NBL0303 Posted May 3, 2018 Share Posted May 3, 2018 yes I have owned BH off and on. Luckily did not own BH into this cliff... Buying any now? Link to comment Share on other sites More sharing options...
Txvestor Posted May 4, 2018 Share Posted May 4, 2018 NBL, Not sure why you are surprised that I was a shareholder. In fact, I had mentioned that is my posts last year, but perhaps you overlooked. Your skeptical tone makes me unclear what exactly you are saying. I cut my position significantly some time ago as Sardar gained full control, but retained a smaller position which I exited recently. I will try to explain but maybe you won't understand. Perhaps I was just waiting for clarity that even after gaining control he would continue with the shenanigans. Based purely on a SOTP basis BH looks undervalued, probably is, but alas there is the issue of Mr Bigs. He totally controls the company and there are few if any checks and balances on him. His behaviour SINCE gaining full control over the company does not lead me to beleive he gives a hoot about his minority shareholders. Perhaps I had hoped deep down somewhere, he would become less of a self centered maniac once the control issue was out of the discussion. Some insecure people can just be that way when they feel threatened. In addition to that, I feel there is additional risk in the mix now, there is some leverage involved even if at a subsidiary level, there is the undeniable deterioration in SNS performance, the unsatisfactory growth of the franchise model into which significant time and capital has been invested, the maxim story has changed from it will either make money by next year or it will be history, to though it is still unprofitable, I bought the brand, and then there is the issue of the share class structure which not only leaves the capital invested vulnerable, but risks him pulling in your additional capital in order to avoid dilution of perceived undervalued shares. He can now do that without risking control or putting in more capital himself. Then there is the drumbeat of negative news about him, gosh he just seems to gore so many people with whom he deals! With all that, and his now demonstrable desire to consistently shift value to himself in any way possible, who knows what the end story will be, but it sure doen't seem like us minority shareholders will come out ahead. So far Sanjeev's prediction that whatever value is created will more accrue to him rather than his shareholders arguably the most accurate prediction. The answer to your Q wouldn't you buy it at any price, is probably still no. The reason I wouldn't is even if value were to accrue, I suspect there will be some new scheme to siphon it off from the holdco. I am generally a hold for a long time investor. The question then becomes, if you were to have a scenario where you money hardly grows, and he keeps getting compensated in various ways, money, shares, corporate jet travel, biglari cafe, "maxim time", unquestionable and unaccountbale power etc etc. would that be an acceptable outcome 20yrs yonder? Even if a calamitous bankruptcy is avoided. As to your assertion that he has bought back 360m of "undervalued" shares. Certainly that is real money, but remember firstly a significant portion of that is money he got through a rights issue. And secondly, doing that was the way to legally if not morally shift that 80m to his own pocket, for an utterly crappy performance as a entrepreneur/ceo/manager or whatever he feels like calling himself on any given day. Anyway, I definitely appreciate your honesty in sticking to your investment thesis, even if it has shifted a bit to the cigar butt approach from the long value approach. I had no idea thst you were trading it around yoir estimate of IV. May I ask why, if you believe in the jockey? Link to comment Share on other sites More sharing options...
Picasso Posted May 4, 2018 Share Posted May 4, 2018 I can't be the only one who finds NBL's posts incredibly condescending. In light of the quote above, I guess you could say that my view is that the sum-of-the-parts analysis necessarily includes an estimation of Sardar. Sardar and all the questions related to him is one of the parts that I estimate and sum. It takes about two seconds to find the flaw in your analysis. You're adding for Sardar when you should be subtracting. It's not unusual to see closed-end funds without high water marks to trade at 50% discounts to NAV which is not dissimilar to what investing in BH is today and has been for years and will be indefinitely. And you even seem to agree with this if you're trading around BH when it "reaches 100% of intrinsic value." The discount/margin of safety must not be that extreme if you feel the need to trade around it that way. And it makes your condescending tone more of a head scratcher. Also says something that you deleted all your past posts on BH. You're attempting to hold someone like Txinvestor accountable for their opinions on a silly stock that has validated the years of negative views when no one can hold you accountable because it's been deleted! Give me a break... Link to comment Share on other sites More sharing options...
bci23 Posted May 4, 2018 Share Posted May 4, 2018 Another possibility now is he starts selling the B shares held by TLF so that he can reinvest that $ in other things that have a chance of producing incentive fees for him because clearly continuing to hold BH shares seem unlikely to produce fees for him at this point. Wouldn't that be something a few years down the line, guy ends up with complete control but close to zero economic interest in the company. Seems to me the Biglari Cafe and other SNS locations in his favorite cities are just a way for him to expense his private jet fuel and other extravagances to the company as a business expense. Link to comment Share on other sites More sharing options...
Cevian Posted May 4, 2018 Share Posted May 4, 2018 Regarding the point of taking it private, I personally doubt this very much. His type of character requires him having sycophants. All narcissists require vassals. If people really want to send him a message (if this is even possible), no one should attend the annual meeting. He should just sit there alone with no one there to ask any questions. Link to comment Share on other sites More sharing options...
gfp Posted May 4, 2018 Share Posted May 4, 2018 Sounds so much like the current President of the United States... Regarding the point of taking it private, I personally doubt this very much. His type of character requires him having sycophants. All narcissists require vassals. If people really want to send him a message (if this is even possible), no one should attend the annual meeting. He should just sit there alone with no one there to ask any questions. Link to comment Share on other sites More sharing options...
NBL0303 Posted May 4, 2018 Share Posted May 4, 2018 Biglari Holdings first quarter earnings are due today, after market close. While Sardar did not say anything about first quarter numbers or anything direct about this during the annual meeting from the transcript I read, I have pieced together info from a number of different places and I have a pretty good idea that the first quarter was not a good one and the recent trends very likely continued. If it is indeed the case that Steak n Shake struggled in the first quarter, I am interested (hopeful even) to see if Biglari Holdings shares will resume their decline next week. Link to comment Share on other sites More sharing options...
Spekulatius Posted May 5, 2018 Share Posted May 5, 2018 Results are posted on the SEC website - loss of $1 per B share. The pig bleeds, but very slowly. https://www.sec.gov/Archives/edgar/data/1726173/000092189518001572/form10q07428007_05042018.htm Link to comment Share on other sites More sharing options...
OracleofCarolina Posted May 5, 2018 Share Posted May 5, 2018 -7% on customer traffic...ouch! Link to comment Share on other sites More sharing options...
Txvestor Posted May 5, 2018 Share Posted May 5, 2018 The answer to NBL is I will not consider BH at any price as I would fear getting caught in a game of missing out on the next greater fool. It can seem tempting at times to trade eg next week but I do fear one could get trapped if an avalanche of bad news comes about or if he does something like announce a dilutive stock issue that makes people further suspect malintent. Investing energies and focus are perhaps better invested elsewhere. SNS Sales are clearly not even keeping up with inflation. SSS and traffic decline continues uninterrupted and arguably accelerating while many QSRs like MCD are reporting upticks even with asset light franchise models and despite cutting franchisee support. I have not heard him convincingly articulate how he plans to reverse that. And i am not certain his past approach will work this time around as we are in a better economy. One wonders if this is a trend Mr Bigs will own as zealously as the increase he was so eager to take credit for and for which he was royally compensated. All I know is I would not want to be a SNS bondholder right now. Other than a CBRL dividend and issuing more stock I don’t see how he gets more cash. None of his subsidiaries are doing that great or are of the size to matter. Of course he has another 50odd million at the holdco, but that’s not a lot if SNS declines continue for too much longer taking operational leverage into reverse. As for corporate overhead well......... I would be interested to hear how the bulls view the current state of the company. Link to comment Share on other sites More sharing options...
frugalchief Posted May 6, 2018 Share Posted May 6, 2018 What worries me is opening 8 and closing 7 franchises, to net +1. In 2017 they opened 40 and closed 13. Mind you, if they are closing underperforms that’s good. But consistent negative drops in same store sales and customer traffic will probably result in more closures. Spot on! Looks like overall, the # of franchises didn't dip. Biglari Holdings first quarter earnings are due today, after market close. While Sardar did not say anything about first quarter numbers or anything direct about this during the annual meeting from the transcript I read, I have pieced together info from a number of different places and I have a pretty good idea that the first quarter was not a good one and the recent trends very likely continued. If it is indeed the case that Steak n Shake struggled in the first quarter, I am interested (hopeful even) to see if Biglari Holdings shares will resume their decline next week. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted May 6, 2018 Share Posted May 6, 2018 What worries me is opening 8 and closing 7 franchises, to net +1. In 2017 they opened 40 and closed 13. Mind you, if they are closing underperforms that’s good. But consistent negative drops in same store sales and customer traffic will probably result in more closures. Spot on! Looks like overall, the # of franchises didn't dip. Biglari Holdings first quarter earnings are due today, after market close. While Sardar did not say anything about first quarter numbers or anything direct about this during the annual meeting from the transcript I read, I have pieced together info from a number of different places and I have a pretty good idea that the first quarter was not a good one and the recent trends very likely continued. If it is indeed the case that Steak n Shake struggled in the first quarter, I am interested (hopeful even) to see if Biglari Holdings shares will resume their decline next week. Who in their right mind would say "Yeah, Steak & Shake is where it is at! I am going to make my fortune selling two good hamburgers for $3"? I would not be surprised at all if SNS is LOSING money on this offering. In the alternative, there is simply no way they can do the volume to make a suitable return on their restaurants. Of course, not everybody cheaps out, but I've talked with the salespeople and warehouse workers at my supplier that is near a SNS. EVERYBODY is ordering off the two for $3 menu...they have abandoned the regular menu. I think SNS will be similar to Subway in that franchisees start to revolt over low priced offerings... Link to comment Share on other sites More sharing options...
gfp Posted May 6, 2018 Share Posted May 6, 2018 I think SNS will be similar to Subway in that franchisees start to revolt over low priced offerings... Yes. Definitely already happening. Link to comment Share on other sites More sharing options...
Txvestor Posted May 6, 2018 Share Posted May 6, 2018 Perhaps he thinks he is putting together a coiled spring and ends up with a broken spring. Link to comment Share on other sites More sharing options...
Jurgis Posted May 6, 2018 Share Posted May 6, 2018 It is also good to know that with Steak n Shake facing existential-type threats, that Steak n Shake's CEO is also the CEO of a failing magazine publisher, a struggling hedge fund and a conglomerate and is the proprietor of a one-off cafe on other side of the world based on the CEO's personal interest in the world's finest caviars. Well, at least he did not name these businesses after himself... 8) (That sarcasm thing) Link to comment Share on other sites More sharing options...
Txvestor Posted May 6, 2018 Share Posted May 6, 2018 In the end, Bigs will say it was the fault of the franchisees for losing money, and eventually he will likely come around to saying it was the fault of the minority shareholders for investing in BH as well. What a POS. Link to comment Share on other sites More sharing options...
NBL0303 Posted May 7, 2018 Share Posted May 7, 2018 While I have issues with Sardar, which I've made apparent, Steak n Shake's struggles are much deeper than him. Though there are enormous negatives to having Sardar involved, in the case of a failing restaurant chain - there are also positives - he has much more future financial rewards available to him from the success of Steak n Shake - he will likely not be content with the gradual managed decline of Steak n Shake - which many public restaurant company CEOs have historically seemingly been fine with. So for all of the negatives about the person running Steak n Shake, especially during war time, it is helpful to have someone who is (1) entrepreneurial and (2) extremely financially motivated. I'm sure some people will say he is so evil Sardar doesn't care about the success of Steak n Shake, but even in the Sardar is evil framework there is much more money for him to appropriate if Steak n Shake is successful. Link to comment Share on other sites More sharing options...
Txvestor Posted May 7, 2018 Share Posted May 7, 2018 I suspect Sardar thinks SnS is a coiled spring selling off of their 2 for $3 menu. The issue is just in past 10yrs there are so many good food options available in your typical retail centers that I am not certain the decline in SnS sales isn’t something more fundamental. The SnS brand just seems so stale, and I don’t think it is just a simple marketing push or pricing issue. I think tastes have changed, they have underinvested and not evolved to meet the market demands. They focussed mainly on developing their franchising business even as their brand went down. I think initially the lower prices compensated for it but now its just a low priced declining brand. Haven’t we seen a few of those before, esp. coming out of this past recession? Generally when your sales are dropping isn’t a good time to raise prices. So though it is hard to predict exactly what Sardar will do here. I am not sure the options are as easy. Link to comment Share on other sites More sharing options...
NBL0303 Posted May 7, 2018 Share Posted May 7, 2018 This is based on someone who spoke with him about this relatively recently, based on that I don't think Sardar views the 2 for $3 as a money-making turnaround endeavor and he doesn't think Steak n Shake's recent competitive dynamics will change in the near future. So, based on Sardar's study of "hundreds of restaurants chains" (his words), he has observed that when chains fail it is because they experience the inevitable competitive pressures of the restaurant business, then they raise prices to maintain profitability, then over time they lose a little more customer traffic, so they cut portion size, but they maintain some profitability - for a while at least. Then over time they lose more customers so they opt for slightly cheaper food options and cut the size of the labor force - thereby offering the customer inferior service and an inferior product - but for a while at least - this allows the chain to eek out profitability. So restaurant chains' response to competitive difficulties is often to make themselves less competitive in the long-run in exchange for short-run profits. And in taking these steps to preserve short-term profits, these chains concretize their long-term certain demise. Sardar, for better or worse, is determined to avoid this well-worn path described above. So last year, when faced with the customer-traffic loss and the challenges that every public restaurant chain eventually faces, Sardar responded the opposite as most public restaurant chains historically have (at least according to his study of them). So he raised the quality of Steak n Shake's products; just by improving the bacon and cheese it cost Steak n Shake an annualized $17 million for just those two product improvements (though according to the person telling me this - this actually cost them less in 2017 because these changes were not in place all year). Anyway, Sardar is willing to spend $17 million more just for better cheese and bacon. In a similar vein, the idea behind the 2 for $3 at this point is even if it cost them some short-term profits, he thinks they simply need to try to keep customers coming to Steak n Shake until they get the better service and better product mix figured out for the long-term. From his study of restaurants, if they lose too much customer-traffic, then it will be much harder to turn it around when the other longer-term initiatives they are working on - actually start showing results in the form of a better customer experience. Thus, the idea is to try to break even now, and do whatever necessary to lose as few customers as possible in this time period, and then to begin showing those customers that remain a better experience and to offer them a better product. Basically, this is Sardar's thoughts on how to avoid the Death Spiral so many restaurant chains experience. He is making decisions in the opposite manner as most chains that face this dynamic. I am not predicting success for any of this, by the way, but I do believe this is what he is currently thinking in regards to Steak n Shake. Link to comment Share on other sites More sharing options...
Txvestor Posted May 7, 2018 Share Posted May 7, 2018 Thanks for sharing that information NBL. His current thinking seems like a grandiose delusion to me. Let me explain, clearly his better bacon and cheese strategy has done nothing to stem the tide of decreasing SSS, and nor has the 2 for $3 promotion. This in my view speaks to a much broader trend. And what I have noticed is this is not unique to the QSRs either. Its a broader change in the US consumer mindset. Large beer companies are facing it, and so are the consumer product companies. The US consumer (a significant portion) is simply much less brand loyal and just more willing to experiment and they are prioritizing quality and experience. His foray into SnS worked in 2008 as the value proposition resonated with customer in a period of financial duress. That no longer applies. But then again he has studied “hundreds of restaurant brands” and we simpletons are know nothings, so what’s the point. Link to comment Share on other sites More sharing options...
abitofvalue Posted May 7, 2018 Share Posted May 7, 2018 Anyone have issues with their broker converting the shares.. my broker (ML) seems to be having trouble with this. Link to comment Share on other sites More sharing options...
Txvestor Posted May 7, 2018 Share Posted May 7, 2018 Anyone have issues with their broker converting the shares.. my broker (ML) seems to be having trouble with this. Chipotle tried this adter their salmonella/norovirus outbreak and had very limited Success and furthermore it eas not sustained. I understand what you are saying about the 2 for $3 being a doorbuster, but I do not think it is working. The reason as I have stated before is that I think the market dynamic has shifted. People are more interested in quality food and are prepared to pay a little more for it in this economy. The traffic that has left is likely not coming back. Of course we need another Q of data to confirm that but thats my current view. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted May 7, 2018 Share Posted May 7, 2018 Hey all: I'll be going back for the 2 for $3 deal a couple times a month. I think that SNS burgers are better than most of their competitors, and 2 for $3 is a great deal. If I eat two of those burgers, I am pretty full. If I remember correctly, SNS was doing $5 meals before the 2 for $3. When I get the 2for3, I don't get a drink, as I have one in the car with me. I don't get anything else, as those 2 burgers completely fill me up. I think SNS is going to face a problem in how do they get the transactions BACK up to $6 or $8 tickets instead of $3 or $4 tickets? Competition near the SNS that I go to is intense...there are MANY different restaurants. A hungry person can get just about anything that they wish from multiple different places. So if SNS raises their prices, I think they are going to have trouble... SNS is in an incredibly bad spot. Link to comment Share on other sites More sharing options...
EricSchleien Posted May 7, 2018 Share Posted May 7, 2018 I've talked to people with a background in the industry who have said Sardar is a total idiot who has no idea what he's doing. If I was running Steak N Shake, I'd raise it to a meal for under $5 and none of this 3$ bullshit. I'd also improve their breakfast menu which completely sucks. I'd take down the photo of Sardar because it's just weird. I'd also spend money to train every franchisee in the Tribal Leadership work so that they could reliably build a Stage 4 culture and you'd have lots of extra profits just from the cultural shifts alone. Those would just be some basic things I'd do that I think are no brainers on the surface. At the same time, it's MUCH easier to critique in the stands than be on the court and play. Anyone have issues with their broker converting the shares.. my broker (ML) seems to be having trouble with this. Chipotle tried this adter their salmonella/norovirus outbreak and had very limited Success and furthermore it eas not sustained. I understand what you are saying about the 2 for $3 being a doorbuster, but I do not think it is working. The reason as I have stated before is that I think the market dynamic has shifted. People are more interested in quality food and are prepared to pay a little more for it in this economy. The traffic that has left is likely not coming back. Of course we need another Q of data to confirm that but thats my current view. Is there anything you think could work? Or, in other words, if you were running Steak n Shake what would you do try to turn it around? Link to comment Share on other sites More sharing options...
OracleofCarolina Posted May 16, 2018 Share Posted May 16, 2018 Does anyone understand the 13F filed by Biglari Capital? Why would he own so many puts on Berkshire Hathaway? Link to comment Share on other sites More sharing options...
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