BH - Biglari Holdings

[giofranchi]

I have just bought more... Don't really care if it is selling slightly above or slightly below BVPS...

 

Gio

[link01]

Steak n Shake bringing menu fixtures to the freezer aisle:

 

http://www.ibj.com/steak-n-shake-bringing-menu-fixtures-to-the-freezer-aisle/PARAMS/article/48958

 

looks like they like the prospects here, & plan to ramp up. I'd imagine this has added a bit to the restaurants recent spike in G & A along with the more visible front end franchising efforts that have been directly alluded to in both the 2013 annual report & subsequent 10Q's.

[mateo999]

As Gio mentions, the Prospectus states there will be 2,065,566 shares post-offering, assuming all rights are exercised.  For calculating BVPS, are you guys and girls backing out the 184,981 pro-forma Treasury shares (154,151 shares * (6/5))?  Ultimately if you think those shares are as good as cancelled, shouldn't we be using a share count of 1,880,585 pro-forma for both the offering and the Treasury shares?

 

This is the language from BH filings:

 

For financial reporting purposes all common shares of the Company held by its consolidated affiliated partnerships are recorded in treasury stock on the consolidated balance sheet. For purposes of computing the weighted average common shares outstanding, the shares of treasury stock attributable to the unrelated limited partners of the consolidated affiliated partnerships — based on their proportional ownership during the period — are considered outstanding shares.

 

Thanks in advance,

 

mateo999

[giofranchi]

Steak n Shake bringing menu fixtures to the freezer aisle:

 

http://www.ibj.com/steak-n-shake-bringing-menu-fixtures-to-the-freezer-aisle/PARAMS/article/48958

 

looks like they like the prospects here, & plan to ramp up. I'd imagine this has added a bit to the restaurants recent spike in G & A along with the more visible front end franchising efforts that have been directly alluded to in both the 2013 annual report & subsequent 10Q's.

 

Very interesting! Thanks for sharing! :)

 

Gio

[giofranchi]

Ultimately if you think those shares are as good as cancelled, shouldn't we be using a share count of 1,880,585 pro-forma for both the offering and the Treasury shares?

 

I don’t think those shares should be cancelled… They are shares held by the partnerships, not by BH. Then, of course, BH owns a percentage of those partnerships.

 

Gio

 

[frugalchief]

Steak n Shake bringing menu fixtures to the freezer aisle:

 

http://www.ibj.com/steak-n-shake-bringing-menu-fixtures-to-the-freezer-aisle/PARAMS/article/48958

 

 

Microwaving the shakes!  :o  Very cool that they are doing this.  Hopefully it will be profitable.

 

 

[frugalchief]

Ultimately if you think those shares are as good as cancelled, shouldn't we be using a share count of 1,880,585 pro-forma for both the offering and the Treasury shares?

 

I don’t think those shares should be cancelled… They are shares held by the partnerships, not by BH. Then, of course, BH owns a percentage of those partnerships.

 

Gio

 

I'd agree with Gio.  If the Lion Fund, LP decided one day to sell all their shares, none would be treasury, even if we considered BH's % ownership in TLF as Treasury shares.  In my calculations I consider them all outstanding shares, b/c TLF could theoretically sell its whole position.

[frugalchief]

In the BH 2013 letter, Sardar mentions at the end of pg.1 and beginning of pg.2 that "for regulatory and financial reasons, BH divested itself of the investment management business."

 

http://biglariholdings.com/letters/2013.pdf#zoom=100

 

Can someone explain to me the regulatory reasons?  I'm assuming public co. vs. privately owned has some different reporting duties...is that it?  Just reporting?

 

Furthermore, what's the difference of "investment management business" compared to an insurance company owned by a holding company and their duties to report?  Like BRK with NICO, GEICO, etc.  And now BH with First Guard.

 

:o

 

 

[rkbabang]

6)  Compensation - SB is Chairman & CEO of BH, SNS, and Western.  So his $900,000 salary might not be out of line for his responsibilities.  He is running three companies.  Would he reduce his salary if/when separate CEO's were hired for SNS and Western...maybe not.  But in current time, you would still have to compensate two other CEOS for SNS and Western if he weren't doing it.  His results for SNS have been well worth the pay, Western maybe not so much since it is a poor performer and the business is declining quickly.  Performance based compensation - he is incentivized to increase shareholder wealth as much as possible.  Not only through increase of his own ownership (personal holdings and his investment in TLF), but also by cash payment.  I really like how WEB has run BRK for 50 yrs (increasing wealth alongside owners), but nothing will motivate someone to make more money, then by paying them more to do so.  In a commission world - work and produce, get paid.  Don't work or produce, don't get paid.  It makes him find the acquire the best businesses and investments possible to grow our wealth as owners.  I've hired him (holding stock) because I believe he can make a better return that I could, and in doing so, I want him to be paid for it.

 

I have no problem with his $900K salary, that is the only part of his compensation that I agree with. Hell if he got rid of the rest of his compensation plan, I wouldn't have objected to him paying himself a fixed $3M/yr.

 

[Gopinath]

I got 10 extra shares @250 from the over-subscription :-) I wish I got more :-(

[Parsad]

http://finance.yahoo.com/news/biglari-holdings-rights-offering-seems-173037263.html

 

Cheers!

[gfp]

http://finance.yahoo.com/news/biglari-holdings-rights-offering-seems-173037263.html

 

Cheers!

 

 

I don't think the author is correct that Biglari just 'earned' his incentive payment - do you?

[kcipper1]

The proceeds from the 2013 rights offering were subtracted from year-end book value for bonus calculation purposes according to the 3-27-14 proxy statement. Is it different this time?

[Picasso]

What returns are you guys expecting in BH?  When I look at the compensation plan I have a hard time believing this can perform better than 8-10% a year if all goes well.  Total return over the past ten years has been a 2% CAGR.  Can someone long fill me in on where you see value here?

[gg]

http://finance.yahoo.com/news/biglari-holdings-rights-offering-seems-173037263.html

 

Cheers!

 

 

I don't think the author is correct that Biglari just 'earned' his incentive payment - do you?

 

That Gurufocus author is entirely incorrect. A thirty second perusal of the filings to find the incentive agreements will show you that the book value growth is adjusted for this sort of event.

 

More importantly, regardless of how you feel about BH (or Biglari personally), this type of misinformation is constantly being spread over the internet, and while it possibly has a negative effect on the company's market price, it has no effect on the company's intrinsic value...

[giofranchi]

More importantly, regardless of how you feel about BH (or Biglari personally), this type of misinformation is constantly being spread over the internet, and while it possibly has a negative effect on the company's market price, it has no effect on the company's intrinsic value...

 

Then we should welcome such poor and misleading information! ;)

 

Gio

 

[wescobrk]

Gio,

I'm curious what your thoughts are if Sardar is incented to keep the stock price down so he can pick up more shares at a cheap price, if that is the case, why not just wait a long time to buy stock in BH?

Just playing devil's advocate.

Sardar would make more money the longer the stock stays cheap but there is an opportunity cost for investors that own the stock and it not doing anything.

[giofranchi]

Sardar would make more money the longer the stock stays cheap but there is an opportunity cost for investors that own the stock and it not doing anything.

 

Well, what is he doing exactly?! ???

 

Besides, I don’t know how you could time such things… Is Biglari buying shares at a cheap price? The only thing I know is I am doing the same! ;)

 

Finally, we just should consider the fact that by April 2015, 6 months from now, the CBRL poison pill is due to expire and Biglari might finally be able to get his seats on the CBRL board of directors. He has more or less $200 million in cash, which might be used to buy another 5%-8% of CBRL. In the meantime CBRL stock has gone nowhere for the last 10 months, it has actually declined -12% from its November 2013 highest price of $118. It is hard to image how CBRL shareholders could be as satisfied now, and therefore as complacent, as they were one year ago… And if nothing changes by April 2015, Biglari will surely have a great chance to get involved in CBRL operations and implement those changes he thinks are necessary to create value.

 

If that happens, it is very difficult to see how the market might go on pricing BH at a multiple of 1 x BV.

 

Gio

 

[wescobrk]

Well, what is he doing exactly?! ???

 

Besides, I don’t know how you could time such things… Is Biglari buying shares at a cheap price? The only thing I know is I am doing the same! ;)

 

Finally, we just should consider the fact that by April 2015, 6 months from now, the CBRL poison pill is due to expire and Biglari might finally be able to get his seats on the CBRL board of directors. He has more or less $200 million in cash, which might be used to buy another 5%-8% of CBRL. In the meantime CBRL stock has gone nowhere for the last 10 months, it has actually declined -12% from its November 2013 highest price of $118. It is hard to image how CBRL shareholders could be as satisfied now, and therefore as complacent, as they were one year ago… And if nothing changes by April 2015, Biglari will surely have a great chance to get involved in CBRL operations and implement those changes he thinks are necessary to create value.

 

If that happens, it is very difficult to see how the market might go on pricing BH at a multiple of 1 x BV.

 

Gio

 

Thanks for the reply, Gio.

The poison pill expires in april but the TN law won't allow him to vote his shares!. He has to wait the full five years after acquiring 10%. I believe he still has two years from January. I highly doubt Biglari will buy more than 20% if he can't vote his shares but maybe he will if there is a 10% correction in the market and cbrl really drops.

 

Is BV $338 a share? I hope this market has a drop soon so we can find some bargains besides BH.

 

Can you imagine how cheap BH will be if we get an 8-10% decline in the market? We haven't had >10% decline in the market since 2011!!

I would love to buy BH at .9 or .8 book value!

[giofranchi]

The poison pill expires in april but the TN law won't allow him to vote his shares!. He has to wait the full five years after acquiring 10%. I believe he still has two years from January. I highly doubt Biglari will buy more than 20% if he can't vote his shares but maybe he will if there is a 10% correction in the market and cbrl really drops.

 

Is BV $338 a share? I hope this market has a drop soon so we can find some bargains besides BH.

 

Ok, so no more CBRL purchases… Even if I think there might be a chance BH will end up buying the whole company… But in April I think Biglari will surely give another try to be elected on the CBRL board of directors, and, if successful this time, I think the market might very likely revalue BH stock. So we have a sort of catalyst in a 6 months’ time. Of course he might get rejected once more… but I guess no catalyst is a sure thing, right? ;)

 

Yes, I think BVPS is around $340.

 

Besides BH, I think also Liberty Media is a good bargain today. Selling at approximately 17% discount to NAV. Of course, its NAV depends on the stock price of Sirius and Charter, if they are overvalued, Liberty Media’s NAV might be somewhat inflated… But, if they are no more than 17% overvalued, practically you are partnering with Malone for free… Not bad!

 

Cheers,

 

Gio

 

 

 

[giofranchi]

Can you imagine how cheap BH will be if we get an 8-10% decline in the market? We haven't had >10% decline in the market since 2011!!

I would love to buy BH at .9 or .8 book value!

 

Given the chance we have of holding BH for the next 2 or 3 decades, I think it won’t make such a difference if your entry point is 0.8 x BV or 1 x BV… I have lots of cash, because I always want and feel comfortable owning a meaningful cash reserve, but I am not deferring my purchases of BH at 1 x BV in hopes of buying it later at a lower multiple.

 

Gio

 

[gg]

Gio,

I'm curious what your thoughts are if Sardar is incented to keep the stock price down so he can pick up more shares at a cheap price, if that is the case, why not just wait a long time to buy stock in BH?

Just playing devil's advocate.

Sardar would make more money the longer the stock stays cheap but there is an opportunity cost for investors that own the stock and it not doing anything.

 

This doesn't make any sense. How are Sardar's incentives here any different than any other CEO in America? Your point is clearly that his incentives is to maximize book value growth (so he gets a large performance bonus) yet at the same time keep the stock price low (because he would then use the large bonus to complete his required purchase of shares w/ something like 1/3 of the bonus). If Sardar grows BV per share really well, then investors will buy shares and bid up the share price. If the share price over a very long period of time performs badly, than it's not unlikely that if the board doesn't get rid of him, then an activist will come along and do the job. If the company's shares absolutely crater, CBRL could make an offer to buy BH out (a transaction that would give them a massive hamburger/diner franchisor, as well as the ability to retire 20% of their shares in one fell swoop.

But either way, Sardar's incentives here are no different than any other CEO in America.

[carson]

For those shareholders who subscribed, what was your fill rate in the oversubscription allotment?  I was filled at a rate of 6.5%.

[Gopinath]

research with some material!

 

http://seekingalpha.com/article/2509345-biglari-holdings-an-attractive-entry-point

[accutronman]

So it looks like Biglari exercised 3,859 rights costing him $964,750. Nice pick-up for him. On another note, I like the changes he's instituted at Maxim. The latest issue is a lot classier than the old days of Maxim.