BH - Biglari Holdings

[BTShine]

If the gap between market price of and intrinsic value closes for BH the analysis of his historical performance will look very different.  In my opinion ownership of BH will trounce the S&P if that gap closes. 

[NBL0303]

When a portfolio is as concentrated as TLF I's is, then there have to be enormous caveats added to the numbers both positively and negatively and a much longer time horizon is needed to make any assessments.  TLF's returns has been nearly entirely determined by BH's share price.  So that drove the 40% or whatever it was four years or so ago and it drove the negative returns the last few years.  So evaluating the fund is basically evaluating the short-term stock price for each of those years; and obviously there has been a ton of ink spilled on BH's performance.  The Lion Fund and Biglari the investor are so entwined with Biglari Holdings that investment performance will be necessarily determined by Biglari Holdings long-term performance.

[OracleofCarolina]

http://www.sec.gov/Archives/edgar/data/93859/000092189516003619/def14a07428007_03072016.htm

 

DEF 14a is out...at least we know why Biglari earned a 23k incentive fee

[ccplz]

I didn't make it past this line...

 

BH> The genesis of the current construction was inaugurated seven and one half years ago, when we took on a business at the edge of bankruptcy [...]

 

It's like reading a very bad high school paper.

 

[awindenberger]

http://www.sec.gov/Archives/edgar/data/93859/000092189516003619/def14a07428007_03072016.htm

 

DEF 14a is out...at least we know why Biglari earned a 23k incentive fee

 

I just read through it and didn't actually find anything about the $23k incentive fee. It only talked about his fees for the operating businesses, which were $0 this year.

[OracleofCarolina]

http://www.sec.gov/Archives/edgar/data/93859/000092189516003619/def14a07428007_03072016.htm

 

DEF 14a is out...at least we know why Biglari earned a 23k incentive fee

 

I just read through it and didn't actually find anything about the $23k incentive fee. It only talked about his fees for the operating businesses, which were $0 this year.

 

See Page 29

[awindenberger]

Thanks, I found it this time.

[coc]

I didn't make it past this line...

 

BH> The genesis of the current construction was inaugurated seven and one half years ago, when we took on a business at the edge of bankruptcy [...]

 

It's like reading a very bad high school paper.

 

Oh man, please keep going. There are so many bad ones.

 

Biglari Holdings can scale an agglomeration of operating companies because of its structure.

We are able to fuse disparate businesses under the command of an efficient holding company

because we centralize financial decision making but preferably seek to delegate operating authority at

the business unit level. Centralized control in capital allocation lies within the extreme, with my

being the sole capital deployer.

[Jurgis]

Careful guys. Mr. Big will kick your ass for disrespecting him.

[awindenberger]

I'm curious with all your guys trashing the letter:

 

Would you not agree that Biglari has created substantial value since taking over SNS in 2008?

 

Even in 2015, the Book Value of the company increased, but obviously the stock didn't. Biglari may be full of himself, but he's going to make investors money in the long run, especially those buying at these levels.

[TwoCitiesCapital]

I'm curious with all your guys trashing the letter:

 

Would you not agree that Biglari has created substantial value since taking over SNS in 2008?

 

Even in 2015, the Book Value of the company increased, but obviously the stock didn't. Biglari may be full of himself, but he's going to make investors money in the long run, especially those buying at these levels.

 

I don't think any is making the point that he hasn't created the value. The question is who will that value accrue to in future years: Biglari or shareholders.

 

 

[NBL0303]

Goodness gracious, that is not a question that is going to lead to an edifying discussion at this point.  The equivalent of that question in the political life is: I just don't understand why anyone would be a Republican or a Democrat.  Or I can't imagine why anyone would take Taylor Swift's/Kanye's side.

 

The topic of whether Biglari has created value and if he has or will create additional value in the future, who that value will accrue to, has been fleshed out over 200 plus pages here and, absent new developments, we are unlikely to unearth new ground on this.

[TwoCitiesCapital]

Goodness gracious, that is not a question that is going to lead to an edifying discussion at this point.  The equivalent of that question in the political life is: I just don't understand why anyone would be a Republican or a Democrat.  Or I can't imagine why anyone would take Taylor Swift's/Kanye's side.

 

The topic of whether Biglari has created value and if he has or will create additional value in the future, who that value will accrue to, has been fleshed out over 200 plus pages here and, absent new developments, we are unlikely to unearth new ground on this.

 

Of course - that's what this whole thread has been about, but he was the one asking the question hadn't Biglari created value with Steak N' Shake. My only point was to correct the framing of the question - who cares if he creates trillions in value if it all accumulates to him and not you? Wasn't trying to re-start the debate, simply pointing to the direction why no one really cares that he's created value with SNS.

[NBL0303]

Goodness gracious, that is not a question that is going to lead to an edifying discussion at this point.  The equivalent of that question in the political life is: I just don't understand why anyone would be a Republican or a Democrat.  Or I can't imagine why anyone would take Taylor Swift's/Kanye's side.

 

The topic of whether Biglari has created value and if he has or will create additional value in the future, who that value will accrue to, has been fleshed out over 200 plus pages here and, absent new developments, we are unlikely to unearth new ground on this.

 

Of course - that's what this whole thread has been about, but he was the one asking the question hadn't Biglari created value with Steak N' Shake. My only point was to correct the framing of the question - who cares if he creates trillions in value if it all accumulates to him and not you? Wasn't trying to re-start the debate, simply pointing to the direction why no one really cares that he's created value with SNS.

 

You are quite right - the comment about re-starting the debate was aimed at whoever who asked the, "Who created the universe?" question.

[awindenberger]

I guess there really is no point debating with someone on the other side of this discussion.

[NBL0303]

I guess there really is no point debating with someone on the other side of this discussion.

 

Exactly.  The points have been very well made, particularly by your excellent work, but I think at this point they've been fully litigated.

[Picasso]

I'm curious with all your guys trashing the letter:

 

Would you not agree that Biglari has created substantial value since taking over SNS in 2008?

 

Even in 2015, the Book Value of the company increased, but obviously the stock didn't. Biglari may be full of himself, but he's going to make investors money in the long run, especially those buying at these levels.

 

I don't know... I think that Biglari is a phony and takes advantage of investors looking for the next Buffett. 

 

Say what you will about cultural biases, but I have dealt with a lot of Iranians and I can tell you that they generally only take care of themslves. Their words mean nothing and they look for small loopholes to screw you. That's been 99% of any situation where I decided to break my rule and work with an Iranian. It is what it is, that's just how a lot of them operate. Just looking at what Mr. Big has written and acted, he's clearly in that bunch for me.  If you want to get your panties in a bunch about this "racism" I urge you to work with a bunch of Iranian "businessman." Come back to me in 5 years and let me know how it goes...  That's the essence of investing in BH here. I don't even think his letter was serious. He basically just took out a Thesaurus to troll all the investors who think he means what he says. It was a big middle finger to the shareholders that lack any say in the matter.

 

This might work out but I don't see it being worth the hassle.  Between the fees and idiot CEO how the heck is this a market beating best idea?

 

Edit: by the way, I have nothing against Iranians in general.  It's actually kind of fun to hang out with them and watch them stab other people in the back.  Their food is awesome too.  But doing business with a dishonest one is a nearly fool proof way to lose your shirt. 

[CalvinL]

Talking about Iranian Businessman...

http://www.bbc.com/news/world-middle-east-35739377

 

None of us here have a closer understanding and tie with Biglari than Philip Cooley and the board. Going through background check of all board members and their businesses, I find it hard to believe that they would all join BH board if not for Biglari. Phil Cooley is a 72 year old retired finance professor, to join a half-his-age crook student's business to scam shareholders money? This board requires them to all own shares of BH over time, and in no small amount. Biglari made sure that their incentives are aligned like all shareholders.

 

The fact that he is still sending out a letter with some apparent dictionary work shows that he cares. (or to show off vocabulary knowledge like keen ESL students) He could have totally cancelled the annual meeting this year, or cut it to half an hour, without sending a letter out. That would be another blow to the stock price and allow him to buy back BH shares at a much lower price, or a lowball takeover bid. When I found that blank letter from the website midnight Feb 19th, that thought came to my mind... >:(

 

I have my doubt too and the jury is still out, until we see actual shareholder friendly movements. Now that he has complete control of the company, we'll soon see if Biglari a simply a phony or "will do all we can to make your journey a prosperous one." If it's somewhere in between, the stock is sold at a big "biglari discount" to value. Isn't this what value investing is about?

[BTShine]

The easiest and fastest way for SB to make a ton of money is to have the company use $50-$75 million in yearly cash flow to buy back stock. I think would put the stock up near $1,000/share and he would see a payday of $150 million or more.

 

 

[racemize]

The easiest and fastest way for SB to make a ton of money is to have the company use $50-$75 million in yearly cash flow to buy back stock. I think would put the stock up near $1,000/share and he would see a payday of $150 million or more.

 

Or he keeps making it look like it isn't making money and does a take under through the lion fund.

[BTShine]

Maybe I'm naive, but I don't think he's making the company look that unprofitable.  This assumes an investor reads the filings. Maybe I've too much faith in the system, but I think most 3rd parties or hired valuation specialists would agree with the clear value of CBRL and the value of SnS, making an extreme take under difficult. 

[awindenberger]

I actually think his current strategy is excellent for him and shareholders.

 

Every year, buy more undervalued BH shares in TLF. At some point those shares will go up as the value discount grows.

 

Biglari benefits as he will receive incentive reallocations based on BH share price growth, thereby increasing his personal ownership of BH over time.

 

Shareholders benefit due to the increase in value, but less so since 25% of any growth over 6% goes to Biglari.

 

However, keeping the shares active within TLF also gives Biglari more flexibility to sell the shares later on if they become overvalued, or exchange them directly for shares of other companies he believes are undervalued. Doing so would be beneficial to all, as it defers taxes that would otherwise be due on capital gains.

[CalvinL]

Maybe I'm naive, but I don't think he's making the company look that unprofitable.  This assumes an investor reads the filings. Maybe I've too much faith in the system, but I think most 3rd parties or hired valuation specialists would agree with the clear value of CBRL and the value of SnS, making an extreme take under difficult.

 

And even if he's out there just to screw all other shareholders, here's a few things to consider:

 

1. With a take under, that would cost at least another 300-500 million dollar of cash at today's price. How is he going to fund that alone? If he is looking for a partner, what is there for him to transfer control from all current shareholders to a major capital partner? Assuming an extreme phony with only self interest in mind? All the lawsuits that comes after would be enough of a headache for him. How about damages in reputation?

 

2. How about all other board members who are required to own shares and the other current partners in TLF?

 

It comes back to the question I posted here last year: Assuming Biglari is a smart and greedy corporate Villan, what is the worst thing that he could do to harm existing shareholders without harming himself?

 

A. Corporate jets and Maxim models expensed with BH money? Let's say thats 10MM a year?

 

B. A take under? I dont think he can pull out that much cash on the side.

 

C. Milking the company with the BH/TLF structure? He's already doing it and it's already clearly explained, thats 25% above 6% gain.

 

D. Accounting fraud? That's possible but I have yet to see any signs of it. BH reporting style is making things look worse than it is if anything.

 

All the answers I've seen so far was a black-and-white judgement of his character, and but whether his seemingly shareholder-unfriendly press and action would lead to shareholder losses - that's yet to be determined. I am only certain of its asset value, and it's worth a lot more than the market value.

[CalvinL]

However, keeping the shares active within TLF also gives Biglari more flexibility to sell the shares later on if they become overvalued, or exchange them directly for shares of other companies he believes are undervalued. Doing so would be beneficial to all, as it defers taxes that would otherwise be due on capital gains.

 

Thank you Awindenberger. Although I have no clue if that's in Biglari's mind, I can't help but think that he is learning that from Henry Singleton, and doing it in a tax-efficient way. Only time will tell.

 

I think Biglari would pay you to not point this one out, if that's indeed what he's intending to do.  ;)

[racemize]

Well, Dell managed to buy out his company and he didn't do it with his own money.  Certainly, some kind of leveraged buy out is a possibility, if he got a sufficient level of assets and control of the company.  In fact, couldn't we just see how he got himself to 50%?  He used BH money to buy it with the lion fund.  So, he can use 1) cash flow from operations; 2) continue to do rights offerings that give BH money, transfer it to Lion Fund, and repurchase there; and/or 3) bring in a new partner for The Lion Fund to do the purchase.  Combine all 4 of the above, and I imagine he can do it. 

 

Also, I would think anyone who he wants on his side (board members for example) would/could remain involved in the company after buyout as well.

 

So:

1) Possible funding discussed above.  I don't think he cares about reputation.  Easy to find someone else who also doesn't care.  If cost of ensuing lawsuits are less than what he's getting, then it is worth it.

 

2) Board members and/or partners in TLF would be part of the buy out (this is just getting rid of public shareholders)