Name Change Approved

[Hawk4value]

My impression at the meeting is that Sadar has intentions to buy multiple insurance cos, at the right price, with the purpose of growing the float. He said investing cost free float is a very attractive concept.

[Packer16]

Maybe I missed something but what is Sadar's edge versus other firms looking for similar insurance properties? In restaurants, he had experience running a low cap intensive franchise restaurant operation @ Western Sizzlin that he could apply to SNS but he has "outgrown" any significant deals in the restaurants space as most firms are smaller cap in size.  

[ExpectedValue]

Maybe I missed something but what is Sadar's edge versus other firms looking for similar insurance properties? In restaurants, he had experience running a low cap intensive franchise restaurant operation @ Western Sizzlin that he could apply to SNS but he has "outgrown" any significant deals in the restaurants space as most firms are smaller cap in size.  

 

I think the fact that he already has a CEO picked means he is pretty serious. Plus, he has been studying insurance for a long time, in his interview with Sanjeev he mentions taking classes, etc.

[Packer16]

I still am having a hard time understanding how he can invest for long-term investment results with a short-tail insurer.  Don't you need the cash to pay claims if the policies have short-tails?  The three hedge fund-type insurance investors (BRK, FFH and Greenlight) all have longer-tail policies so they can invest the float. 

 

Packer

[ExpectedValue]

I still am having a hard time understanding how he can invest for long-term investment results with a short-tail insurer.  Don't you need the cash to pay claims if the policies have short-tails?  The three hedge fund-type insurance investors (BRK, FFH and Greenlight) all have longer-tail policies so they can invest the float. 

 

Packer

 

Berkshire has GEICO too though, which is short-tail and has Lou Simpson investing the float.

[SharperDingaan]

 

The day they get into the insurance business is the day that you want to start aggressively hedging.

 

The only reason that a restaurant chain could possibly want a short-tail insurer, is so that they could effectively 'kite' the float to finance the restaurants expansion. Short-term revolving loans to the chain at a slightly above market rate (but cheaper than a bank) - then hope the insurer is well run, & that it doesn't hit a bad year at the same time the restaurant is financially strained. Cross subsidization that could turn deadly at the drop of a hat.

 

When sub-prime was being sold; nobody wanted to know that property prices could also decline, & that there would be tears if it did. All kinds of 'eminent' people could see the benefit, so you must be stupid. Quite possibly, but you'll STAY rich if it ultimately fails & the other guy will not.

 

We wish you the best of luck, but the flags keep going up!

 

SD

[oldye]

 

The day they get into the insurance business is the day that you want to start aggressively hedging.

 

The only reason that a restaurant chain could possibly want a short-tail insurer, is so that they could effectively 'kite' the float to finance the restaurants expansion. Short-term revolving loans to the chain at a slightly above market rate (but cheaper than a bank) - then hope the insurer is well run, & that it doesn't hit a bad year at the same time the restaurant is financially strained. Cross subsidization that could turn deadly at the drop of a hat.

 

When sub-prime was being sold; nobody wanted to know that property prices could also decline, & that there would be tears if it did. All kinds of 'eminent' people could see the benefit, so you must be stupid. Quite possibly, but you'll STAY rich if it ultimately fails & the other guy will not.

 

We wish you the best of luck, but the flags keep going up!

 

SD

 

I'm not comparing Sardar to Buffett, just saying its wrong generalize and assume that SNS buying an insurer is the same as Jack in the Box buying an insurer.  99 times out of 100 you'd be right

[link01]

The only reason that a restaurant chain could possibly want a short-tail insurer, is so that they could effectively 'kite' the float to finance the restaurants expansion.

 

um, from the time SB got control of sns & became chairman the co. ceased to be a "restaurant chain". they are a holding co whose largest biz asset right now happens to be one, but they also have a couple of investment mngt co's & a real estate arm....more & varied subs will be added over time.

 

and i very much doubt there is any intention of "kiting" the insurance float to finance the restaurant expansion. i think you have a fundamental misunderstanding of SB if you believe that. either that or i do. most of any future restaurant expansion will be franchised stores not co owned stores. they'll be funded by the franchisees.

[SharperDingaan]

 

We hear you ... but

Holding coy's exist to advantageously cross-subsidize businesses, & the squeeky wheel gets the grease. The strong holdings underwrite the bulk of the corporate 'guarantee' over the weaker holdings, & it works best when all the holdings are in similar businesses. Textbook stuff; but we have one holding here that seems to be driving the conglomerate (versus the reverse), it has little to do with the other businesses in the group, its sucking up a disproportional amount of the execs time, & its generating increasing signs of egotism. Its not because its their biggest holding; they could always hire someone else to run it.

 

Most conglomerates have either a bank or an insurer as a principal holding (Bronfmans, Power Financial, ELF, etc.), & its because the sub can extend cheap financing to the rest of the group. Having an insurer is simply good business, but its not healthy when one of the subs in a disparate business; is effectively driving decicisions as to how the overall conglomerate operates.

 

We'd be a lot happier if SB had either less involvement in the restaurants, or the sub was smaller (by either a partial sale, or overall conglomerate growth); but don't see either happening anytime soon. We also agree that SB is very good at what he does; but the prudent would he hedging, as this insurance layer could easily leverage the existing risk pretty aggressively.

 

Different take.

 

SD     

[Uccmal]

I sold the minor amount of SNS stock I had a couple of weeks ago.  I am willing to be wrong since there are lots of other places to invest the money.

 

I think that moving into insurance is going to provide shareholders with future discounts on this stock that will be cheaper than anything seen so far.  Virtually every insurer that Buffett bought has had periods of nightmarish times.  Same with FFH.  Insurance nearly wiped out FFH, and they had 15 years real live experience in the business (Bigliari has none), and a huge collection of experienced people.  I in no way believe that Bigliari will get through this scott free. 

 

Once he has taken his lumps I will reconsider investing if the company is not wiped out in the process.

[Guest Bronco]

Uccmal - I can't say I really disagree with you - your opinion has some merit.  But I am holding this stock because 1) Biglari has done some impressive stuff and 2) his age. 

 

I respect Buffett more than anyone, but he won't be the one running the company much longer.  Biglari seems like a young educated pit bull, and I will put some of my money on this jockey and see what happens. 

 

To me, this is no longer a value stock.  It is a potential growth stock.  To reiterate, it is a bet on SB.  I was really turned off by the name change, but I am over it.  I like this guy's focus on profits and more importantly, free cash flow.  I have really been disappointed in Wall Street - no one using FCF as a guiding indicator.  SB does.

 

For better or worse, this will be one of the most (if not the most) interesting stories to follow on WS.  I thank this board for the opportunity to learn about it.  And although I still have most my money with the Tisch family, I may shift more resources to this young burger renegade over time.

 

 

Also, just want to say great recap of the meeting by some posters here, and also great dialogue by all. 

[link01]

Holding coy's exist to advantageously cross-subsidize businesses, & the squeeky wheel gets the grease.

 

that may be true of most holding co.s, unfortunately (which rather defeats the purpose) but the good ones use the excess funds divied up to the holdco to further grease the strong & the fast wheel with a long open road still in front of it, not the squeeky, creaky wheel. or other new & promising investments. thats the difference between a smart, rational capital allocator & an average run of the mill one.

[elltel]

Bringing this conversation back to the name change.... Parsad, when are you going to change the main page to.... Biglari Holdings?

 

Incidentaly, I noticed that www.biglariholdings.com was been purchased back in January 2010. At the moment a blank canvas.... interesting.

[cooger72]

I didn't get the impression that Sardar wanted insurance float to invest in SNS at all.  It seemed clear he wanted the float to invest more broadly and I think he sees it just as Buffett does, a source of free funds to invest profitably in whatever is opportunistic.  It would be irresponsible to invest the float in SNS and I don't think Sardar plans to do it.  It really seems Sardar wants to pull money OUT of SNS, not the other way around.

 

The reason you can make money on short tail insurance investing float is that even though each policy is short, you continually sell policies to keep your float stable or growing. 

[Parsad]

Bringing this conversation back to the name change.... Parsad, when are you going to change the main page to.... Biglari Holdings?

 

Not until there is a shrieking outcry from board members.  This is Parsad's house, not Biglari's!  ;D 

 

No, I'll change it soon enough...maybe once Google Finance and everyone else get the ticker symbol straight.  Or maybe after the first big acquisition by Biglari Holdings.  Cheers!

 

[elltel]

sounds like a good plan