BH - Biglari Holdings

[NBL0303]

Thanks Gregmal - I've also learned from this discussion and appreciate your thoughts.

 

The Broken yoyo that you well describe I think it an important part of investing. If you are investing in a company on the sum-of-the-parts but the parts change in value - then your calculus must necessarily change. If you are investing because you think the revenues of the company are nearly certain to grow and leverage the fixed costs much more thereby making the company much more operationally profitable - but that doesn't happen - then your thesis is not playing out. There are tons of examples of this. I think this is an important part of investing well is understanding this dynamic in one's own thinking.

 

I would say that something as a value investor that I do not recognize as part of the Broken yoyo effect is what happens in the market in the short-run. What I mean is this - if I'm investing in the company because i expect the SSS to improve - and the SSS improves - then regardless of what happens to the stock in the market - that is not necessarily the Broken yoyo effect that you are describing - at least in my investing framework it is not. And this is what makes investing challenging, but also rewarding. We are trying to take advantage of inefficient wrinkles in the market - so sometimes the market makes it seem like it is a Broken yo-yo because you invest in the company and then it goes down or sideways - but that, to me, is not necessarily indicative that the underlying value you see or saw in it is actually there. It could be an inefficient wrinkle in the market that is materializing or expanding or whatever. Not sure if I'm articulating this well. I guess I'm trying to describe a skill of accurately distinguishing what is a true Broken yoyo versus what is a Broken Market.

 

I'm not saying any of that does not comport with what you were saying about the Broken yoyo effect or anything - I was trying to analyze that effect in light of my own investment framework. Anyway, I appreciate the discussion.

[Gregmal]

I guess what I'd say is that you need to apply a balance to everything because nothing in an investment is one dimensional. With the SSS example, maybe the price improvement doesnt occur because the issue really isnt SSS at all? The key is to always be aggressive with challenging your thesis. If you have a SSS thesis and SSS isnt the key that unlocks the value than there is a good chance you are focusing on the wrong variable. Go look at the crypto thread. Every $10,000 up or down theres a new wave of people coming in and challenging various "fundamental" issues with the thesis....except....the thesis has very little to do with much of what they are talking about! When people miss the key pieces and get wrapped up in things that arent really a prominent driver of the value....eventually the onus is on a hungry investor to figure out that the reason they're off is because they arent focusing on the right things."Ive watched BTC go from $3,000 to $55,000....what am I doing?"...If you were skeptical for a long time and it went against you then obviously you were skeptical of the wrong thing! Look at Amazon. For two decades traditional value investors made up excuses about valuation and PE....with hind site those weren't the metrics you needed to be looking at with Amazon. Google was widely regarded as a terrible investment and one of the most overvalued IPOs ever! Now its a value investor favorite? Why were these investing gurus on this earlier? Because they sat around quoting Buffett and Munger, etc, and being snarky, condescending assholes to people who got it...rather than asking themselves "what am I missing"...

 

The best example of a full circle, IMO is the Griffin Industrial thread. Griffin wasnt really all that different years ago in terms of its assets and execution strategy. Earnings will inflect didnt matter either and neither did discount to NAV, heck not even a white hot industrial market mattered either...it sat there, doing everything "roughly" right for years...turns out that the issue and key to unlocking value was management. There was a wide perception that management didnt care about creating shareholder value. And nothing really changed with that, in a visible way, for a long time. Then, all of a sudden, it did. And the stock did over 100% bottom to top and they now can tap the markets for $100M cash when 2 years ago its market cap was like $175M!

 

Narratives drive valuations and inputs are hugely important. Once you are able to hone in on or figure out which ones move the needle, you've got a huge edge. So again, bringing it back to BH....Significant discount to liquidation value, Horrible broader market sentiment, I dont follow the trading at all..but Id gander its somewhat illiquid(so classic overreaction to both upside and downside are possible), at which point the setup presents itself and basically, "if the world doesnt end I make money"....yes, even if Sardar keeps being Sardar, you can clean up. It sounds easy and it often is, but it takes a lot of practice and rigorous thought process to get there mentally...at least Ive found. I mean David Tepper has been timing the markets for 3 decades and there's still people who arrogantly will tell you that timing stocks is impossible or that trying to do so is foolish gambling...which is fine and all, but even that thesis; evaluate it. Warren Buffett employs a buy and hold strategy. Warren Buffett is a human. So its possible he just has a different strategy and its also possible that he is just wrong. And if either or both of those statements are possibly true, than why remain so invested in peddling a faulty narrative? Do what works for you!

[Ballinvarosig Investors]

Biglari still buying, even with the stock hitting 52 week highs. It seems like this will only continue to go higher. The restaurant biz is likely got some decent momentum, the oil business will do well with increasing prices, the insurance operation is continuing to grow, even Maxim is making a tiny profit.

 

If SNS can be turned around, I would even go as far as thinking that this could be a double from here.

 

https://www.dataroma.com/m/ins/ins.php?t=y2&po=1&am=0&sym=BH&L=1

 

 

[awindenberger]

2 hours ago, Ballinvarosig Investors said:

Biglari still buying, even with the stock hitting 52 week highs. It seems like this will only continue to go higher. The restaurant biz is likely got some decent momentum, the oil business will do well with increasing prices, the insurance operation is continuing to grow, even Maxim is making a tiny profit.

 

If SNS can be turned around, I would even go as far as thinking that this could be a double from here.

 

https://www.dataroma.com/m/ins/ins.php?t=y2&po=1&am=0&sym=BH&L=1

 

 

 

I'm very happy to see him buying up more shares here. With things improving across all the businesses, BH is incredibly cheap even with the runup, and Sardar has created a lot of value for shareholders with the buybacks he's made over the last year. I know its sacrilege to be positive here regarding Sardar's actions, but I would be willing to bet that the mood will be very different among investors regarding his decision making in 5 years.  

[wescobrk]

Anyone have notes to post from the May annual meeting for BH?

[OracleofCarolina]

There are some notes in this thread