BH - Biglari Holdings

[peridotcapital]

On the contrary, I've yet to see a single valuation on here that actually capitalized, then deducted the corporate expenses. I have heard vague references to "corporate governance" meaning they don't like Biglari's policies, personality, capital allocation, etc.

 

I agree that it is not "uninvestable" or whatever that means, nor have I argued it. I'm saying in at least one way, you can replace a vague notion about governance with some actual numbers. Then, if you think he's going to destroy further value (or create it), you can go on with your guessing.

 

Thanks.

 

Huh? If we value the operating businesses based on GAAP EBITDA, the corporate G&A costs are included and assumed to be perpetual.

[NBL0303]

 

I agree that it is not "uninvestable" or whatever that means, nor have I argued it. I'm saying in at least one way, you can replace a vague notion about governance with some actual numbers. Then, if you think he's going to destroy further value (or create it), you can go on with your guessing.

 

 

By uninvestable I simply mean a company/stock that one would not invest in at any price. I think that is many people's decision on this company - that they would not invest a dollar in it at any price - and I certainly respect that decision and it may prove to be the best decision regarding this company.

 

But I do not think that anyone is valuing it without including those G&A/corporate expenses. If you mean that sometimes people use short-hand and say "The operating businesses are worth X" meanwhile the "market cap is only 1/2 of X" - plus the company has these investments - then yes, I'm sure some people discuss the investment in that fashion without explicitly writing out something like the following: "the corporate expenses, including the $8.4 million services/administrative/boondoggle fees, usually total around $10 million per year - those must be valued and deducted from any valuation of the company and its constituent businesses." While it would be tedious to write that out - I think that all people who value this company are all-too-aware that these expenses must be considered in the valuation. With that said, I'm not really sure very many people are valuing the company at all - which probably goes back to the uninvestable point. How many investors read the annual report/10Qs/13F-HRs and develop some kind of valuation of the company? I would guess it is only a handful of investors.

[RichardGibbons]

To add on to this... consider that as of 12/31/20 the implied market value for BH's operating businesses (market cap less after-tax FMV of LP interests) was negative $200 million. Even with Sardar's compensation and the corporate G&A costs, can anyone really say that the cumulative intrinsic value of the six 100% owned businesses is negative? And not just a little negative... negative $65 per share??!!

 

I don't think that's all that unreasonable an assumption for a value investor. I mean, the value of a business is a sum of the discounted cash that the business will give to the shareholders. But my impression based on Biglari's past actions is that he'll take that cash for himself rather than distributing it to shareholders.

 

So that makes the company basically worthless as long as he's running it.

[wescobrk]

If he can turn SNS around within a year or two and it is producing around $30 million in free cash flow (around 2013 it was producing close to $50 million) then this is a double from here.

[skanjete]

To add on to this... consider that as of 12/31/20 the implied market value for BH's operating businesses (market cap less after-tax FMV of LP interests) was negative $200 million. Even with Sardar's compensation and the corporate G&A costs, can anyone really say that the cumulative intrinsic value of the six 100% owned businesses is negative? And not just a little negative... negative $65 per share??!!

 

I don't think that's all that unreasonable an assumption for a value investor. I mean, the value of a business is a sum of the discounted cash that the business will give to the shareholders. But my impression based on Biglari's past actions is that he'll take that cash for himself rather than distributing it to shareholders.

 

So that makes the company basically worthless as long as he's running it.

 

That's also how I look at it.

[peridotcapital]

 

I don't think that's all that unreasonable an assumption for a value investor. I mean, the value of a business is a sum of the discounted cash that the business will give to the shareholders. But my impression based on Biglari's past actions is that he'll take that cash for himself rather than distributing it to shareholders.

 

So that makes the company basically worthless as long as he's running it.

 

I'm not sure how it would be possible for him to literally take all of the cash for himself. Since inception that surely has not been the case (the cash generated from the legacy restaurants has funded the CBRL investment and the acquisition of 4 businesses outright) and there is no indication he has a path to do that in future.

 

Will he get paid more than the average CEO in America out of that pile of cash? Yes, which is easily accounted for by reducing the valuation you place on those cash flows. But saying it's worth zero isn't a fair conclusion.

[bizaro86]

 

I don't think that's all that unreasonable an assumption for a value investor. I mean, the value of a business is a sum of the discounted cash that the business will give to the shareholders. But my impression based on Biglari's past actions is that he'll take that cash for himself rather than distributing it to shareholders.

 

So that makes the company basically worthless as long as he's running it.

 

I'm not sure how it would be possible for him to literally take all of the cash for himself. Since inception that surely has not been the case (the cash generated from the legacy restaurants has funded the CBRL investment and the acquisition of 4 businesses outright) and there is no indication he has a path to do that in future.

 

Will he get paid more than the average CEO in America out of that pile of cash? Yes, which is easily accounted for by reducing the valuation you place on those cash flows. But saying it's worth zero isn't a fair conclusion.

 

I don't think a scenario where he takes an ever increasing piece of a shrinking pie as compensation, never pays any dividends, and slowly buys all the shares at decreasing prices using that compensation is wildly unlikely.

[peridotcapital]

 

I don't think a scenario where he takes an ever increasing piece of a shrinking pie as compensation, never pays any dividends, and slowly buys all the shares at decreasing prices using that compensation is wildly unlikely.

 

I guess that's true... if you think the pie has been and will continue to shrink. I don't think the evidence supports that, but things can obviously change. Those of us who were buying this aggressively during 2020 are definitely betting the pie will increase over the long term.

[bizaro86]

 

I don't think a scenario where he takes an ever increasing piece of a shrinking pie as compensation, never pays any dividends, and slowly buys all the shares at decreasing prices using that compensation is wildly unlikely.

 

I guess that's true... if you think the pie has been and will continue to shrink. I don't think the evidence supports that, but things can obviously change. Those of us who were buying this aggressively during 2020 are definitely betting the pie will increase over the long term.

 

If his piece of the pie grows faster than the pie as a whole that would also eventually result in a terminal value of zero.

[peridotcapital]

 

If his piece of the pie grows faster than the pie as a whole that would also eventually result in a terminal value of zero.

 

His compensation is not setup that way, so until that changes, I don't see it being a highly plausible outcome.

[NBL0303]

 

If his piece of the pie grows faster than the pie as a whole that would also eventually result in a terminal value of zero.

 

His compensation is not setup that way, so until that changes, I don't see it being a highly plausible outcome.

 

And it would not make any sense for why he has repurchased (personally and even more so through Biglari Holdings/Lion Fund II) so many shares after he already had control. That is a $100 million or so that he can't "steal" or find some way to appropriate to himself.

[NBL0303]

This press release is hilarious, there may be a little bit of good Steak n Shake news in it, but it is such sort of obvious marketing/hype and even the language in some places is so over-the-top it strongly resembles a press release from a dictator. "Leader so and so played golf yesterday and shot a 18-hole score of 21 shots, breaking his own previous world record of 22" kind of thing.

 

It's interesting that the company put this out because they ordinarily do not press releases or seek media attention. I suppose there is some kind of reason they are seeking attention now.

 

https://www.prnewswire.com/news-releases/steak-n-shake-opening-45-restaurants-301242857.html

[Agrippa07]

This press release is hilarious, there may be a little bit of good Steak n Shake news in it, but it is such sort of obvious marketing/hype and even the language in some places is so over-the-top it strongly resembles a press release from a dictator. "Leader so and so played golf yesterday and shot a 18-hole score of 21 shots, breaking his own previous world record of 22" kind of thing.

 

It's interesting that the company put this out because they ordinarily do not press releases or seek media attention. I suppose there is some kind of reason they are seeking attention now.

 

https://www.prnewswire.com/news-releases/steak-n-shake-opening-45-restaurants-301242857.html

 

reads like an ad for Herballife  :o

[Parsad]

This press release is hilarious, there may be a little bit of good Steak n Shake news in it, but it is such sort of obvious marketing/hype and even the language in some places is so over-the-top it strongly resembles a press release from a dictator. "Leader so and so played golf yesterday and shot a 18-hole score of 21 shots, breaking his own previous world record of 22" kind of thing.

 

It's interesting that the company put this out because they ordinarily do not press releases or seek media attention. I suppose there is some kind of reason they are seeking attention now.

 

https://www.prnewswire.com/news-releases/steak-n-shake-opening-45-restaurants-301242857.html

 

reads like an ad for Herballife  :o

 

The franchise model is the same as Chik-Fil-A.  Not a bad company to copy!  Cheers!

[NBL0303]

 

The franchise model is the same as Chik-Fil-A.  Not a bad company to copy!  Cheers!

 

I agree with you Parsad that it is a good idea, especially given the issues Steak n Shake had, but you have to admit that press release is kind of funny in an over-the-top kind of way right?

[muscleman]

Anybody buying here? The technical is starting to shape up but I just can't figure out why I should own a slice of Mr Scammer's company.

[Parsad]

Anybody buying here? The technical is starting to shape up but I just can't figure out why I should own a slice of Mr Scammer's company.

 

The time to own it was 12 months ago when I bought it for $50!  ;D  And I was out by $120...that takes care of management risk!  Cheers!

[NBL0303]

Anybody buying here? The technical is starting to shape up but I just can't figure out why I should own a slice of Mr Scammer's company.

 

The time to own it was 12 months ago when I bought it for $50!  ;D  And I was out by $120...that takes care of management risk!  Cheers!

 

How do you know what the right price for this management risk was? Why $120 and not $100 or $150? This is not a cheeky question, I think this is a challenging consideration as it relates to this company. If there is management risk at this level, it is difficult to calculate how to factor that in where to sell it at or whether to buy it at all.

 

An investor told me recently they were more comfortable with the management risk of this company now - even though the price is higher than the 2020 lows - because late in the year the company/Lion Fund II purchased so many Biglari Holdings shares. And the other day another Form 4 was filed and they purchased more shares bringing their recent total purchases to over $15 million I think. If Sardar's plan is just to screw everyone out of all the money - then these purchases are dumb as they deprive him of money that he could swindle to himself. The point being, he is having the company buy all of these shares for a reason - and according to this argument - that maybe makes the management risk more tolerable. All of the Biglari Holdings/Lion Fund purchases of Biglari Holdings own stock the last few years - also make his incentive payments nearly entirely bound to the share price of Biglari Holdings - so the straightest line path for him to make significant sums in the near future is to drive the price of the stock up - if he can.

 

I'm not saying this argument is accurate but I am saying I can understand why investors are more comfortable holding it now when the company has recently been purchasing all of these shares on the open market, versus last year at a lower price but when the company was not buying it - which could add to the risk that he had other schemes to appropriate money to himself that did not involve driving the share price of Biglari Holdings higher. I just think these are interesting questions and am curious if you had thoughts.

[Parsad]

Anybody buying here? The technical is starting to shape up but I just can't figure out why I should own a slice of Mr Scammer's company.

 

The time to own it was 12 months ago when I bought it for $50!  ;D  And I was out by $120...that takes care of management risk!  Cheers!

 

How do you know what the right price for this management risk was? Why $120 and not $100 or $150? This is not a cheeky question, I think this is a challenging consideration as it relates to this company. If there is management risk at this level, it is difficult to calculate how to factor that in where to sell it at or whether to buy it at all.

 

An investor told me recently they were more comfortable with the management risk of this company now - even though the price is higher than the 2020 lows - because late in the year the company/Lion Fund II purchased so many Biglari Holdings shares. And the other day another Form 4 was filed and they purchased more shares bringing their recent total purchases to over $15 million I think. If Sardar's plan is just to screw everyone out of all the money - then these purchases are dumb as they deprive him of money that he could swindle to himself. The point being, he is having the company buy all of these shares for a reason - and according to this argument - that maybe makes the management risk more tolerable. All of the Biglari Holdings/Lion Fund purchases of Biglari Holdings own stock the last few years - also make his incentive payments nearly entirely bound to the share price of Biglari Holdings - so the straightest line path for him to make significant sums in the near future is to drive the price of the stock up - if he can.

 

I'm not saying this argument is accurate but I am saying I can understand why investors are more comfortable holding it now when the company has recently been purchasing all of these shares on the open market, versus last year at a lower price but when the company was not buying it - which could add to the risk that he had other schemes to appropriate money to himself that did not involve driving the share price of Biglari Holdings higher. I just think these are interesting questions and am curious if you had thoughts.

 

You're trying to understand management's behavior...that's a mistake right there.  When I bought the stock, I bought it for 1/4 of book value after accounting for the potential bankruptcy of SNS and discounting any debt that would be recourse to the parent company.  If the biggest risks are accounted for, the likelihood of it returning to at least half of book value was very good, as those assets were not impaired, nor were they related to SNS.  Once it got to a little better than half of book after calculating for SNS bankruptcy (I thought he might let it actually go), I sold out...no consideration for management's decisions going forward, his plans to screw or not screw over shareholders...it just wasn't relevant to my estimate of intrinsic value in the worst case scenario.  Cheers!

[Gregmal]

Anybody buying here? The technical is starting to shape up but I just can't figure out why I should own a slice of Mr Scammer's company.

 

The time to own it was 12 months ago when I bought it for $50!  ;D  And I was out by $120...that takes care of management risk!  Cheers!

 

How do you know what the right price for this management risk was? Why $120 and not $100 or $150? This is not a cheeky question, I think this is a challenging consideration as it relates to this company. If there is management risk at this level, it is difficult to calculate how to factor that in where to sell it at or whether to buy it at all.

 

An investor told me recently they were more comfortable with the management risk of this company now - even though the price is higher than the 2020 lows - because late in the year the company/Lion Fund II purchased so many Biglari Holdings shares. And the other day another Form 4 was filed and they purchased more shares bringing their recent total purchases to over $15 million I think. If Sardar's plan is just to screw everyone out of all the money - then these purchases are dumb as they deprive him of money that he could swindle to himself. The point being, he is having the company buy all of these shares for a reason - and according to this argument - that maybe makes the management risk more tolerable. All of the Biglari Holdings/Lion Fund purchases of Biglari Holdings own stock the last few years - also make his incentive payments nearly entirely bound to the share price of Biglari Holdings - so the straightest line path for him to make significant sums in the near future is to drive the price of the stock up - if he can.

 

I'm not saying this argument is accurate but I am saying I can understand why investors are more comfortable holding it now when the company has recently been purchasing all of these shares on the open market, versus last year at a lower price but when the company was not buying it - which could add to the risk that he had other schemes to appropriate money to himself that did not involve driving the share price of Biglari Holdings higher. I just think these are interesting questions and am curious if you had thoughts.

 

You're trying to understand management's behavior...that's a mistake right there.  When I bought the stock, I bought it for 1/4 of book value after accounting for the potential bankruptcy of SNS and discounting any debt that would be recourse to the parent company.  If the biggest risks are accounted for, the likelihood of it returning to at least half of book value was very good, as those assets were not impaired, nor were they related to SNS.  Once it got to a little better than half of book after calculating for SNS bankruptcy (I thought he might let it actually go), I sold out...no consideration for management's decisions going forward, his plans to screw or not screw over shareholders...it just wasn't relevant to my estimate of intrinsic value in the worst case scenario.  Cheers!

 

I am not at all talking about NBL0303 or anyone specifically, but this board and many others are littered with people who dont know how to trade. Ive found catalyst driven trading to be one of the most consistently safe ways to pick off outsized returns without a long term correlation to the "market". I'd probably sum up your BH trade as value inspired, but the catalyst, given the distress you bought it under, was simple. Time. 3-6 months out, it would have been nearly impossible for the stock not to rerate. I dont know how more people didnt take advantage of the vaccine timeline either. For the past year everyone under the sun had basically said, late 2020 early 2021 we'll have a vaccine. Vaccine basically equalled 50-100% upside and it wasnt hard to see given as late as October many banks, restaurants, and RE were trading at or near 52 week lows despite being pretty damn close to the end of this plandemic.

 

One of my biggest gripes with value investing is that the rhetoric is often dated and continuously encourages people to be scared of everything and always overemphasize every stupid little risk. I dont follow BH cuz I think Sardar is a scumbag but nice job picking up free banjamins...the best trades or special situations are the ones where the risks and fundamentals really dont matter....when fuckstick Sardar cant even mess things up, its safe to say the deck is stacked in your favor.

[Parsad]

Anybody buying here? The technical is starting to shape up but I just can't figure out why I should own a slice of Mr Scammer's company.

 

The time to own it was 12 months ago when I bought it for $50!  ;D  And I was out by $120...that takes care of management risk!  Cheers!

 

How do you know what the right price for this management risk was? Why $120 and not $100 or $150? This is not a cheeky question, I think this is a challenging consideration as it relates to this company. If there is management risk at this level, it is difficult to calculate how to factor that in where to sell it at or whether to buy it at all.

 

An investor told me recently they were more comfortable with the management risk of this company now - even though the price is higher than the 2020 lows - because late in the year the company/Lion Fund II purchased so many Biglari Holdings shares. And the other day another Form 4 was filed and they purchased more shares bringing their recent total purchases to over $15 million I think. If Sardar's plan is just to screw everyone out of all the money - then these purchases are dumb as they deprive him of money that he could swindle to himself. The point being, he is having the company buy all of these shares for a reason - and according to this argument - that maybe makes the management risk more tolerable. All of the Biglari Holdings/Lion Fund purchases of Biglari Holdings own stock the last few years - also make his incentive payments nearly entirely bound to the share price of Biglari Holdings - so the straightest line path for him to make significant sums in the near future is to drive the price of the stock up - if he can.

 

I'm not saying this argument is accurate but I am saying I can understand why investors are more comfortable holding it now when the company has recently been purchasing all of these shares on the open market, versus last year at a lower price but when the company was not buying it - which could add to the risk that he had other schemes to appropriate money to himself that did not involve driving the share price of Biglari Holdings higher. I just think these are interesting questions and am curious if you had thoughts.

 

You're trying to understand management's behavior...that's a mistake right there.  When I bought the stock, I bought it for 1/4 of book value after accounting for the potential bankruptcy of SNS and discounting any debt that would be recourse to the parent company.  If the biggest risks are accounted for, the likelihood of it returning to at least half of book value was very good, as those assets were not impaired, nor were they related to SNS.  Once it got to a little better than half of book after calculating for SNS bankruptcy (I thought he might let it actually go), I sold out...no consideration for management's decisions going forward, his plans to screw or not screw over shareholders...it just wasn't relevant to my estimate of intrinsic value in the worst case scenario.  Cheers!

 

I am not at all talking about NBL0303 or anyone specifically, but this board and many others are littered with people who dont know how to trade. Ive found catalyst driven trading to be one of the most consistently safe ways to pick off outsized returns without a long term correlation to the "market". I'd probably sum up your BH trade as value inspired, but the catalyst, given the distress you bought it under, was simple. Time. 3-6 months out, it would have been nearly impossible for the stock not to rerate. I dont know how more people didnt take advantage of the vaccine timeline either. For the past year everyone under the sun had basically said, late 2020 early 2021 we'll have a vaccine. Vaccine basically equalled 50-100% upside and it wasnt hard to see given as late as October many banks, restaurants, and RE were trading at or near 52 week lows despite being pretty damn close to the end of this plandemic.

 

One of my biggest gripes with value investing is that the rhetoric is often dated and continuously encourages people to be scared of everything and always overemphasize every stupid little risk. I dont follow BH cuz I think Sardar is a scumbag but nice job picking up free banjamins...the best trades or special situations are the ones where the risks and fundamentals really dont matter....when fuckstick Sardar cant even mess things up, its safe to say the deck is stacked in your favor.

 

Hi Greg, you are correct!  Although I don't call it trading...what I'm doing is buying securities that are well under intrinsic value, and I expected a V-shaped rebound, but I was happy to hold these investments longer if necessary until they got closer to my sell price.  So in BH's case, I bought dirt cheap and expected to sell somewhere above a 100% return...fortunately it took only 6 months, but if I had to hold 12-18 months, until it hit that target, I was comfortable enough to do it with the margin of safety I bought at.

 

But yes, I think if investors simply bought the stronger companies in most sectors that could survive the downturn, they would have done extremely well over the last 12 months.  Problem is that psychology kicks in and many investors lose courage in their analysis and convictions.  That's a hard thing to teach to overcome!  Cheers!

[ValueMaven]

I really wish First Guard was part of the Berkshire insurance umbrella and not with Mr Scammer's company...

[Parsad]

I really wish First Guard was part of the Berkshire insurance umbrella and not with Mr Scammer's company...

 

Give it time!  I was truly hoping someone else would buy SNS out of bankruptcy. 

 

At some point, he may blow up something else...although it many not be worth owning First Guard if he lets that happen.  ;D  Cheers!

[NBL0303]

 

I am not at all talking about NBL0303 or anyone specifically, but this board and many others are littered with people who dont know how to trade. Ive found catalyst driven trading to be one of the most consistently safe ways to pick off outsized returns without a long term correlation to the "market". I'd probably sum up your BH trade as value inspired, but the catalyst, given the distress you bought it under, was simple. Time. 3-6 months out, it would have been nearly impossible for the stock not to rerate. I dont know how more people didnt take advantage of the vaccine timeline either. For the past year everyone under the sun had basically said, late 2020 early 2021 we'll have a vaccine. Vaccine basically equalled 50-100% upside and it wasnt hard to see given as late as October many banks, restaurants, and RE were trading at or near 52 week lows despite being pretty damn close to the end of this plandemic.

 

One of my biggest gripes with value investing is that the rhetoric is often dated and continuously encourages people to be scared of everything and always overemphasize every stupid little risk. I dont follow BH cuz I think Sardar is a scumbag but nice job picking up free banjamins...the best trades or special situations are the ones where the risks and fundamentals really dont matter....when fuckstick Sardar cant even mess things up, its safe to say the deck is stacked in your favor.

 

Absolutely guilty as charged! To quote something I heard Charlie Munger say a long time ago, "I'm not predicting and I'm not trading...I'm investing." I am indeed not a trader. And even in my field of investing, there are indeed much better investors out there. Nevertheless, I try to learn and engage in worthwhile discussions anywhere I can and this company has certainly generated some interesting ones. This website is called the Corner of Berkshire and Fairfax - I always assume that meant people who invested according to the principles espoused by Warren Buffett, Charlie Munger and Prem Watsa. One insight about catalyst driven investing from Warren and Charlie is that if a catalyst is obvious it is probably priced in. "You pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values." As Howard Marks would say, you need not only to identify a catalyst to get outsized returns without undue risk, but you must identify a second-level thinking catalyst - where most participants in the market think something about the catalyst or lack of a catalyst but they are actually missing something about it.

 

The vulgar language aside about Biglari Holdings, I do share the sentiment about management of the company. I think one of the questions I have about Parsad and others investments in this company that is led in a largely reprehensible fashion relates to this kind of catalyst driven investing that some seemed to be engaged in with this stock. I think because I've written about this company on this site, I've had a number of messages from people who have purchased this stock beginning late in 2020, because though the price was a bit higher than the $50 per share that Parsad purchased it at, for catalyst driven traders - the massive amount of insider purchasing late in the year seemed to be a potential catalyst. Some people have said the buying itself was a catalyst and others thought the buying signified an underlying catalyst that management knew about and was buying. I'm not at all agreeing with these purchases, but for catalyst driven traders - as Gregmal was advocating for - I could see why they believe that is significant. Though the price is higher, this is a separate potential catalyst - just like Gregmal thought the vaccine was a broad market catalyst.

 

As for purchasing at $50 per share, management is such a risk with this company, that I think proper investment thinking had to wrestle with that thinking at $50 per share as well as $150 per share and if its ever at $250 per share or anything else. The company is cheap for a reason and an investor may just be buying it based on that cheapness, but management risk is an inherent part of the investment no matter how cheap the purchase price. So from that perspective, I don't think Parsad's simple matter of investing in it at $50 per share regardless of management would do it for me. Also, at the end of the quarter, after buying out the $150 million in debt for $100 million booking a $50 million gain, and Cracker Barrel's price going from $50 per share or so to $170 per share (and Biglari buying more shares of it at $60 per share or so, though it was a relatively minor amount compared to what they already held) and with the buybacks adding significant book value per share since they were buying at a large discount to book value, I believe that tangible book value per share is actually cheaper now at $150 per share than it was when Parsad purchased it at $50 per share.

 

The other point in Gregmal's post is congratulating him for buying a company that you would never touch because of f***stick Sardar. I share that sentiment about the management of the company - but that perhaps means it was not a great investment even though it turned out well. There were plenty of other great companies to purchase at times during the last year. Viacom a relatively safe investment at $12 per share, now at close to $100 and dozens of others like that. If Sardar is that bad then he perhaps presents such a risk to the company that it is not good to invest in it at any price. Just celebrating an investment because it went up is results-oriented thinking - which runs completely counter to the Buffett/Munger framework of thought. These weren't "free benjamins" if there was a lot of management risk embedded in the company, even if it worked out. If one had that much confidence in the vaccine and in a recovery, one could have just made a leveraged investment on the S&P 500 and avoided company-specific risk, or leveraged investments on those sector ETFs that would have also avoided company specific risk that is inherently embedded in investing in an individual stock like Biglari Holdings.

 

There is so much results-oriented thinking running through the worlds of investing and speculating now. Many people made lots of money on Gamestock, do adherents of the way of Buffett/Munger/Watsa believe those were sound decisions simply because they worked out in the short-run for the people that purchased those securities? Buying at X and then selling at 2X or even 5X actually does not make it a sound investment, necessarily. At least according to the principles of these investors who lead the companies honored in the name of this great site.

[Gregmal]

^^Wow, awesome post. I love this kind of discussion and its totally worth having and evaluating, to each their own in terms of assessing the playing field and ultimately getting comfortable. I know from just reading the board, Sanjeev follows BH. It seems to be something not only within his circle of competence, but something he is comfortable with. From there its really just taking what the market can give you and waiting for the fat pitch. The key when applying a trading edge to your investments, you need a yo-yo. What I mean by this, is that if I am expecting or trading off a catalyst ABC....I need my investing instrument to respond accordingly. When I flick my wrist, the yo-yo reacts the way I want it to. If you're betting on a restaurant with an improving SSS thesis, well, if you see improving SSS, it would suck big time if your stock didnt go up! Which means you likely missed some variables and part of the narrative elsewhere. Broken yo-yo syndrome.

 

For me, my yo-yo was in the real estate spectrum. If time passes, things normalize, more stimulus occurs, vaccine gets announced.....there's a mammoth mispricing! What you dont want, is to be investing on a thesis where your underlying vehicle misses the boat. Think of all the guys back during the GFC who claimed to have called the crash, and then you find out they lost 50% or whatever. If this, then that...kinda thing.

 

So its not so much BH, IMO...or SPG/MSGE/ESRT etc, its about seeing a setup, and then having everything else fall into place in a vehicle/instrument that you feel confident in you ability to assess and even stronger in its ability to generate a return for you as your catalyst plays out.

 

GME is a perfect example of the market not being efficient. The dude Roaring Kitty saw something, it kinda played out, he was right in a big way. Not to say there arent plenty of total tards in that name....but the point in fact being very "value investory"...stick to your circle of competence, wait for your fat pitch, and the rest often takes care of itself.

 

I think often people, especially smart ones, utilize Buffett and Munger type lingo as a way to excuse evolving or seeing other angles to things. Speculating, investing, gambling...who gives a hoot what you call it? The end of the day the goal is to make money and ideally as much of it as fast as possible. And utilizing judgment or sequencing of events to determine catalysts has been one of the most consistent ways Ive been able to put myself in positions where its possible to "get lucky". If the deck is stacked in your favor, its profitable to play the game...even if its gambling...see Beat the Dealer. Even in regards to technicals....front running is 100% ILLEGAL...but if its playing out in the public markets in a way that you can do it legally, is that any different?

 

So I think while Sanjeev calls it investing, you can deconstruct the thesis as 1) SOTP value is immensely disconnected here, 2) things would have to get significantly worse to justify this price, 3) if things at the company level improve its a very high IRR type of setup, and 4) the backdrop of the markets as a whole are pretty awful right now, so even if all else remains equal, I can win on sentiment improvement.