getting on your $550m investment this year and over the next 2 years? CM Link to comment Share on other sites More sharing options...
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