BH - Biglari Holdings

[giofranchi]

Sardar currently controls just under 400k shares of BH right now. 1.05mil shares would be enough to control half the company. That means an extra 650k shares need to be purchased. Thats less than $240mil at current prices, or about $310m assuming a tender offer 30% over the current price.

 

Personally, I think that Biglari should simply continue to buy shares on the open market. I think he could probably buy 5k/day and end up with the 650k in about 4 months. I bet this method would likely lead to a lower average price than a tender offer.

 

Of course, that’s another great way of using BH’s large pile of cash! ;)

 

Let’s see what happens actually.

 

Cheers,

 

Gio

 

[mcmaaaaath]

Re: maxim, I had definitely though the increased revenues might have started to cut into the losses already. Guess not.

 

Will be interesting to see if the "gap between the two (ie costs and revenues) narrows" as Sardar says in the 10Q. I hope he is right as I've continued to add on the recent slide in the share price relative to the cracker barrel stake, which is now at an all time low.  $5m in losses per quarter is certainly non trivial, although I suppose they can shut it down at any time.

 

Also I have a question. Its a little embarrassing that I don't know this, but isn't the majority of the Western Sizzlin revenues franchise royalties? With only 4 restaurants, I wouldn't expect more than $1m per quarter from the 4 company owned WS restaurants, meaning that the majority of the $3.3m in Q1 Western Sizzlin rev's would be from royalties.

 

But that can't be right, since the company as a whole only did $3.6m in royalties. So the above math would imply just $1-2m from the SnS franchise business, and that seems too low.

 

I'm sure its something quite obvious, but what am I missing here?

[peridotcapital]

Re: maxim, I had definitely though the increased revenues might have started to cut into the losses already. Guess not.

 

Will be interesting to see if the "gap between the two (ie costs and revenues) narrows" as Sardar says in the 10Q. I hope he is right as I've continued to add on the recent slide in the share price relative to the cracker barrel stake, which is now at an all time low.  $5m in losses per quarter is certainly non trivial, although I suppose they can shut it down at any time.

 

Also I have a question. Its a little embarrassing that I don't know this, but isn't the majority of the Western Sizzlin revenues franchise royalties? With only 4 restaurants, I wouldn't expect more than $1m per quarter from the 4 company owned WS restaurants, meaning that the majority of the $3.3m in Q1 Western Sizzlin rev's would be from royalties.

 

But that can't be right, since the company as a whole only did $3.6m in royalties. So the above math would imply just $1-2m from the SnS franchise business, and that seems too low.

 

I'm sure its something quite obvious, but what am I missing here?

 

Western does about $3M in annual franchise revenue. That leaves a little less than $3M of SNS franchise revenue in Q1, in-line with where the current franchise base stands.

[giofranchi]

I have just bought much more of BH.

 

The idea someone as dedicated and hardworking and successful as Biglari will try to make money for himself without giving a damn for all other shareholders strikes me as both an insult to Biglari’s intelligence and one of the silliest reason a stock could fall so much as BH’s has fallen recently.

 

I am never in a hurry, but I am really curious to see how this will play itself out.

 

Cheers,

 

Gio

 

[awindenberger]

I have just bought much more of BH.

 

So you must be the one that pushed up the price the last couple days.

[valueyoda]

I have also added a few thousand shares in the last two sessions. I didn't pull the trigger earlier, because I was a bit worried about the Maxim acquisition. However, the recent pullback allows me to enter at a good discount to the sum-of-parts valuation per share.

[giofranchi]

I didn't pull the trigger earlier, because I was a bit worried about the Maxim acquisition.

 

Sincerely, I have found the April 2015 issue of MAXIM much more interesting than I had thought it would be:

 

The essay “HUSTLE” by Philipp Meyer has made me discover a great writer that I hadn’t previously heard of,

 

“TOTAL BALLERS”, “THE NEW KING OF VEGAS”, “THE BIG PAYBACK”, “SLACK ATTACK”, and “KISS KISS BANG BANG” are all interesting articles that could have appeared on Forbes or Fortune,

 

I also enjoyed “INFORMER” about online dating! ;D

 

I think I am buying the May 2015 issue too. ;)

 

Cheers,

 

Gio

 

[dcollon]

"Of course Buffett, the world’s third richest man according to Forbes’ 2015 Billionaires List, and $360 billion market-cap Berkshire Hathaway have attracted many copycats, and not all have lived up to the hype. For instance, Forbes recently chronicled the struggles of ‘world-be Buffett wannabe’ Sardar Biglari, chairman and CEO of NYSE-listed Biglari Holdings (ticker: BH). While Biglari makes every effort to resemble Buffett — his website, annual meeting and shareholder letters are formatted in the Berkshire style — the results have been decidedly sub par."

 

http://www.forbes.com/sites/antoinegara/2015/05/15/10-wannabe-berkshire-hathaways-warren-buffett/

 

[gfp]

"The only person making money off of Biglari is its CEO, who’s taken over $75 million in compensation in recent years, despite poor performance."

 

That Antoine Gara really doesn't like Sardar very much!

 

 

"Of course Buffett, the world’s third richest man according to Forbes’ 2015 Billionaires List, and $360 billion market-cap Berkshire Hathaway have attracted many copycats, and not all have lived up to the hype. For instance, Forbes recently chronicled the struggles of ‘world-be Buffett wannabe’ Sardar Biglari, chairman and CEO of NYSE-listed Biglari Holdings (ticker: BH). While Biglari makes every effort to resemble Buffett — his website, annual meeting and shareholder letters are formatted in the Berkshire style — the results have been decidedly sub par."

 

http://www.forbes.com/sites/antoinegara/2015/05/15/10-wannabe-berkshire-hathaways-warren-buffett/

[APG12]

"The only person making money off of Biglari is its CEO, who’s taken over $75 million in compensation in recent years, despite poor performance."

 

That Antoine Gara really doesn't like Sardar very much!

 

 

"Of course Buffett, the world’s third richest man according to Forbes’ 2015 Billionaires List, and $360 billion market-cap Berkshire Hathaway have attracted many copycats, and not all have lived up to the hype. For instance, Forbes recently chronicled the struggles of ‘world-be Buffett wannabe’ Sardar Biglari, chairman and CEO of NYSE-listed Biglari Holdings (ticker: BH). While Biglari makes every effort to resemble Buffett — his website, annual meeting and shareholder letters are formatted in the Berkshire style — the results have been decidedly sub par."

 

http://www.forbes.com/sites/antoinegara/2015/05/15/10-wannabe-berkshire-hathaways-warren-buffett/

 

I was surprised to see that Gara got the Forbes cover story with his 'Baby Buffett' article on Ackman. His earlier piece on Biglari was a recitation of the issues raised by Groveland, both the fair and the unfair.

[stahleyp]

 

 

The idea someone as dedicated and hardworking and successful as Biglari will try to make money for himself without giving a damn for all other shareholders strikes me as both an insult to Biglari’s intelligence and one of the silliest reason a stock could fall so much as BH’s has fallen recently.

 

 

What has he done to prove otherwise?

[wescobrk]

http://www.forbes.com/sites/antoinegara/2015/05/15/10-wannabe-berkshire-hathaways-warren-buffett/

 

It's because of lazy thinking exhibited by the writer that makes some people rich on this board.

Jeez, this a guy employed by Forbes?

It reads like an article from a freshman college class.

Disagreeing with Biglari is one thing but some substance would be nice.

[Spekulatius]

Lazy thinking? BH has underperformed over 1 year, 2 years and 5 years versus the SPY as far as I can tell.

[wescobrk]

Hello Spekulatius,

 

Sardar took over at around $160 (excluding rights offerings) I think it shows in the proxy the math with the rights offerings.

Even if it did underperform over 1,3 and 5, that is a better argument than the article. The article states it is down 11% ytd and it has an operating loss. My contention was with the writer's argument. He only put ytd. I think the stock being down for 5 months is a poor argument. That is why I said it sounds like a college freshman class.

He was also too lazy to look up the performance numbers for John Malone's company.

Plus, operating loss? What? The gaap number for q1 operating  was $17 million. Where does he get operating loss?

Then he cites Buffett. I can assure you Buffett has underperformed the S&P for more than 5 months. I'm pretty sure he underperformed for a 5 year time frame from 69-74.

I like your argument a lot more than the writer.

Again, his reasons are an operating loss (that doesn't exist according to the recent q) and the stock is down 11% since May.

Not exactly robust analysis.

 

Here is the writer's comments unedited:

Biglari took control of burger chain Steak n Shake, helping to revive the company during the Great Recession. However, performance has fallen by the wayside as he’s tried to build a conglomerate. In May, Biglari Holdings reported it second consecutive operating loss and its shares are off 11% year-to-date – with losses accelerating after the company narrowly won a bitter proxy fight. The only person making money off of Biglari is its CEO, who’s taken over $75 million in compensation in recent years, despite poor performance.

[wescobrk]

Please don't misunderstand, I'm not saying he is Buffett, no one is.

Nor will anyone ever be.

The other people he cites in his article have done well but they can't carry Buffett's jockstrap.

The man took a dying bankrupt textile firm from a market cap I think around $10 million into $360 billion!

 

[giofranchi]

 

 

The idea someone as dedicated and hardworking and successful as Biglari will try to make money for himself without giving a damn for all other shareholders strikes me as both an insult to Biglari’s intelligence and one of the silliest reason a stock could fall so much as BH’s has fallen recently.

 

 

What has he done to prove otherwise?

 

Paul,

I can only say that to be a BH shareholder is not easy. It requires that you come to your own conclusions about what's rational and what's not. For many reasons it is a unique company, therefore not many truly meaningful examples to refer to out there!

 

My advice: if you have the time and the inclination, study BH business results closely, and ask yourself if such successes could be achieved by anyone who is not supremely rational.

 

Cheers,

 

Gio

[giofranchi]

Please don't misunderstand, I'm not saying he is Buffett, no one is.

Nor will anyone ever be.

The other people he cites in his article have done well but they can't carry Buffett's jockstrap.

The man took a dying bankrupt textile firm from a market cap I think around $10 million into $360 billion!

 

Who said that?!

What about the founder of Facebook? Or the founders of Google? Even Bill Ackman for what I know at 48 is richer than Buffett at the same age...

 

This is not to say they will become richer than Buffett... Just to say that "no one will ever be like Buffett" is not carved in stone! ;)

 

Cheers,

 

Gio

[wescobrk]

Please don't misunderstand, I'm not saying he is Buffett, no one is.

Nor will anyone ever be.

The other people he cites in his article have done well but they can't carry Buffett's jockstrap.

The man took a dying bankrupt textile firm from a market cap I think around $10 million into $360 billion!

 

Who said that?!

What about the founder of Facebook? Or the founders of Google? Even Bill Ackman for what I know at 48 is richer than Buffett at the same age...

 

This is not to say they will become richer than Buffett... Just to say that "no one will ever be like Buffett" is not carved in stone! ;)

 

Cheers,

 

Gio

 

Hello Gio,

 

I wasn't very clear in my writing. Thanks for questioning me on it.

I didn't mean from the standpoint of accumulating wealth. Gates has been kicking Warren's ass for twenty years on that. I also don't mean it from the standpoint of a start-up and timing the next technological wave like a Gates or the Google's founders, my sentiment was from pure capital allocation, I don't think we'll ever see another Buffett.

His 73 year track record, that's right, not the 50 year, he started at 11, I don't think can be duplicated.

Again, he never invented anything or disrupted an industry, it was just extremely focused and disciplined.

There is also a time bias it may or may not be easier in the future.

Greenblatt, Ackman, Soros, you can go on and on, their rates of return were impressive for many years but a 70 year track record?

Rockafeller Sr was the richest man ever (share of gdp), I'm not sure the government (at least in the west) will allow another Rockafeller Sr type of wealth, and sure there will be plenty of mega-billionaires in the future, but if you take the durability and his performance, especially at gigantic sums, Ackman and all these other guys give capital back, Buffett has kept it and hasn't distributed it back.

It's enormously easier to compound when you give a large amount of capital back like a lot of hedge fund managers.

Finally, the man quit taking carried interest in 1968!

Another man with a 75 year track record, and more than half of it without carried interest, and without distributing back and therefore his universe got smaller every year?

I'll be dead before someone that can eclipse that.

Your point is taken to never say never, if someone told me in 1962 (when he first started buying) some kid from Omaha would take a near dead textile firm and turn it into $360 billion with a terribly inefficient tax code, I would have thought the guy was on some serious drugs!

[tombgrt]

Buffett hasn't given back any capital? What about the $15 billion he has given to the Gates Foundation? That's $15b at market valuation at time of donation so easily $20b+ now. He would be the richest man in the world if he didn't donate anything until now.

This doesn't matter for his compounding of capital since his vehicle, Berkshire Hathaway, doesn't shrink in size. The beauty is that his donation will continue to grow in value even after he passes away. Also, giving away shares by reducing given shares by 5% annually is very smart.Would definitely do this as well later when I have enough means.

 

And yes, comparing Gates and Zuckerberg to Buffett isn't correct. Apples and oranges. At least compare Buffett to pur sang investors and capital allocators to make it fair. There will always be some hotshot that gets rich quicker, doesn't automatically mean they are better. Also, Buffett could have maybe ran a hedge fund aside from BRK, reinvest his 2&20 in BRK again and be A LOT richer today, but what's the point? In the end, after securing livelong wealth, he was in it purely for the game. Could have paid him in bananas if that was the universal standard of success.

 

 

[APG12]

 

 

The idea someone as dedicated and hardworking and successful as Biglari will try to make money for himself without giving a damn for all other shareholders strikes me as both an insult to Biglari’s intelligence and one of the silliest reason a stock could fall so much as BH’s has fallen recently.

 

 

What has he done to prove otherwise?

 

1.) He doesn't get paid unless value is created for the company. Compensation is also based off of book value at the holding co.

2.) Franchising efforts have created losses that have reduced his compensation in exchange for potential future gains for the company.

3.) Maxim purchase for the same reason as franchising.

4.) Rights offerings have been structured to allow shareholders to sell their rights, in other words, exempting shareholders from the pay or lose nature of other rights offerings.

5.) No options issuance.

 

[merkhet]

I'm sure I've said this before, but I suppose it bears repeating.

 

Does anyone on either side really think they're going to be able to convince the folks on the other side that they're wrong in evaluating the integrity of Sardar Biglari? i.e. "Yes, you're correct [Poster532]. I see now that my prior commitment and consistency bias from repeatedly defending my position was a mistake. Thank you for convincing me with your cold hard logic."

 

We're all (nominally) value investors here. What would you judge the probability of the above to be?

[APG12]

I'm sure I've said this before, but I suppose it bears repeating.

 

Does anyone on either side really think they're going to be able to convince the folks on the other side that they're wrong in evaluating the integrity of Sardar Biglari? i.e. "Yes, you're correct [Poster532]. I see now that my prior commitment and consistency bias from repeatedly defending my position was a mistake. Thank you for convincing me with your cold hard logic."

 

We're all (nominally) value investors here. What would you judge the probability of the above to be?

 

I've never seen someone change their mind on BH. Opinions about Biglari are rooted in very fundamental issues like morality and character. No one changes their mind about such things easily and without considerable thought. That doesn't mean there's not value in discussing the company. If stahleyp's question causes someone to think about their investment (or non-investment) from a new angle, or to consider factors not previously considered, value has been added. Anyone arguing about anything, let along fundamental issues, on the internet to change minds is likely to be disappointed.

[wescobrk]

Buffett hasn't given back any capital? What about the $15 billion he has given to the Gates Foundation? That's $15b at market valuation at time of donation so easily $20b+ now. He would be the richest man in the world if he didn't donate anything until now.

This doesn't matter for his compounding of capital since his vehicle, Berkshire Hathaway, doesn't shrink in size. The beauty is that his donation will continue to grow in value even after he passes away. Also, giving away shares by reducing given shares by 5% annually is very smart.Would definitely do this as well later when I have enough means.

 

And yes, comparing Gates and Zuckerberg to Buffett isn't correct. Apples and oranges. At least compare Buffett to pur sang investors and capital allocators to make it fair. There will always be some hotshot that gets rich quicker, doesn't automatically mean they are better. Also, Buffett could have maybe ran a hedge fund aside from BRK, reinvest his 2&20 in BRK again and be A LOT richer today, but what's the point? In the end, after securing livelong wealth, he was in it purely for the game. Could have paid him in bananas if that was the universal standard of success.

 

I just meant BRK is permanent capital. He isn't returning capital (regular dividends or one-offs)like most hedge funds after they have been successful, thus, his investing universe continues to get very small.

I applaud his many, many billion donation to Gates foundation and to his kids foundations.

[merkhet]

I'm sure I've said this before, but I suppose it bears repeating.

 

Does anyone on either side really think they're going to be able to convince the folks on the other side that they're wrong in evaluating the integrity of Sardar Biglari? i.e. "Yes, you're correct [Poster532]. I see now that my prior commitment and consistency bias from repeatedly defending my position was a mistake. Thank you for convincing me with your cold hard logic."

 

We're all (nominally) value investors here. What would you judge the probability of the above to be?

 

I've never seen someone change their mind on BH. Opinions about Biglari are rooted in very fundamental issues like morality and character. No one changes their mind about such things easily and without considerable thought. That doesn't mean there's not value in discussing the company. If stahleyp's question causes someone to think about their investment (or non-investment) from a new angle, or to consider factors not previously considered, value has been added. Anyone arguing about anything, let along fundamental issues, on the internet to change minds is likely to be disappointed.

 

Oh, I didn't mean to imply that arguing about things has no purpose. (Former lawyer here -- that would be sacrilege.) What I mean is that after the first, say, 30 pages, there doesn't seem to be much point. Perhaps the continued arguing will help the lazy reader who didn't already read the initial volleys. (Though there's also the moral hazard of incentivizing lazy readers.)

 

Some folks are arguing back and forth consistently with the implied objective of somehow changing the other person's mind. However, what it's actually doing is forcing the other person to ante up in their commitment and consistency bias by forcing them to defend their stance. That's not terribly useful in fulfilling the implied objective. There's a great chapter on this (Chapter Eight) in Think Like a Freak.

 

I'm not necessarily saying don't argue. I'm saying, maybe, argue differently.

[APG12]

Oh, I didn't mean to imply that arguing about things has no purpose. (Former lawyer here -- that would be sacrilege.)

 

Haha

 

What I mean is that after the first, say, 30 pages, there doesn't seem to be much point. Perhaps the continued arguing will help the lazy reader who didn't already read the initial volleys. (Though there's also the moral hazard of incentivizing lazy readers.)

 

Some folks are arguing back and forth consistently with the implied objective of somehow changing the other person's mind. However, what it's actually doing is forcing the other person to ante up in their commitment and consistency bias by forcing them to defend their stance. That's not terribly useful in fulfilling the implied objective. There's a great chapter on this (Chapter Eight) in Think Like a Freak.

 

I'm not necessarily saying don't argue. I'm saying, maybe, argue differently.

 

Ah, that makes sense.