Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: accutronman on August 13, 2011, 11:48:15 AM

Title: BH - Biglari Holdings
Post by: accutronman on August 13, 2011, 11:48:15 AM
Another good quarter for Sardar especially on realized investment gains.



Title: Re: BH - Biglari Holdings
Post by: CassiusKing1 on January 05, 2012, 10:52:10 AM
Looks like the franchising is finally coming into fruition and will make a impact.
Title: Re: BH - Biglari Holdings
Post by: racemize on January 05, 2012, 10:54:46 AM
Looks like the franchising is finally coming into fruition and will make a impact.

do you have a source or was there an announcement that I missed?
Title: Re: BH - Biglari Holdings
Post by: CassiusKing1 on January 05, 2012, 12:25:09 PM
Looks like the franchising is finally coming into fruition and will make a impact.

do you have a source or was there an announcement that I missed?
Just in reading Sardar's letter.  He stated that the first Signature store will open in NYC on the 12th.  They have commitments for another 110 units from franchisee's.
Title: Re: BH - Biglari Holdings
Post by: dcollon on April 10, 2012, 12:57:12 PM
Cracker Barrel Old Country Store, Inc. Adopts Shareholder Rights Plan with 20% Threshold and Qualifying Offer Exception
Tuesday, April 10, 2012 07:00:00 AM


The Board of Directors of Cracker Barrel Old Country Store, Inc., yesterday adopted a shareholder rights plan with a 20% triggering threshold and a qualifying offer exception and declared a dividend distribution of one preferred share purchase right on each outstanding share of Cracker Barrel common stock. The plan does not apply to all-cash, fully financed tender offers open for at least 60 business days and will terminate unless approved by shareholders at the company’s 2012 annual meeting.

Sandra B. Cochran, President and Chief Executive Officer of Cracker Barrel Old Country Store, Inc., stated, “The Board’s action is in response to Biglari Holdings’ continuing open-market acquisition program of Cracker Barrel shares, which has brought current ownership to over 16% and the resulting possibility that Biglari Holdings could accumulate an even more substantial and potentially controlling position in Cracker Barrel through market purchases that do not reflect a control premium offered to all shareholders. Biglari Holdings previously sought and received clearance in September 2011 under the Hart-Scott-Rodino Act to acquire up to 49.99% of Cracker Barrel's common stock. We intend to put this rights plan to a vote of our shareholders at our 2012 shareholder meeting and believe it is important to protect the interests of our shareholders in the near-term.

“Unlike the rights plan that Cracker Barrel adopted in September 2011 with a 10% triggering threshold, and which expired after Cracker Barrel shareholders voted against the plan at the 2011 annual meeting, this new rights plan has a 20% triggering threshold that is fully consistent with the guidelines of Institutional Shareholder Services and that we believe contains the attributes looked for by most leading institutional investors. The shareholder rights plan is designed to assure that all of Cracker Barrel’s shareholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against any attempt to gain control of Cracker Barrel without paying all shareholders a premium for that control.”

If a person or group acquires 20% or more of Cracker Barrel’s outstanding common stock, each right will entitle its holder (other than such person or members of such group) to purchase, for $200, a number of Cracker Barrel’s common shares having a market value of twice such price. In addition, at any time after a person or group acquires 20% or more of Cracker Barrel’s outstanding common stock (unless such person or group acquires 50% or more), Cracker Barrel’s Board of Directors may exchange one share of Cracker Barrel common stock for each outstanding right (other than rights owned by such person or group, which would have become void).

The rights would not interfere with all-cash, fully financed tender offers for all shares that remain open for a minimum of 60 business days (“qualifying offers”).

The rights plan is effective immediately and, if approved by shareholders, will expire on April 9, 2015. If shareholders do not approve the rights plan, it will expire upon certification of the vote at the 2012 annual shareholders’ meeting.

Prior to the acquisition by a person or group of beneficial ownership of 20% or more of the Company’s common stock, the rights are redeemable for one cent per right at the option of the Board of Directors.

Certain synthetic interests in securities created by derivative positions - whether or not such interests are considered to constitute beneficial ownership of the underlying common stock for reporting purposes under Regulation 13D of the Securities Exchange Act - are treated as beneficial ownership of the number of shares of the company’s common stock equivalent to the economic exposure created by the derivative position, to the extent actual shares of the company’s stock are directly or indirectly held by counterparties to the derivatives contracts. The dividend distribution will be made on April 20, 2012, payable to shareholders of record on that date, and is not taxable to Cracker Barrel shareholders.

Title: Re: BH - Biglari Holdings
Post by: augustabound on April 14, 2012, 04:03:56 PM
Found this kind of funny. 
https://twitter.com/#!/SardarBigliar

(To those who don't have Twitter, this isn't actually him, it's a phantom account.  Hence the "i" in the wrong spot in his last name.)  :D
Title: Re: BH - Biglari Holdings
Post by: stahleyp on April 14, 2012, 08:03:55 PM
When did he take over Steak n Shake?
Title: Re: BH - Biglari Holdings
Post by: dcollon on April 19, 2012, 04:02:57 AM
From 8-k:

On April 19, 2012, Biglari Holdings Inc. (the “Company”) will disclose at its 2012 Annual Meeting of Shareholders that same-store sales and customer traffic of its wholly-owned subsidiary, Steak n Shake Operations, Inc., increased by 4.8% and 5.2%, respectively, during the sixteen weeks ended April 11, 2012.
 
Title: Re: BH - Biglari Holdings
Post by: dcollon on April 19, 2012, 04:30:07 AM
And the letter (attached) from Sardar to CBRL
Title: Re: BH - Biglari Holdings
Post by: bargainman on April 19, 2012, 05:45:36 AM
And the letter (attached) from Sardar to CBRL

Interesting:

"We want shareholders who share our owner mentality to support us; only then can we be positioned to implement triumphant, value-maximizing ideas. I pledge in return that Biglari Holdings will not sell a single share of Cracker Barrel stock. If we should decide to do so — again, we have no such plans — we would first issue a press release to notify all shareholders quite far in advance (i.e., minimum of two weeks). In other words, we will not take advantage of you."
Title: Re: BH - Biglari Holdings
Post by: rmitz on April 19, 2012, 06:39:41 AM
[Interesting:

"We want shareholders who share our owner mentality to support us; only then can we be positioned to implement triumphant, value-maximizing ideas. I pledge in return that Biglari Holdings will not sell a single share of Cracker Barrel stock. If we should decide to do so — again, we have no such plans — we would first issue a press release to notify all shareholders quite far in advance (i.e., minimum of two weeks). In other words, we will not take advantage of you."

The fact that he had to say that says volumes, doesn't it?
Title: Re: BH - Biglari Holdings
Post by: Junto on April 19, 2012, 11:06:00 AM
[Interesting:

"We want shareholders who share our owner mentality to support us; only then can we be positioned to implement triumphant, value-maximizing ideas. I pledge in return that Biglari Holdings will not sell a single share of Cracker Barrel stock. If we should decide to do so — again, we have no such plans — we would first issue a press release to notify all shareholders quite far in advance (i.e., minimum of two weeks). In other words, we will not take advantage of you."

The fact that he had to say that says volumes, doesn't it?

Now you know he wants to take control similar to SNS. No debate after that letter. I find it is more profitable to be an investor in the target of Biglari than the BH itself. I have no skin in this game but been watching it develop. Fun reading either way.
Title: Re: BH - Biglari Holdings
Post by: dcollon on April 24, 2012, 03:46:55 AM
Was this Sardar and his family on the way home from the annual meeting?   ;) I couldn't resist.

"New Jersey removed two state troopers from active duty amid investigations into a high-speed caravan of Porsches, Lamborghinis and Ferraris led by police cruisers on the Garden State Parkway"

http://www.bloomberg.com/news/2012-04-24/n-j-suspends-two-state-troopers-amid-death-race-probes.html

Title: Re: BH - Biglari Holdings
Post by: bookie71 on August 11, 2012, 09:00:21 AM
latest quarter
http://finance.yahoo.com/news/biglari-holdings-inc-news-release-204000558.html
Title: Re: BH - Biglari Holdings
Post by: Kuhndan on August 16, 2012, 06:05:25 PM
Sardar is at it again, requesting two Board seats on Cracker Barrel's Board. Excerpt from todays SEC filing:

On August 16, 2012, BH delivered a letter to the Secretary of the Issuer nominating Sardar Biglari and Philip L. Cooley to stand for election to the Board of Directors of the Issuer (the “Board”) at its 2012 annual meeting of stockholders (the “2012 Annual Meeting”).  The Reporting Persons have had and will continue to have discussions with the Issuer about representation on the Board.  The Reporting Persons continue to believe that the Board requires directors who have a meaningful ownership interest in the Issuer as well as highly consequential industry experience.  The Reporting Persons are committed to seeking such representation for the benefit of all shareholders without the need for a costly proxy contest. As a consequence, the Reporting Persons have communicated to the Issuer’s CEO and recently designated Independent Chairman their desire for two Board seats, their interest to work constructively with the Board, and their interest in avoiding a costly proxy contest. The Reporting Persons are awaiting the Issuer’s response and maintain that all shareholders’ best interests lie in a favorable outcome.

My bet is that he gets his seats. He's always interesting to watch.
Title: Re: BH - Biglari Holdings
Post by: bargainman on August 16, 2012, 08:04:03 PM
Sardar is at it again, requesting two Board seats on Cracker Barrel's Board. Excerpt from todays SEC filing:

On August 16, 2012, BH delivered a letter to the Secretary of the Issuer nominating Sardar Biglari and Philip L. Cooley to stand for election to the Board of Directors of the Issuer (the “Board”) at its 2012 annual meeting of stockholders (the “2012 Annual Meeting”).  The Reporting Persons have had and will continue to have discussions with the Issuer about representation on the Board.  The Reporting Persons continue to believe that the Board requires directors who have a meaningful ownership interest in the Issuer as well as highly consequential industry experience.  The Reporting Persons are committed to seeking such representation for the benefit of all shareholders without the need for a costly proxy contest. As a consequence, the Reporting Persons have communicated to the Issuer’s CEO and recently designated Independent Chairman their desire for two Board seats, their interest to work constructively with the Board, and their interest in avoiding a costly proxy contest. The Reporting Persons are awaiting the Issuer’s response and maintain that all shareholders’ best interests lie in a favorable outcome.

My bet is that he gets his seats. He's always interesting to watch.

Yeah at this stage I don't think anyone believe Sardar when he says he wants to 'work constructively' with anyone...
Title: Biglari Holdings-He has said that wants to treat shareholders well
Post by: Greg on August 17, 2012, 05:20:54 PM
Don't you like Biglari? He has said that he wants to treat his shareholders well.
For example:

"We are here to make money with you, not off you"-Warren Buffett, 1996 letter to shareholders.

"Not only will I refuse extra remuneration for the time I intend to commit, but I also will not accept any stock options. The reason is simple:We are one of the largest shareholders; thus, we plan to make money with you, not off you."-Sardar Biglari, 2008 letter to Steak N Shake shareholders.
Title: Re: BH - Biglari Holdings
Post by: dcollon on October 08, 2012, 06:07:53 AM
New Letter to CBRL:

Biglari Holdings Sends Letter To Cracker Barrel's Board On Discovery Of Discrepancy In Professed Experience Of Designated Chairman James Bradford
Monday, October 08, 2012 08:15:00 AM


SAN ANTONIO, TX, Oct. 8, 2012 /PRNewswire/ -- Biglari Holdings Inc. (NYSE: BH) today sent the following letter to the Board of Directors of Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL) regarding public filings and statements made by Cracker Barrel, including Chief Executive Officer Sandra B. Cochran, that highlight designated Chairman James W. Bradford's former experience as CEO of a New York Stock Exchange-listed company: 

October 8, 2012

Board of Directors
Cracker Barrel Old Country Store, Inc.
305 Hartmann Drive
Lebanon, Tennessee 37087

Dear Board of Directors:

Cracker Barrel's proxy statement filed with the Securities and Exchange Commission in connection with the Company's 2012 annual shareholders' meeting contains the following statement regarding the qualifications of James W. Bradford, Cracker Barrel's designated Chairman of the Board:  "An experienced corporate executive, Mr. Bradford previously served ... from 1992 to 1999 as President and Chief Executive Officer of AFG Industries Inc., which during his tenure was North America's largest vertically integrated glass manufacturing and fabrication company and was traded on the New York Stock Exchange (the 'NYSE')."

This assertion was repeated to investors at the Wells Fargo Retail & Restaurants Conference on October 2, 2012 by Cracker Barrel's Chief Executive Officer, Sandra Cochran, who stated that "Jim Bradford, who was the former CEO of [a] New York Stock Exchange company, and he's now the Dean of the Business School at Vanderbilt...."

Then on October 4, 2012, Ms. Cochran wrote a letter to shareholders highlighting the changes to the Board by stressing the experience of the incoming Chairman: "[Michael Woodhouse] will be succeeded by Jim Bradford, a former NYSE company CEO...."

As the largest shareholder of the Company, owning approximately 17.3% of the outstanding shares, we felt it was important for us to understand Mr. Bradford's performance as a purportedly former CEO of a public company, in view of his recent appointment as the incoming Chairman of the Board, as well as Ms. Cochran's statements underlining his position as "a former NYSE company CEO." However, a public search reveals that Mr. Bradford has never been CEO of a New York Stock Exchange company. In fact, we found that AFG Industries in 1988 was taken private, four years before Mr. Bradford was appointed CEO. 

The Company has claimed that Mr. Bradford was CEO of a NYSE company by way of SEC disclosures and statements from Ms. Cochran. The question for shareholders is whether Mr. Bradford was indeed CEO of a NYSE-listed company. If the answer is negative, then misrepresentations have been made in SEC filings, investor presentations, and a letter to shareholders. If Mr. Bradford has embellished his professional record, we believe this undermines his credibility. Therefore, the Board must determine whether Mr. Bradford should continue in his present capacity. After all, it is Mr. Bradford's, Ms. Cochran's and the full Board's responsibility to ensure the accuracy of the Company's public filings and statements. A Board must exercise diligence and care; such a material inaccuracy would be a failure on the part of the Board of Directors, especially the Nominating and Corporate Governance Committee, reflecting poorly on the entire Board's governance process.

In its proxy statement, Cracker Barrel claims to have strict procedures and standards and to have engaged in "significant efforts" to identify qualified candidates for director. Echoing its Corporate Governance Guidelines, Cracker Barrel states in its proxy statement:

"The Nominating and Corporate Governance Committee assesses a candidate's independence, background and experience.... The Nominating and Corporate Governance Committee recommends appropriate candidates with the goal that the Board of Directors be comprised of qualified individuals.... Individual directors and any person nominated to serve as a director should possess the highest moral integrity and should generally have had significant managerial experience in the form of being a current or former senior executive of a publicly traded or privately held company or similar business experience or training."

We certainly understand why the Board, in the midst of a proxy contest, would be interested in highlighting an accomplishment of a director, especially an incoming Chairman, who would have led a NYSE-listed company in the capacity of CEO. Initially we had no reason to doubt the Board or Mr. Bradford. We assumed that the Nominating and Corporate Governance Committee would have conducted a thorough background check on the incoming Chairman. It is certainly the obligation of the full Board, including that of Ms. Cochran, to be fully versed about Mr. Bradford's professional accomplishments. Assuming Mr. Bradford was required to complete Cracker Barrel's 22-page, 33-question director-and-officer questionnaire that Phil Cooley and I were required to submit in connection with our nomination to the Board, we believe that, at the very least, his responses to questions 3 and 33 should have shed light on his experience at the public company. (Enclosed with this letter is Cracker Barrel's questionnaire, which is especially voluminous.)

Should our concerns about the accuracy of Mr. Bradford's experience prove correct, then shareholders should seriously question the level of diligence and oversight exercised by Cracker Barrel's Board of Directors in the vitally important vetting process for identifying qualified directors, including the one director possessing the essential character and experience to serve as Chairman of the Board.

We hope that the Board can provide shareholders with a satisfactory explanation. In order to do so, we call upon the Board to conduct immediately an independent investigation to understand whether Mr. Bradford misrepresented his prior position to the Board and thereby led Ms. Cochran to misrepresent Mr. Bradford's credentials to the public. The investigation should also determine whether the Company's Code of Business Conduct and Ethics has been violated. We believe shareholders have a basic right to know the facts, including the correct answers to the following questions:

Did Mr. Bradford mislead the Board regarding his past experience and qualifications to serve as a director of Cracker Barrel?
Did Mr. Bradford's misrepresentations lead Ms. Cochran to misinform investors of his credentials in her October 4, 2012 letter to shareholders as well as during her presentation at the Wells Fargo conference on October 2, 2012?
Why would CEO Sandra Cochran not be aware of the credentials of the Company's designated Chairman of the Board?
By including Mr. Bradford's inaccurate biography in its proxy statement, did any officers or directors of the Company violate its Code of Business Conduct and Ethics, which contains the following requirements:  "Directors, officers and employees who are involved in the process of preparing the periodic reports required by applicable securities laws and rules are responsible for ensuring that the disclosure in the Company's periodic reports is full, fair, accurate, timely and understandable....Knowingly making or maintaining false, misleading or incomplete entries, records or documentation is strictly prohibited."
A separate review should also be conducted to understand fully the process by which background checks and the vetting are conducted by the Nominating and Corporate Governance Committee, which bears responsibility for the accuracy of the credentials of Board members. Incidentally, Mr. Bradford is not only the designated Chairman of the Board, but also is the current Chairman of the Nominating and Corporate Governance Committee. 

We urge the Cracker Barrel Board to report the results of this investigation to shareholders in sufficient time for them to cast their votes for directors at the 2012 annual meeting. Shareholders have a fundamental right to know that the stewards of their investment have been chosen with great care and possess the requisite qualities of leadership.

Furthermore, this proxy contest should have been avoided, for, in our view, we bring shareholder representation of 17.3%, including a long-term perspective, relevant industry experience, yet no business or legal conflicts. Because we are independent, we would critically and objectively discuss business issues. Patently, as the Company's largest shareholder, we are interested in finding ways to advance shareholder value. Moreover, the current proxy contest is centered on Phil Cooley's and my holding two board seats out of ten; that is, we are neither asking nor seeking board control or ownership control of Cracker Barrel.

We await your immediate response.

Sincerely,

/s/ Sardar Biglari

Sardar Biglari
Title: Re: Biglari Holdings-He has said that wants to treat shareholders well
Post by: MYDemaray on October 08, 2012, 09:23:45 AM
Don't you like Biglari? He has said that he wants to treat his shareholders well.
For example:

"We are here to make money with you, not off you"-Warren Buffett, 1996 letter to shareholders.

"Not only will I refuse extra remuneration for the time I intend to commit, but I also will not accept any stock options. The reason is simple:We are one of the largest shareholders; thus, we plan to make money with you, not off you."-Sardar Biglari, 2008 letter to Steak N Shake shareholders.

Watch what he does, not what he says.  E.g., his proposal to take 25% of book value above a 5% hurdle.
Title: Re: BH - Biglari Holdings
Post by: dcollon on October 09, 2012, 12:19:48 PM
Cracker Barrel responds to letter from Sardar Biglari regarding experience of Chairman James Bradford
Tuesday, October 09, 2012 01:29:51 PM


In the 8-Oct letter, Biglari (BH) calls into question one aspect of Bradford’s credentials.
Bradford was appointed to the Cracker Barrel board in July 2011 and will become the independent Chairman of the board next month.
CBRL notes that Bradford did not represent to the Company’s Board that AFG was publicly traded during the time he served as CEO of that company.
However, the wording of the Company’s proxy statement and subsequent statements was presented in a manner that suggested the contrary.
The Company regrets any resulting misunderstanding.
The facts remain that Mr. Bradford was indeed the CEO of AFG Industries and AFG Industries was an NYSE-listed company while Mr. Bradford was the general counsel and prior to his assuming the role of CEO.
Title: Re: BH - Biglari Holdings
Post by: MYDemaray on October 09, 2012, 12:37:23 PM
Biglari (BH) calls into question one aspect of Bradford’s credentials.

Trying to be Dan Loeb...which he's not
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on October 09, 2012, 04:10:36 PM
http://finance.yahoo.com/news/biglari-holdings-responds-cracker-barrels-225800934.html

You guys are going to love Biglari's response....ah man, this guy cracks me up!
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on October 09, 2012, 04:23:56 PM
http://finance.yahoo.com/news/biglari-holdings-responds-cracker-barrels-225800934.html

You guys are going to love Biglari's response....ah man, this guy cracks me up!

But he raises good points. I mean, owning over 17% of a company's stock is a pretty good reason to get a board seat....
Title: Re: BH - Biglari Holdings
Post by: matts on October 09, 2012, 04:30:30 PM
I can't believe my first post on the board will be about this, but...

What a character. He might have some good points but that is no way to speak or conduct yourself in a professional manner while addressing a board of directors. Can you imagine Buffett ever speaking like this? I wouldn't invest with this guy no matter how much money makes. However, I am considering front-running his ridiculous attempts at gaining control of companies in the future. His ego is getting the best of him. Anyone know if he buys his stakes all in 1 shot or does he continue buying after the initial disclosure?
 
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 09, 2012, 04:33:48 PM
http://finance.yahoo.com/news/biglari-holdings-responds-cracker-barrels-225800934.html

You guys are going to love Biglari's response....ah man, this guy cracks me up!

But he raises good points. I mean, owning over 17% of a company's stock is a pretty good reason to get a board seat....

Yes, I would have to agree.  He does douchy things, but he's correct here.  They should have corrected the credentials, and he should get a board seat.  But the problem is...you give him one seat, and that's it...he's going to eventually whittle away the board and take over the company.  It'll be called "Cracker Biglari" shortly thereafter.   ;D  Cheers!
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on October 09, 2012, 05:01:55 PM
Sanjeev,

You're absolutely right..maybe we should buy the domain
www.crackerbiglari.com....lol
Title: Re: BH - Biglari Holdings
Post by: slkiel on October 09, 2012, 06:00:32 PM
I thought the letter was pretty standard fare for an activist. Nothing unusual. We shouldnt hold him to a Buffett standard. He's done a very good job as an activist so far. Yeah, he rubs people the wrong way, but I don't think he deserves criticism for this one.
Title: Re: BH - Biglari Holdings
Post by: MYDemaray on October 09, 2012, 06:04:24 PM

I can't believe my first post on the board will be about this, but...


haha -- welcome aboard
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 10, 2012, 03:28:56 AM
I don’t understand why you all are so hard and negative on Mr. Sardar Biglari. Personally, I think he is a very shrewd businessman. He has structured BH exactly the way I have structured my firm, sometimes I marvel because what he says and writes about BH applies so well to the way I also try to manage my firm! There is a difference, though: despite being just a little older than me, he has already amassed a lot of resources, was able to get control of a business much bigger and much more profitable than mine (fast food vs. civil engineering), and is able to acquire stakes in public companies large enough to make him the controlling shareholder! And good for him! Given the current environment, I like control value investing very much. If I could, I would do it too! It helps mitigate market risk very effectively. Ok, while trying to get control of something, you certainly may run the risk of looking unfriendly or not being very funny… But that’s simply how it works: have you ever thought that Mr. Carl Ichan is a friendly person?! I don’t think so. But is he a great investor? Of course! Mr. Sardar Biglari has already proven himself, is still very young, and I wish him to go on compounding capital at satisfying rates of return for a very long time.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on October 10, 2012, 07:37:44 AM
I don’t understand why you all are so hard and negative on Mr. Sardar Biglari. Personally, I think he is a very shrewd businessman. He has structured BH exactly the way I have structured my firm, sometimes I marvel because what he says and writes about BH applies so well to the way I also try to manage my firm! There is a difference, though: despite being just a little older than me, he has already amassed a lot of resources, was able to get control of a business much bigger and much more profitable than mine (fast food vs. civil engineering), and is able to acquire stakes in public companies large enough to make him the controlling shareholder! And good for him! Given the current environment, I like control value investing very much. If I could, I would do it too! It helps mitigate market risk very effectively. Ok, while trying to get control of something, you certainly may run the risk of looking unfriendly or not being very funny… But that’s simply how it works: have you ever thought that Mr. Carl Ichan is a friendly person?! I don’t think so. But is he a great investor? Of course! Mr. Sardar Biglari has already proven himself, is still very young, and I wish him to go on compounding capital at satisfying rates of return for a very long time.

giofranchi

I think that the people that have issues with him, either didn't see or felt that they were misled about what would eventually happen with SNS. Then there was the whole name change thing... Personally, I see both sides of it, but tend to think about as you have outlined in regard to the whole matter.

My only gripe was that I thought he would be willing to work for close to free profit or not (he about was working for free for a while), which is why I sold my shares after the pay package went through. After that, my shares felt pretty close to fully valued, so I sold them and moved on to what I thoguth were greener pastures. Nothing personal though.
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on October 10, 2012, 07:43:14 AM
http://finance.yahoo.com/news/biglari-holdings-responds-cracker-barrels-225800934.html

You guys are going to love Biglari's response....ah man, this guy cracks me up!

But he raises good points. I mean, owning over 17% of a company's stock is a pretty good reason to get a board seat....

Yes, I would have to agree.  He does douchy things, but he's correct here.  They should have corrected the credentials, and he should get a board seat.  But the problem is...you give him one seat, and that's it...he's going to eventually whittle away the board and take over the company.  It'll be called "Cracker Biglari" shortly thereafter.   ;D  Cheers!

I actually laughed out loud at this. Thanks for that!

We should start an intrade market and game show for this. Call it "The Biglari Games" or something like that and have various cameras in the board rooms that he is going activist on. Then, have the confession booths like in all the reality shows. It would be entertaining, educational, and enriching.

Biglari would likely be an expensive bet- the guy is impressive and I don't think many would want to bet against him.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 10, 2012, 08:13:32 AM
After that, my shares felt pretty close to fully valued, so I sold them and moved on to what I thoguth were greener pastures. Nothing personal though.

The valuation of BH goes along the same line as the valuation of LRE. Mr. Biglari, just like Mr. Brindle, is compounding at 20% per annum. If he can go on outperforming, 1,3xBV is absolutely not a high price to pay. BRK was trading at 1,3xBV in the ‘70s, and it is almost trading at that level even today. So, a person, who had invested in BRK at 1,3xBV in the ’70, would have achieved a compounded annual return equal to the CAGR in BRK’s book value per share. The real question is: will Mr. Biglari go on outperforming for a very long time? Imo:
1) He has a proven track record,
2) He is still very young and is very driven,
3) BH’s capital is still relatively small,
4) Control value investing is the way to go,
5) Selling franchises of a fast food business is a wonderful way to keep generating cash.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: racemize on October 10, 2012, 08:40:19 AM
After that, my shares felt pretty close to fully valued, so I sold them and moved on to what I thoguth were greener pastures. Nothing personal though.

The valuation of BH goes along the same line as the valuation of LRE. Mr. Biglari, just like Mr. Brindle, is compounding at 20% per annum. If he can go on outperforming, 1,3xBV is absolutely not a high price to pay. BRK was trading at 1,3xBV in the ‘70s, and it is almost trading at that level even today. So, a person, who had invested in BRK at 1,3xBV in the ’70, would have achieved a compounded annual return equal to the CAGR in BRK’s book value per share. The real question is: will Mr. Biglari go on outperforming for a very long time? Imo:
1) He has a proven track record,
2) He is still very young and is very driven,
3) BH’s capital is still relatively small,
4) Control value investing is the way to go,
5) Selling franchises of a fast food business is a wonderful way to keep generating cash.

giofranchi

Seems like he'll have trouble compounding BVPS at 20% for shareholders if he's taking significant amounts of book though, right?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 10, 2012, 09:14:28 AM
Seems like he'll have trouble compounding BVPS at 20% for shareholders if he's taking significant amounts of book though, right?

Maybe… but if I look at page 4 of the most recent 10-q (Q3 2012), I find that total equity on July 6, 2011 was $275,206,000, while on July 4, 2012 it was $332,186,000, a $56,980,000 increase, which is 20,7% of total equity value on July 6, 2011. Pay for performance is fine with me! It is exactly what I do every day at my firm too. If and when increase in equity value falters, then it will be an entirely different situation. But my guess is, if that really comes to pass, it will be for entirely different reasons than Mr. Biglari’s compensation…

giofranchi
Title: Re: BH - Biglari Holdings
Post by: bargainman on October 10, 2012, 09:00:41 PM
First, the reason people are so visceral towards Biglari these days is because of expectations, and perceived betrayal (although that might be too strong a word).  It might interest you to know there was a time where, in addition to the sacred BRK and FFH sections on this message board, there was a, then named, Steak n Shake section!  Then Biglari could do no wrong!  But there were signs of course.  There were signs that he was opinionated and arrogant, that he would listen to no one but himself, that he, in his own words was 'supremely insensitive to criticism', or advice it would seem.  So the expectation then was that he was following in the steps of BRK, Buffet, Watsa, that he was going to get rich *with* the shareholders, not *off* the share holders.  He said he would not take any money from SNS shareholders, but then he did!  Not only that, he took a lot of money!  So the sense was that he betrayed those who thought he was the next coming of Buffet, and that's why some are so negative.  Personally I always saw the signs, and never bought into his 'next Buffet' persona.  He always seemed like a smart, ambitious, arrogant prick who would do things his way, everyone else be damned, but still with a keen understanding of business, investing and capital allocation well beyond his years.  As such I still own some BH and will hold until he reverse splits me out like he almost did a while back!  Oh yeah the reverse splits!  That was something else that pissed people off :-)

Anyway now that we're done with the history...  Remember his compensation package.. Last I remember he's paid 900K a year.  Also he takes 25% off the top of book value growth after the 6% hurdle.  So if he does increase book value by 20%, he gets 20-6=14* (0.25) = 3.5% of that book value into his wallet.  Meaning that the other shareholder(us) only gets 20-3.5% = 16.5% book value growth.  That's not bad, but still that's a pretty big headwind for the rest of us, and very different from investing in BRK when it was small since that would have been unencumbered by the headwind.  It sure takes a lot off of the present fair value calculation that's for sure...
Title: Re: BH - Biglari Holdings-A Major Issue With His Compensation Package
Post by: Greg on October 11, 2012, 01:01:28 AM
A major issue that I see here is that when the incentive compensation agreement was approved the stated book value of the company was about $250 million, I think that the economic value exceeded $650 million. The difference was appreciation of assets over decades, a lot of it because of inflation, not real appreciation.

This transferred very significant value from the existing shareholders to Biglari.

25% of the $400+ million difference is $100+ million. This is easy for Biglari to take even though had had nothing to do with that appreciation (inflation). He can get a lot of money even if he creates no value, even if he destroys value.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 11, 2012, 02:38:45 AM
First, the reason people are so visceral towards Biglari these days is because of expectations, and perceived betrayal (although that might be too strong a word).  It might interest you to know there was a time where, in addition to the sacred BRK and FFH sections on this message board, there was a, then named, Steak n Shake section!  Then Biglari could do no wrong!  But there were signs of course.  There were signs that he was opinionated and arrogant, that he would listen to no one but himself, that he, in his own words was 'supremely insensitive to criticism', or advice it would seem.  So the expectation then was that he was following in the steps of BRK, Buffet, Watsa, that he was going to get rich *with* the shareholders, not *off* the share holders.  He said he would not take any money from SNS shareholders, but then he did!  Not only that, he took a lot of money!  So the sense was that he betrayed those who thought he was the next coming of Buffet, and that's why some are so negative.  Personally I always saw the signs, and never bought into his 'next Buffet' persona.  He always seemed like a smart, ambitious, arrogant prick who would do things his way, everyone else be damned, but still with a keen understanding of business, investing and capital allocation well beyond his years.  As such I still own some BH and will hold until he reverse splits me out like he almost did a while back!  Oh yeah the reverse splits!  That was something else that pissed people off :-)

Anyway now that we're done with the history...  Remember his compensation package.. Last I remember he's paid 900K a year.  Also he takes 25% off the top of book value growth after the 6% hurdle.  So if he does increase book value by 20%, he gets 20-6=14* (0.25) = 3.5% of that book value into his wallet.  Meaning that the other shareholder(us) only gets 20-3.5% = 16.5% book value growth.  That's not bad, but still that's a pretty big headwind for the rest of us, and very different from investing in BRK when it was small since that would have been unencumbered by the headwind.  It sure takes a lot off of the present fair value calculation that's for sure...


bargainman,
I understand what you say, and basically I already knew that. Anyway, the truth is I couldn’t care less about the “next Buffett” persona. I know from the start that any person I decide to partner with has his or her strengths and his or her weaknesses. I am fine with that, no problem. Is Mr. Biglari opinionated and arrogant? Well, those are his weaknesses. The question is: given his strengths, can those weaknesses be tolerated? Or are they likely to significantly hinder future financial performance? In my experience, a lot of very successful businessmen are opinionated and arrogant… Mr. Biglari isn’t the first, and won’t certainly be the last! Luckily, I don’t have to live with them, I just have to do business with them, and make sure that they go on performing well. I’d rather rely on the opinionated and the arrogant, than on the superficial (see, for instance, the Cracker Barrel management) and the ignorant (look almost wherever you want in the business world…). Also the 'supremely insensitive to criticism' thing should be put into context: for instance, do you think Mr. Watsa could be able to invest the way he does, if he weren’t 'supremely insensitive to criticism'? 'Supremely insensitive to criticism' might mean that you have a strong reliance in your work and analysis and that you are able to back it with an iron will. And that is exactly what I look for in the people I decide to partner with.
Finally, on the compensation front, I admit I would have liked a 10% hurdle better than the actual 6% hurdle. But that is not a sufficient reason to dismiss a business that I understand and like, a very capable management, and a fair price. Because those three are the things we are all looking for, and they are not easy to find at all!

giofranchi
Title: Re: BH - Biglari Holdings-A Major Issue With His Compensation Package
Post by: giofranchi on October 11, 2012, 02:55:09 AM
He can get a lot of money even if he creates no value, even if he destroys value.

Greg,
if and when increase in equity value per share falters (Mr. Biglari won’t be able to go on creating value) for whatever reason, I will part ways with Mr. Biglari. I hope that moment will be as far in the future as possible!

giofranchi
Title: Re: BH - Biglari Holdings-A Major Issue With His Compensation Package
Post by: enoch01 on October 11, 2012, 06:05:19 AM
He can get a lot of money even if he creates no value, even if he destroys value.

Greg,
if and when increase in equity value per share falters (Mr. Biglari won’t be able to go on creating value) for whatever reason, I will part ways with Mr. Biglari. I hope that moment will be as far in the future as possible!

giofranchi

Do you believe you can project growth in book value per share reasonably better than other options in the universe of stocks, given that Biglari has a history of turning on his shareholders so egregiously?  I don't, which is why this would have to trade probably at a very large discount to book for me to be interested.
Title: Re: BH - Biglari Holdings
Post by: premfan on October 11, 2012, 07:38:09 AM
Bottom line is he was appointed the next coming of buffet. Due to copying buffet in website and letters. People fell for this including myself. He was using buffet's philosophy and celebrity status as a way of marketing himself. Anyone saying i'm doing a bufffet like partnership or writes a long letter preaching value investing. is trying to trigger trust by leveraging buffets success. Actions always louder than words. Results are the name of the game.
Title: Re: BH - Biglari Holdings
Post by: Kraven on October 11, 2012, 07:57:23 AM
I will say this for Biglari.  At the Berkshire meeting earlier this year I found myself standing next to him and he is a snappy dresser.  I don't know much about clothes, but even I could tell his suit was perfectly tailored and very expensive.  Additionally, as Warren Zevon said, "and his hair was perfect".
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 11, 2012, 09:55:47 AM
Also the 'supremely insensitive to criticism' thing should be put into context: for instance, do you think Mr. Watsa could be able to invest the way he does, if he weren’t 'supremely insensitive to criticism'? 'Supremely insensitive to criticism' might mean that you have a strong reliance in your work and analysis and that you are able to back it with an iron will. And that is exactly what I look for in the people I decide to partner with.

Oh, you've got it completely wrong here...completely!  Prem is absolutely adamant in his investment thesis and analysis...the ideas...but he is incredibly sensitive to criticism.  He deeply cares for his employees, shareholders, board of directors, associates, colleagues and even those who simply write to him.  In fact, it was because shareholders weren't getting adequate information during 2003, that he started reading the posts by shareholders here.  He takes alot of notice on things that are of particular interest to shareholders. 

He is lowest man on the totem pole in terms of compensation at Fairfax...whereas Biglari is by far the highest.  The bulk of Prem's compensation comes from dividends he receives just like any other shareholder.  He has no bonus plan, no stock options, no loans and has not changed the compensation structure since his salary increased about 8-9 years ago...or was it nearly a decade!  No executive has left Fairfax other than for retirement in the last decade.  Whereas how many people have fled Biglari Holdings?  The way you treat your team, your shareholders and the people around you has no immediate benefit...but it shows over the long-term in standing, reputation and loyalty.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 12, 2012, 12:53:31 AM
Also the 'supremely insensitive to criticism' thing should be put into context: for instance, do you think Mr. Watsa could be able to invest the way he does, if he weren’t 'supremely insensitive to criticism'? 'Supremely insensitive to criticism' might mean that you have a strong reliance in your work and analysis and that you are able to back it with an iron will. And that is exactly what I look for in the people I decide to partner with.

Oh, you've got it completely wrong here...completely!  Prem is absolutely adamant in his investment thesis and analysis...the ideas...but he is incredibly sensitive to criticism.  He deeply cares for his employees, shareholders, board of directors, associates, colleagues and even those who simply write to him.  In fact, it was because shareholders weren't getting adequate information during 2003, that he started reading the posts by shareholders here.  He takes alot of notice on things that are of particular interest to shareholders. 

He is lowest man on the totem pole in terms of compensation at Fairfax...whereas Biglari is by far the highest.  The bulk of Prem's compensation comes from dividends he receives just like any other shareholder.  He has no bonus plan, no stock options, no loans and has not changed the compensation structure since his salary increased about 8-9 years ago...or was it nearly a decade!  No executive has left Fairfax other than for retirement in the last decade.  Whereas how many people have fled Biglari Holdings?  The way you treat your team, your shareholders and the people around you has no immediate benefit...but it shows over the long-term in standing, reputation and loyalty.  Cheers!


Well, it is obvious that I have not expressed my thought properly… And for that I apologize! I had already said that Mr. Biglari has evident weaknesses: he clearly is opinionated and arrogant, and those weaknesses lead him to behave poorly with his employees, shareholders, board of directors, associates, colleagues, etc.. That is a big minus, no doubt about it! And I clearly know that Mr. Watsa is the exact opposite! As you have rightly pointed out. That’s why my firm has a huge position in FFH, and a small position in BH.
What I was trying to say, though, is a completely different thing. I was remarking that, after you have examined all the facts and you have reached some conclusions, you must posses the will to stick to your ideas, even if people don’t agree with you for a very long time, at least until new facts are brought to light, which disprove your thesis. That’s the meaning I gave to “insensitive”: not to be blind or deaf, but to show a strong will. That’s also why I made the comparison with Mr. Watsa: because Mr. Watsa possesses one of the strongest will I know of!
I really hope now I have clarified what I meant.

Regarding Mr. Biglari, I know that the way he treats his team and shareholders will have a negative impact on BH financial results. But he looks to me like a hedge fund manager with a lot of his savings in the fund: as of last July 4, 2012, Mr. Biglari personally owned 10,073 shares (and he keeps on buying), while the Lion Fund owned 98,339 shares. So I just don’t see how it could be possible that he doesn’t really care to maximize value per share… Maybe, his weaknesses will prevent him from maximizing value per share as much as he could have, given his capabilities as a businessman and investor. But, to say that he will on purpose fail to maximize value per share, seems an exaggeration to me! I tend to think of it this way: BH has the potential to be an outstanding business: it has permanent capital, it controls a very dependable business that generates a lot of new cash, and it has the capabilities to invest wherever it makes the most sense. Whereas, “to thrive at the expense of shareholders” is notoriously a poor business: it almost always ends badly. Why should Mr. Biglari, who by the way is a significant shareholder and is increasing his stake in the company, choose the second alternative? BH is a much better business than a hedge fund, even a successful one: just because Mr. Biglari pretends to be remunerated like a hedge fund manager, does it mean that BH can not be a worthwhile investment?

Parsad, I am just asking. Maybe you have known Mr. Biglari personally for a long time, and you know many things that I ignore. So, your opinion will be greatly appreciated!

Thank you,

giofranchi
Title: Re: BH - Biglari Holdings
Post by: twacowfca on October 12, 2012, 01:30:26 AM
Also the 'supremely insensitive to criticism' thing should be put into context: for instance, do you think Mr. Watsa could be able to invest the way he does, if he weren’t 'supremely insensitive to criticism'? 'Supremely insensitive to criticism' might mean that you have a strong reliance in your work and analysis and that you are able to back it with an iron will. And that is exactly what I look for in the people I decide to partner with.

Oh, you've got it completely wrong here...completely!  Prem is absolutely adamant in his investment thesis and analysis...the ideas...but he is incredibly sensitive to criticism.  He deeply cares for his employees, shareholders, board of directors, associates, colleagues and even those who simply write to him.  In fact, it was because shareholders weren't getting adequate information during 2003, that he started reading the posts by shareholders here.  He takes alot of notice on things that are of particular interest to shareholders. 

He is lowest man on the totem pole in terms of compensation at Fairfax...whereas Biglari is by far the highest.  The bulk of Prem's compensation comes from dividends he receives just like any other shareholder.  He has no bonus plan, no stock options, no loans and has not changed the compensation structure since his salary increased about 8-9 years ago...or was it nearly a decade!  No executive has left Fairfax other than for retirement in the last decade.  Whereas how many people have fled Biglari Holdings?  The way you treat your team, your shareholders and the people around you has no immediate benefit...but it shows over the long-term in standing, reputation and loyalty.  Cheers!


Well, it is obvious that I have not expressed my thought properly… And for that I apologize! I had already said that Mr. Biglari has evident weaknesses: he clearly is opinionated and arrogant, and those weaknesses lead him to behave poorly with his employees, shareholders, board of directors, associates, colleagues, etc.. That is a big minus, no doubt about it! And I clearly know that Mr. Watsa is the exact opposite! As you have rightly pointed out. That’s why my firm has a huge position in FFH, and a small position in BH.
What I was trying to say, though, is a completely different thing. I was remarking that, after you have examined all the facts and you have reached some conclusions, you must posses the will to stick to your ideas, even if people don’t agree with you for a very long time, at least until new facts are brought to light, which disprove your thesis. That’s the meaning I gave to “insensitive”: not to be blind or deaf, but to show a strong will. That’s also why I made the comparison with Mr. Watsa: because Mr. Watsa possesses one of the strongest will I know of!
I really hope now I have clarified what I meant.

Regarding Mr. Biglari, I know that the way he treats his team and shareholders will have a negative impact on BH financial results. But he looks to me like a hedge fund manager with a lot of his savings in the fund: as of last July 4, 2012, Mr. Biglari personally owned 10,073 shares (and he keeps on buying), while the Lion Fund owned 98,339 shares. So I just don’t see how it could be possible that he doesn’t really care to maximize value per share… Maybe, his weaknesses will prevent him from maximizing value per share as much as he could have, given his capabilities as a businessman and investor. But, to say that he will on purpose fail to maximize value per share, seems an exaggeration to me! I tend to think of it this way: BH has the potential to be an outstanding business: it has permanent capital, it controls a very dependable business that generates a lot of new cash, and it has the capabilities to invest wherever it makes the most sense. Whereas, “to thrive at the expense of shareholders” is notoriously a poor business: it almost always ends badly. Why should Mr. Biglari, who by the way is a significant shareholder and is increasing his stake in the company, choose the second alternative? BH is a much better business than a hedge fund, even a successful one: just because Mr. Biglari pretends to be remunerated like a hedge fund manager, does it mean that BH can not be a worthwhile investment?

Parsad, I am just asking. Maybe you have known Mr. Biglari personally for a long time, and you know many things that I ignore. So, your opinion will be greatly appreciated!

Thank you,

giofranchi


I agree with Sanjeev on this one.  Many on the board used to be enthusiasts for Mr Big.  I was not one for reasons I had a hard time expressing at the time other than a strong impression that he wasn't someone I would like to partner with.  Then he overreached Big time at the expense of his junior partners on this board and his other stockholders.

Laura Rittenhouse has written a number of books on Buffett style management, including one titled, Do Business With People You Trust.  She shows how to analyze communications to spot phonies, and she has found a very high correlation of high future returns for companies whose CEOs communicate with their shareholders in an honest, trustworthy way.  Buffett, Watsa, and Brindle meet her test as controlling CEO shareholders.  Many other CEOs don't.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 12, 2012, 02:10:35 AM
Laura Rittenhouse has written a number of books on Buffett style management, including one titled, Do Business With People You Trust.  She shows how to analyze communications to spot phonies, and she has found a very high correlation of high future returns for companies whose CEOs communicate with their shareholders in an honest, trustworthy way.  Buffett, Watsa, and Brindle meet her test as controlling CEO shareholders.  Many other CEOs don't.


I have read “Do Business With People You Trust”. I liked it and I agree. The problem here, though, is not how Mr. Biglari communicates. Imo, he communicates very well, he is very exhaustive in his letters, and expresses his thoughts with much clarity. The problem is he is not believed… “Pay attention to what he does, not what he says!” is the most frequent warning. I guess people think he is just plain dishonest. And I just have a hard time to accept that a person, who could manage and grow a very good business for a very long time, and who has a lot of skin in the game, is so “stupid” to behave dishonestly.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: bookie71 on October 12, 2012, 09:08:01 AM
There is a reason someone gave him the nickname of "Biglier"
Title: Re: BH - Biglari Holdings
Post by: twacowfca on October 12, 2012, 10:00:16 AM
Laura Rittenhouse has written a number of books on Buffett style management, including one titled, Do Business With People You Trust.  She shows how to analyze communications to spot phonies, and she has found a very high correlation of high future returns for companies whose CEOs communicate with their shareholders in an honest, trustworthy way.  Buffett, Watsa, and Brindle meet her test as controlling CEO shareholders.  Many other CEOs don't.


I have read “Do Business With People You Trust”. I liked it and I agree. The problem here, though, is not how Mr. Biglari communicates. Imo, he communicates very well, he is very exhaustive in his letters, and expresses his thoughts with much clarity. The problem is he is not believed… “Pay attention to what he does, not what he says!” is the most frequent warning. I guess people think he is just plain dishonest. And I just have a hard time to accept that a person, who could manage and grow a very good business for a very long time, and who has a lot of skin in the game, is so “stupid” to behave dishonestly.

giofranchi

I think the disconnect between what he says and what he does arose as he presented himself as modeling his future path after people like Buffett and  Watsa, treating the other shareholders as equal partners.  Then, when he got control of the Board, he forced a big change in the way he would be compensated that was extreme and very different from the vision of a an equal partnership that he had preached.

This is not exactly the focus Laura has on communications, but it cuts to the heart of perceived deception  which is what she seeks to uncover in a different way.  The reality is evident, his operations are not perceived to be like the fair and friendly way of  Buffett and Watsa, his supposed models.
Title: Re: BH - Biglari Holdings
Post by: premfan on October 12, 2012, 10:18:27 AM
The question is would you invest in biglari holdings if he didnt write exhaustive letters and preach value investing? If you take that out and look at the actions and valuation is this a business you would want to be partners in?  Any small business or large business owner knows marketing and innovation are the two drivers of business growth. Biglari is a MASTER marketer. He has marketed himself as the second coming via the website presentation, long letters, and reverse stock split. This was all premediated  hes an absolute genius using buffets cult status to trigger trust. Absolutely brillant marketing tactic.  The proof is that  buffet is a great businessman able to attract groups together to achieve a common goal. Biglari is a bully activist that forces his way on boards and enforces his will. He will never attract enough partners to grow a mini berkshire cause his repupation is ruined.  You need goodwill and trust to grow a business.  He has no goodwill and us living in the information age his actions will not be forgotten.  He is alone with his minion cooley and logical busineessman will not partner with him period. For him to be successful he has to use all his energy to bully companies to give in. This might work for awhile but omg his isnt a sustainable business plan. 
Title: Re: BH - Biglari Holdings
Post by: bookie71 on October 12, 2012, 01:07:36 PM
I hope you folks who invest with him make tons of money, but not me, I like to sleep at night.
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 12, 2012, 06:03:57 PM
Parsad, I am just asking. Maybe you have known Mr. Biglari personally for a long time, and you know many things that I ignore. So, your opinion will be greatly appreciated!

He is determined, driven, intelligent and poised. 

That being said, I would not be surprised to see him accidentally blow up Biglari Holdings by going "all in" into one investment and it goes bad.  With Cracker Barrel, he borrowed against Steak'n Shake to invest almost everything into this one investment.  Leverage cuts both ways. 

I was also immensely disappointed with the contradictions in his statements and actions when it came to compensation...the name change give it away, and that's when we started selling our stock and we also wrote a letter to the board of directors.  The compensation change was the final straw for us, and we sold the rest of our stock after that. 

We won't invest with him, but if he ever does blow it up, I'm more than happy to invest in Steak'n Shake.   ;D  Cheers! 
Title: Re: BH - Biglari Holdings
Post by: shalab on October 12, 2012, 06:32:49 PM
Looks like he is going to issue new shares, from the Oct 5th proxy:

The Board has unanimously approved and recommends to the shareholders the adoption of an amendment to Article V of our Amended and Restated Articles of Incorporation (the “Amendment”).  The Amendment would (a) increase the total number of shares of all classes of stock that we are authorized to issue from the current 12,500,000 shares to 60,000,000, (b) redesignate the existing Common Stock as Class A Common Stock and reduce the authorized number of shares of the redesignated Class A Common Stock from 2,500,000 to 2,000,000, and (c) approve the issuance of 48,000,000 shares of a new Class B Common Stock, each share of which would have economic rights equivalent to one-fifth (1/5th) of a share of Class A Common Stock, and would have one-one-hundredth (1/100th) of the vote of a share of Class A Common Stock.


Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 13, 2012, 03:13:14 AM
Looks like he is going to issue new shares, from the Oct 5th proxy:

The Board has unanimously approved and recommends to the shareholders the adoption of an amendment to Article V of our Amended and Restated Articles of Incorporation (the “Amendment”).  The Amendment would (a) increase the total number of shares of all classes of stock that we are authorized to issue from the current 12,500,000 shares to 60,000,000, (b) redesignate the existing Common Stock as Class A Common Stock and reduce the authorized number of shares of the redesignated Class A Common Stock from 2,500,000 to 2,000,000, and (c) approve the issuance of 48,000,000 shares of a new Class B Common Stock, each share of which would have economic rights equivalent to one-fifth (1/5th) of a share of Class A Common Stock, and would have one-one-hundredth (1/100th) of the vote of a share of Class A Common Stock.


For the purpose of creating an initial, timely supply of Class B shares, we currently intend to issue the Class B shares through a pro rata dividend on the Class A shares at a rate of ten (10) Class B shares for each Class A share outstanding. Shareholders should note that the proposed issuance of Class B shares in the form of a stock dividend will not mean that a shareholder of the Company will be diluted, nor will his or her voting power be minimized.
Page 3 of PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 2, 2012

I have read all your objections, and they are well thought and expressed, still I just don’t see the difference between what Mr. Biglari is doing and, for instance, what Mr. Loeb is doing at Third Point and what Mr. Ackman is doing at Pershing Square. Or what Mr. Ichan has done for the last 40 years. Is Mr. Loeb an activist? Yes. Does Mr. Loeb operate on a value basis? Yes. Is he willing to bet big on a single idea? Well, to be an activist investor you are compelled to do so (YHOO). Is Mr. Loeb friendly and fair? Hardly… Ask Yahoo’s management (actually, ex-management!). Is Mr. Loeb very well remunerated? Yes. Has Mr. Loeb achieved great results since inception in 1996? Of course. Exactly the same could be said regarding Mr. Ackman. And what about Mr. Ichan? Though I cannot claim to have studied Mr. Ichan’s career in depth, I am sure he is one of the greatest american investors, he has always pushed for changes within companies that were destroying value, and, because of that, he has never been associated with the word ‘friendly’. Furthermore, Ichan Enterprises is very much concentrated in just a handful of big ideas (9).

So, just one more question, if you please, then I won’t bother you anymore! I promise! ;D
Do this board generally thinks poorly about activists?

Thank you,

giofranchi
Title: Re: BH - Biglari Holdings
Post by: bookie71 on October 13, 2012, 09:03:12 AM
Give me your money and I will give you a token vote (1/100) that doesn't count.
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 13, 2012, 11:45:10 AM
Looks like he is going to issue new shares, from the Oct 5th proxy:

The Board has unanimously approved and recommends to the shareholders the adoption of an amendment to Article V of our Amended and Restated Articles of Incorporation (the “Amendment”).  The Amendment would (a) increase the total number of shares of all classes of stock that we are authorized to issue from the current 12,500,000 shares to 60,000,000, (b) redesignate the existing Common Stock as Class A Common Stock and reduce the authorized number of shares of the redesignated Class A Common Stock from 2,500,000 to 2,000,000, and (c) approve the issuance of 48,000,000 shares of a new Class B Common Stock, each share of which would have economic rights equivalent to one-fifth (1/5th) of a share of Class A Common Stock, and would have one-one-hundredth (1/100th) of the vote of a share of Class A Common Stock.


Pphhhtttt!  LOL!

Looks like he is going to issue new shares, from the Oct 5th proxy:

The Board has unanimously approved and recommends to the shareholders the adoption of an amendment to Article V of our Amended and Restated Articles of Incorporation (the “Amendment”).  The Amendment would (a) increase the total number of shares of all classes of stock that we are authorized to issue from the current 12,500,000 shares to 60,000,000, (b) redesignate the existing Common Stock as Class A Common Stock and reduce the authorized number of shares of the redesignated Class A Common Stock from 2,500,000 to 2,000,000, and (c) approve the issuance of 48,000,000 shares of a new Class B Common Stock, each share of which would have economic rights equivalent to one-fifth (1/5th) of a share of Class A Common Stock, and would have one-one-hundredth (1/100th) of the vote of a share of Class A Common Stock.


For the purpose of creating an initial, timely supply of Class B shares, we currently intend to issue the Class B shares through a pro rata dividend on the Class A shares at a rate of ten (10) Class B shares for each Class A share outstanding. Shareholders should note that the proposed issuance of Class B shares in the form of a stock dividend will not mean that a shareholder of the Company will be diluted, nor will his or her voting power be minimized.
Page 3 of PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 2, 2012

I have read all your objections, and they are well thought and expressed, still I just don’t see the difference between what Mr. Biglari is doing and, for instance, what Mr. Loeb is doing at Third Point and what Mr. Ackman is doing at Pershing Square. Or what Mr. Ichan has done for the last 40 years. Is Mr. Loeb an activist? Yes. Does Mr. Loeb operate on a value basis? Yes. Is he willing to bet big on a single idea? Well, to be an activist investor you are compelled to do so (YHOO). Is Mr. Loeb friendly and fair? Hardly… Ask Yahoo’s management (actually, ex-management!). Is Mr. Loeb very well remunerated? Yes. Has Mr. Loeb achieved great results since inception in 1996? Of course. Exactly the same could be said regarding Mr. Ackman. And what about Mr. Ichan? Though I cannot claim to have studied Mr. Ichan’s career in depth, I am sure he is one of the greatest american investors, he has always pushed for changes within companies that were destroying value, and, because of that, he has never been associated with the word ‘friendly’. Furthermore, Ichan Enterprises is very much concentrated in just a handful of big ideas (9).

So, just one more question, if you please, then I won’t bother you anymore! I promise! ;D
Do this board generally thinks poorly about activists?

Thank you,

giofranchi


Giofranchi, if you are comfortable with the three examples you've mentioned, then Biglari Holdings should be no different.  Other than Ackman, I do not trust Loeb, and Icahn has the type of reputation that Sardar is aiming for and I do not prefer.  If your only goal is to make money, then that is perfectly fine...most people have the same interests...heck at the right price I would buy BH if I knew it was tremendously undervalued.  Unfortunately, how someone treats their partners is also important...make sure you go into that investment with your eyes open and understand the risks in terms of being shareholder friendly.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: link01 on October 13, 2012, 01:25:15 PM
The question is would you invest in biglari holdings if he didnt write exhaustive letters and preach value investing? If you take that out and look at the actions and valuation is this a business you would want to be partners in?  Any small business or large business owner knows marketing and innovation are the two drivers of business growth. Biglari is a MASTER marketer. He has marketed himself as the second coming via the website presentation, long letters, and reverse stock split. This was all premediated  hes an absolute genius using buffets cult status to trigger trust. Absolutely brillant marketing tactic.  The proof is that  buffet is a great businessman able to attract groups together to achieve a common goal. Biglari is a bully activist that forces his way on boards and enforces his will. He will never attract enough partners to grow a mini berkshire cause his repupation is ruined.  You need goodwill and trust to grow a business.  He has no goodwill and us living in the information age his actions will not be forgotten.  He is alone with his minion cooley and logical busineessman will not partner with him period. For him to be successful he has to use all his energy to bully companies to give in. This might work for awhile but omg his isnt a sustainable business plan.

you hit the nail on the head, premfan!

as talented, passionate, & driven as he might be how can he ever hope to truly 'partner' with anyone who knows the value of trust & honest dealings? biglari's whole persona & style is the antithesis of that. its combative & divisive. the very definition of egotisitical. he sees only pawns, not partnetrs despite his rhetoric & parroting of WEB & others like him. if he wants to be successful then he will have to drop his pretences & mock-berkshire aspirations & aim lower, literally & metaphorically: he should look to investors like icahn & loeb at 3rd point for his models. they are cut from the same cloth. and whatever it is of the stuff that makes for good & trusted partners that those guys lack he can perhaps like them make up for it with a callous indifference for how he achieves his goals, including greemail & the big, bad bully-pulpit at large.
Title: Re: BH - Biglari Holdings
Post by: Kiltacular on October 13, 2012, 02:07:19 PM
People like this, in my experience and in my read of history, always, always, ALWAYS find a way to screw you -- and that's IF things work out well.  That is, even if things work out, you won't get much benefit.  There are a hundred way to imagine this scenario.  The management literally has a virtually unlimited number of ways to screw the "outside, passive, minority shareholder" when a compensation scheme like the one he has set up is in place.  How many other NYSE listed companies have such a compensation set-up?

Just put yourself in his shoes and imagine you want to get as rich as possible and ask yourself what you could do using the compensation scheme to make that happen?

Moreover, in many cases, for reasons mentioned by others in this thread, things often don't work out well.  In this case, you're also screwed. 

I wouldn't hesitate to move on.
Title: Re: BH - Biglari Holdings
Post by: biaggio on October 13, 2012, 02:53:26 PM
Agree with all above.

Life is too short to do business with folks you don t like. It is not worth it no matter how much money you think you may make. Especially when there are other viable options. Its especially not prudent if you can t trust them as you most certainly will be screwed if they are energetic and able. My 2 cents, paraphrasing wiser men then me.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 14, 2012, 03:44:00 AM
I particularly enjoyed shalab’s answer! But I have read all your answers and they have provided a lot of food for thought. Thank you very much!

Parsad,
please, do not really believe my only goal is to make money! You are all great investors and great people, and I would really loathe to give you an impression of me that is so wrong!
Call me naïve, but I believe there is at least some truth in the following well-known quote by Mr. Icahn:

"I'm like the gunfighter you hire to save the town. That gunfighter is there to do good...but he'll only do what he does if he knows he'll get paid for it."
Carl Icahn

Let me explain: paraphrasing Mr. Winston Churchill, private enterprise really is the strong horse that pulls the whole cart. And for private enterprise to do its job, wealth must be created. If a business does not create wealth for too long a time, whether it be Yhaoo! (Loeb), or Canadian Pacifics (Ackman), or Chesapeake (Icahn), or Cracker Barrel (Biglari), as far as I know, two are the paths that could be followed:
1) some changes are implemented, believing that profitability and growth will resume,
2) the business is orderly wind down, and cash is returned to shareholders, who will put it to better productive uses.
In the process I am aware that mistakes are going to be made. The Time Warner example, Mr. Munger referred to, might surely have been a mistake. And without any doubt a lot of other mistakes were made by Mr. Icahn! But also useful and praise-worthy goals were achieved! At least, that is what I believe… though, I might be utterly wrong!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: bargainman on October 14, 2012, 09:32:49 AM
I think that really the thing that led people against Biglari is that he said one thing, not just said, but preached and sold himself one way.  Very very adamantly.  He built up a persona around being all for the shareholders.  Then he went and did things that were very shareholder unfriendly.  It was like night and day.  I think that's the thing about him that bugs everyone.  Have the other activists on the list done this?  I don't know them well enough to say.  But it's really about him being disingenuous rather than being just arrogant or an activist.  In fact when he was an activist against SNS and western sizzlin' almost everyone was cheering him on in spite of him being a jerk at that time.

The other thing is that if you look at his history, the only guy he seems to keep happy is Cooley.  The Mustang Capital guy decided to boot IIRC, as does everyone else who spends any time with him.  The man does not create any loyalty at all.  His franchisees sound pretty unhappy after the first go around, the SNS employees seem pretty unhappy (I remember someone posted a website from them, probably glassdoor).  Again, I'm not sure how this compares to the other activists in the list.  But there is also potentially a difference in that Biglari is CEO of a 'real' company now.  The CEO of a company who's sole purpose is not activism probably needs to engender more loyalty..  Just more food for thought.
Title: Re: BH - Biglari Holdings
Post by: premfan on October 14, 2012, 10:40:22 AM
Good post BM.  To grow a business you need loyalty, goodwill, and trust.  I would advise reading dan kennedy no bs trust based marketing. The greatest trust based business in the world is walt disney which is also referenced in the book.
Title: Re: BH - Biglari Holdings
Post by: dcollon on October 25, 2012, 10:29:23 AM
New CBRL letter if anyone cares.
Title: Re: BH - Biglari Holdings
Post by: dcollon on November 02, 2012, 10:06:13 AM
When in doubt, if the results aren't going your way...delay the meeting.  Maybe I'm being too cynical.

Biglari Holdings Inc. News Release
Friday, November 02, 2012 04:00:00 PM (GMT)


SAN ANTONIO, TX, Nov. 2, 2012 /PRNewswire/ -- Biglari Holdings Inc. (NYSE: BH) (the "Company") announced today that it has decided to delay the special meeting of shareholders of the Company presently scheduled for November 2, 2012 (the "Special Meeting") until Friday, December 14, 2012 at 2:00 p.m., Central Standard Time, at Eilan Hotel, 17103 La Cantera Parkway, San Antonio, Texas 78256.  The record date for the postponed meeting remains October 5, 2012.

The Company encourages all shareholders who have not yet voted to do so now.  Your vote is important.  Please contact Morrow & Co., LLC, the Company's proxy solicitation agent for the Special Meeting, at (800) 607-0088 with any questions.
Title: Re: BH - Biglari Holdings
Post by: Parsad on November 02, 2012, 10:58:26 AM
When in doubt, if the results aren't going your way...delay the meeting.  Maybe I'm being too cynical.

Are you being too cynical?  What is the track record when it comes to these things at BH? 

You are not being too cynical...this is just old hat stuff that we've seen too many times.  The fact is, that it sadly usually works for him, so there is no reason to stop.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: dcollon on November 13, 2012, 01:54:11 PM
BH just filed on UNAM. 
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on November 17, 2012, 06:41:58 AM
UNAM announced a $1 a share dividend and this update regarding their interaction with Biglari
http://finance.yahoo.com/news/unico-american-corporation-issues-statement-233400997.html
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on January 11, 2013, 03:07:31 PM
http://sec.gov/Archives/edgar/data/93859/000092189513000091/ex101to8k07428_01112013.htm

You folks should get a chuckle from this filing..
Title: Re: BH - Biglari Holdings
Post by: zippy1 on January 11, 2013, 03:14:20 PM
http://sec.gov/Archives/edgar/data/93859/000092189513000091/ex101to8k07428_01112013.htm

You folks should get a chuckle from this filing..
Yes, I do get a big one!  ;D
Title: Re: BH - Biglari Holdings
Post by: Buckeye on January 11, 2013, 04:20:01 PM
Wow. Seems like a great use if time. What's great is the shareholders paid to have him set this up.
Title: Re: BH - Biglari Holdings
Post by: augustabound on January 11, 2013, 04:58:09 PM
http://sec.gov/Archives/edgar/data/93859/000092189513000091/ex101to8k07428_01112013.htm

You folks should get a chuckle from this filing..


Am I understanding that he's licencing his name to the holding company? 
The legalese in that filing almost put me to sleep and I just wonder if I understand it.   :o
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on January 11, 2013, 06:12:30 PM
The way I read it, is that this just entrenches him even more... no?
Title: Re: BH - Biglari Holdings
Post by: Parsad on January 11, 2013, 07:06:04 PM
The company plans on developing and building "Biglari Land", where this massive ego can grow unfettered, away from the criticisms of any rational and ethical shareholder. 

Geez, this guy!  First he changes a perfectly good, historical name (The Steak'n Shake Company), to his own name.  Then he wants to license it out to shareholders!  My opinion, shareholders really need to tell him to go fuck himself!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: ragu on January 11, 2013, 07:50:45 PM
Am I understanding that he's licencing his name to the holding company? 
The legalese in that filing almost put me to sleep and I just wonder if I understand it.   :o

augustabound,

The 8-K (http://www.sec.gov/Archives/edgar/data/93859/000092189513000091/form8k07428_01112013.htm) should be easier.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Parsad on January 11, 2013, 09:14:48 PM
The way I read it, is that this just entrenches him even more... no?

Entrenches him, and at the same time protects him if someone else decides to ever run a proxy against him or buy out the company.  If he goes, he gets a nice fat royalty.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: augustabound on January 12, 2013, 02:54:04 AM
Am I understanding that he's licencing his name to the holding company? 
The legalese in that filing almost put me to sleep and I just wonder if I understand it.   :o

augustabound,

The 8-K (http://www.sec.gov/Archives/edgar/data/93859/000092189513000091/form8k07428_01112013.htm) should be easier.

Best,
Ragu

Lol, thanks Ragu.

I usually don't have a problem with filings but I think I was reading in disbelief and assumed I must have been reading it wrong. 
Title: Re: BH - Biglari Holdings
Post by: Charlie on January 12, 2013, 05:46:15 AM
Some years ago I was sitting with Biglari in L.A. at an investment dinner and he was running the Lion Fund and his only holding was Berkshire Hathaway. At the time I thought he is very funny, but it gets better and better.  ;)
Title: Re: BH - Biglari Holdings
Post by: Redskin212 on February 22, 2013, 09:40:13 AM
Biglari gets exposure on CNBC's home page for his ongoing dispute with Cracker Barrel


http://www.cnbc.com/id/100484937
Title: Re: BH - Biglari Holdings
Post by: wescobrk on February 22, 2013, 10:15:27 AM
Biglari gets exposure on CNBC's home page for his ongoing dispute with Cracker Barrel


http://www.cnbc.com/id/100484937

The article mentions it has a market cap of 472 million. He references things that happened a week ago but we haven't seen a market cap since nov of 470 million. This guy is off almost 20%. It takes two seconds to verify that. He writes for cnbc?
Title: Re: BH - Biglari Holdings
Post by: DCG on February 22, 2013, 12:36:31 PM
He writes for cnbc?

Since when would you expect high-quality reporting from CNBC?
Title: Re: BH - Biglari Holdings
Post by: wescobrk on February 22, 2013, 12:57:44 PM
Touché
Title: Re: BH - Biglari Holdings
Post by: giofranchi on February 27, 2013, 01:33:21 AM
Biglari Holdings Investors Now Getting Core Steak'N Shake Business For Just $125 Million

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: Redskin212 on February 27, 2013, 04:49:42 AM
Looks like Biglari has found a winner in CBRL.  It will be interesting to see how this fight with CBRL's management is finally resolved.


Cracker Barrel Old Country Store, Inc. - Shares in the operator of Cracker Barrel restaurants surged nearly 13% today to hit a new all-time high of $75.45 during the first half of the session, after the company posted better-than-expected earnings and revenue and raised earnings guidance for fiscal year 2013. Fresh interest in front month calls on CBRL suggests one or more traders are positioning for shares in the name to extend gains in the near term. Bullish strategists traded more than 180 calls at the Mar. $80 strike against open interest of 16 contracts, buying most of the volume for an average premium of $0.25 apiece in the early going this morning. Call buyers may profit at expiration in two weeks in the event that shares in Cracker Barrel rally 6.0% over today's high of $75.45 to top the average breakeven point at $80.25.
Title: Re: BH - Biglari Holdings
Post by: siddharth18 on February 28, 2013, 12:25:40 AM
So what's Biglari's average purchase price on his 20% stake?

UPDATE: Did find from his shareholder letter that his first 17% stake was at avg price of ~$48/share

(http://i.imgur.com/wk7xpma.png)
Title: Biglari Holdings
Post by: Kuhndan on March 06, 2013, 06:39:15 PM
I know this won't be popular with some on this board, put I have a series of eight articles on Biglari Holdings coming out on Seeking Alpha. The first was published today with the remaining articles to follow over the next two weeks. I've been a buyer of BH for the past three years (with minimal profits to show for my efforts to date) but I am convinced that Sardar has something special. The link is below:

http://seekingalpha.com/article/1251201-biglari-holdings-sardar-biglari-bet-the-jockey-part-i?source=yahoo
Title: Re: BH - Biglari Holdings
Post by: bookie71 on March 06, 2013, 08:41:00 PM
I wish both you and he all the luck, but I like to sleep at night, instead of wondering what my "partner" is doing to change the rules.
Title: Re: BH - Biglari Holdings
Post by: Parsad on March 06, 2013, 09:00:42 PM
I wish both you and he all the luck, but I like to sleep at night, instead of wondering what my "partner" is doing to change the rules.

Yup.  He's definitely one to watch and there is a story there to tell, but shareholders will have to watch their back as well and may end up with their own story to tell at some point.  He'll be rich, but I choose not to partner with people like that.  Mohnish said it best in his interview a little while ago..."Lose money, you lose nothing.  Lose health, you lose something.  Lose reputation, all is lost."  Sardar has lost one aspect of his reputation...that he puts his shareholders ahead of himself...and that will not come back to him.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: siddharth18 on March 06, 2013, 09:18:29 PM
Sardar may get no respect from the peanut gallery but he still has a following of a microcosm among those that pride themselves of being value investors. And that's all he needs honestly. If he's measuring himself against himself and his past (and this, I believe, is the most objective way of measuring oneself) he's done quite well. In 2000's he was barely worth a million (from selling his first venture) and fast forward to 2013 and he's worth a multiple of that, has his own springboard and he's not completely off-track from where he wants to be.

Granted, he is not as humble as Warren Buffett, I'm sure he thinks that he doesn't need to be. In some ways, he's the antithesis of Buffett in that Biglari choses to be hostile (think proxy fights) where Warren chose to be humble (think keeping same leadership). Sardar has got it all figured out in his head and so far he has made out well personally, even while his stock continues to languish for over 3 years (which is a story unto itself).
Title: Re: Biglari Holdings
Post by: ragu on March 06, 2013, 09:36:12 PM
I know this won't be popular with some on this board, put I have a series of eight articles on Biglari Holdings coming out on Seeking Alpha. The first was published today with the remaining articles to follow over the next two weeks.

Kuhndan,

I quite enjoyed it and look forward to the rest.


[...]but I am convinced that Sardar has something special.

Likewise. I have high expectations of Sardar. Paradoxically, I expect that he will surpass them.

Best,
Ragu
Title: Re: Biglari Holdings
Post by: giofranchi on March 06, 2013, 11:23:20 PM
I know this won't be popular with some on this board, put I have a series of eight articles on Biglari Holdings coming out on Seeking Alpha. The first was published today with the remaining articles to follow over the next two weeks. I've been a buyer of BH for the past three years (with minimal profits to show for my efforts to date) but I am convinced that Sardar has something special. The link is below:

http://seekingalpha.com/article/1251201-biglari-holdings-sardar-biglari-bet-the-jockey-part-i?source=yahoo

Kuhndan,
I agree with most of the criticisms on this board regarding Mr. Biglari. But I like the way he has conceived and structured Biglari Holdings very much. And I have an investment in BH, that I intend to keep, unless it becomes seriously overvalued.
It is true that BH stock price has gone sideways for almost three years. But the reason is overvaluation at the beginning of the three years period. BV per share, instead, has continued growing handsomely. Right now overvaluation is not an issue anymore. Actually, I think BH is quite undervalued.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: Parsad on March 07, 2013, 12:00:07 AM
It's not undervalued, but it is cheaper than a year ago as CBRL has gone up.  Growth at SNS has been somewhat flat, but much of the industry has also been the same.  With that much captive capital, I would have thought he would have picked more compelling and even cheaper businesses, rather than go after CBRL.  Nonetheless, he's got a lot of capital that he can do some damage with.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 07, 2013, 12:53:28 AM
It's not undervalued, but it is cheaper than a year ago as CBRL has gone up.  Growth at SNS has been somewhat flat, but much of the industry has also been the same.  With that much captive capital, I would have thought he would have picked more compelling and even cheaper businesses, rather than go after CBRL.  Nonetheless, he's got a lot of capital that he can do some damage with.  Cheers!

Anything that trades at 1.25 x BV per share, and has the ability to grow BV per share at a 15% CAGR for the next 20 years, is undervalued. And those are my assumptions for Biglari Holdings. Although they surely might be wrong (nothing is certain!), I clearly understand how and why BH might succeed in meeting those goals. I don’t invest in businesses, where I don’t understand how and why they might be able to increase BV per share at a 15% CAGR for the next 10 to 20 years. That’s why my circle of competence is so small! :) I don’t like looking for things that are “statistically cheap”, 0.5 x BV per share or something like that, if I don’t understand them very well. Like Mr. E. H. Harriman was used to saying: “I am not interested in ten per cent: I want something that will grow.” And, if BH really succeeds in growing, 1.25 x BV per share will prove to be a true bargain.
That being said, I am well aware of Mr. Biglari’s flaws, and BH stays a relatively small position in my firm’s portfolio of businesses.
As an aside, I believe Mr. Biglari hasn’t picked “more compelling and even cheaper businesses, rather than go after CBRL”, exactly because he knows his circle of competence very well, and doesn’t stray outside:
Quote
Our approach to purchasing stocks is to concentrate capital into very few concerns. We focus our attention and capital in an attempt to increase returns yet concomitantly reduce investment risk. Therefore, we limit our appraisals and allocations to businesses we can rationally assess, immersing ourselves in understanding a business rather than attempting to study many shallowly. As a consequence, our range of investments may be narrow, but within it we must be supreme. Analysis that is a mile wide and an inch deep is fool’s gold. We purchase stocks for investment not speculation. Our old-fashioned, long-term investment approach is one that suits us.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 07, 2013, 04:57:24 AM
Are you factoring in the incentive comp on 15% cagr? Shareholders will probably receive closer to 12%.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 07, 2013, 05:12:43 AM
Incidentally, Buffett would have received about 3 billion if he had sardar's agreement for, in his words, a subpar year.
Granted he had that agreement when he had the hedge fund but a public company with permanent capital is different and the fact that the average roe for a corporation is 10-12% means there is quite a bit of compensation above the 6% hurdle for even an average company.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 07, 2013, 05:33:45 AM
Are you factoring in the incentive comp on 15% cagr? Shareholders will probably receive closer to 12%.

Increase in BV per share by definition is the increase in equity divided by the number of shares outstanding, after all costs are subtracted. It follows that a 15% CAGR in BV per share is by definition after incentive comp. You might view it as rightly due, or you might judge it much too high, anyway incentive comp is just another cost, right?

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: rmitz on March 07, 2013, 05:49:30 AM
Sardar may get no respect from the peanut gallery but he still has a following of a microcosm among those that pride themselves of being value investors. And that's all he needs honestly. If he's measuring himself against himself and his past (and this, I believe, is the most objective way of measuring oneself) he's done quite well. In 2000's he was barely worth a million (from selling his first venture) and fast forward to 2013 and he's worth a multiple of that, has his own springboard and he's not completely off-track from where he wants to be.

Granted, he is not as humble as Warren Buffett, I'm sure he thinks that he doesn't need to be. In some ways, he's the antithesis of Buffett in that Biglari choses to be hostile (think proxy fights) where Warren chose to be humble (think keeping same leadership). Sardar has got it all figured out in his head and so far he has made out well personally, even while his stock continues to languish for over 3 years (which is a story unto itself).

Two things.  1) Buffett was not always Mr. Nice Guy.  2) The best measure of a man is the size of his bank account?  I reject that entirely.
Title: Re: BH - Biglari Holdings
Post by: udravi on March 07, 2013, 06:25:28 AM
Incidentally, Buffett would have received about 3 billion if he had sardar's agreement for, in his words, a subpar year.
Granted he had that agreement when he had the hedge fund but a public company with permanent capital is different and the fact that the average roe for a corporation is 10-12% means there is quite a bit of compensation above the 6% hurdle for even an average company.

I own a few BH shares and have been following this debate.
I am by no means an expert, but excessive compensation is a problem at a vast majority of companies.

If I understand correctly, Sardar's incentive compensation is limited to 10 million USD. If nothing else he won't get overcompensated if he underperforms.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 07, 2013, 06:44:23 AM
I am by no means an expert, but excessive compensation is a problem at a vast majority of companies.

If I understand correctly, Sardar's incentive compensation is limited to 10 million USD. If nothing else he won't get overcompensated if he underperforms."

That's true but it was originally proposed 5% hurdle and no cap. That 10 million cap isn't inflation adjusted and Sardar has hinted it will be removed. You need to factor in the probability of it being removed because it's a matter of when not if.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 07, 2013, 06:46:27 AM
I think he's doing a brilliant job but losing one fourth of gains above the hurdle is a very big adjustment to make for net returns is my only point.
Title: Re: BH - Biglari Holdings
Post by: WideMoat on March 07, 2013, 07:31:45 AM
Leaving aside the compensation scheme, I have been less than impressed by the growth in BV (per share) under Biglari's rule.  (Acc. to the BH proxy, this is a "reasonable, albeit conservative proxy for gain in intrinsic value.")

At 9/24/08, BV was 284m (with 28.66m shares out, or 1.43m shares split-adjusted). 
At 9/30/09, BV was 292m.
At 9/29/10, BV was 249m.
At 9/28/11, BV was 280m.
At 9/26/12, BV was 349m (with 1.43m shares out).

Given those results, it strikes me as excessively optimistic to expect BH to return 15% per annum on BV (even before incentive comp).

In addition, given the size of the CBRL stake, and Biglari's expressed desire to hold for the long term, BH shareholders will effectively need CBRL to grow its market price p.s. (now at 1.84b) at 15% per annum, to get those results.  That strikes me as even more optimistic than the first.
Title: Re: BH - Biglari Holdings
Post by: premfan on March 07, 2013, 08:03:49 AM
Are you factoring in the incentive comp on 15% cagr? Shareholders will probably receive closer to 12%.

Increase in BV per share by definition is the increase in equity divided by the number of shares outstanding, after all costs are subtracted. It follows that a 15% CAGR in BV per share is by definition after incentive comp. You might view it as rightly due, or you might judge it much too high, anyway incentive comp is just another cost, right?

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Gio, it seems like you are anchored in your assumptions of biglari. As a boardmember and former owner of the company i was here first hand during the incentive fiasco. If you havent already  reviewed the archives please do. If biglari holdings increases BV at 15 percent you as a shareholder gains about 10 percent BV and he profits the rest. So to realize shareholder gain of 15 percent BV he would need to average 20 percent BV per year. I have read all the lion fund letters when i requested them from biglari's receptionist and he averaged in the mid teens in return with a much lower capital base. 
Title: Re: BH - Biglari Holdings
Post by: constructive on March 07, 2013, 08:23:10 AM
If biglari holdings increases BV at 15 percent you as a shareholder gains about 10 percent BV and he profits the rest. So to realize shareholder gain of 15 percent BV he would need to average 20 percent BV per year.

Gross BV Increase        Compensation (25% over 6%)       Net BV Increase
         11.33%                                 1.33%                                  10.0%
         15.0%                                    2.25%                                 12.75%
         18.0%                                    3.0%                                   15.0%
         20.0%                                    3.5%                                   16.5%
Title: Re: BH - Biglari Holdings
Post by: ragu on March 07, 2013, 08:25:15 AM
At 9/26/12, BV was 349m (with 1.43m shares out).

WideMoat,

The reported BV understates the economic BV. Please see the section titled 'Accounting Rules Regulating Affiliated Partnerships' (Pg. 8 ) of the 2010 Annual Letter (http://www.biglariholdings.com/letters/2010.pdf#zoom=100) in order to make the necessary adjustments.


Quote from: WideMoat
Given those results, it strikes me as excessively optimistic to expect BH to return 15% per annum on BV (even before incentive comp).

What then do you make of Sardar's stated goal of 15% growth in per-share intrinsic value over the next decade in the 2011 letter (http://www.biglariholdings.com/letters/2011.pdf#zoom=100)?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: premfan on March 07, 2013, 08:27:57 AM
If biglari holdings increases BV at 15 percent you as a shareholder gains about 10 percent BV and he profits the rest. So to realize shareholder gain of 15 percent BV he would need to average 20 percent BV per year.

Gross BV Increase        Compensation (25% over 6%)       Net BV Increase
         11.33%                                 1.33%                                  10.0%
         15.0%                                    2.25%                                 12.75%
         18.0%                                    3.0%                                   15.0%
         20.0%                                    3.5%                                   16.5%

My bad my math was wrong. Thanks man
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 07, 2013, 08:37:00 AM
@Ragu
I think he has a good shot once he starts buying I insurance companies. He can't do it without leverage in my opinion though especially net to shareholders since book value was artificially low when book value declined 50 million merely because BH bought the lion fund thanks to bizarre GAAP rules.

By the way, email me your contact info if you are attending the meeting again in NY.
I'll be there.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 07, 2013, 08:39:43 AM
I meant he got a one time fillip with that lowered bv. It'll be a little tougher now but even with slowly converting to pure franchise model will raise roe but to get to net 15 to the shareholder he"ll need leverage (insurance)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 07, 2013, 08:56:53 AM
WideMoat,
the question is: how much did Mr. Biglari pay to get control of SNS equity? That, I think, is the number you should compare to 349m at 2012 year end. Why? Because, once you have used the bulk of your capital to get control of a large business like SNS, what you are left with is SNS, which is a solidly profitable business, but cannot grow BV per share at high rates, and a very small capital invested elsewhere. Result: you must have the time to build up new capital, and deploy it into new investments, before being able to grow BV per share at high rates. If you see how fast Biglari has grown investments in the last 5 years, you get the picture!

premfan,
I have not read all the archives of the board about BH, but I do have read all his annual reports, the ARs of the Lion Fund included (thanks Christopher1!).
You see? I just like the business. It is conceived and structured in a way that makes me believe a good strategist and capital allocator at the helm can compound capital at high rates of return. Mr. Biglari surely is gifted, recognizes a good bargain when he encounters one, and will always be focused on improving fcf and deploying it opportunistically. He also understands the importance of insurance float, and I won’t be surprised if sooner rather than later he gets control over some insurance operations.
Cannot he blow up? Of course he can! Every business deals with the future… and the future is always uncertain… That’s why we must put our attention on the process: is he doing the right things and taking the right choices? If so, odds are future results will be very satisfactory!

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 07, 2013, 10:50:19 PM
WideMoat,
the question is: how much did Mr. Biglari pay to get control of SNS equity? That, I think, is the number you should compare to 349m at 2012 year end. Why? Because, once you have used the bulk of your capital to get control of a large business like SNS, what you are left with is SNS, which is a solidly profitable business, but cannot grow BV per share at high rates, and a very small capital invested elsewhere. Result: you must have the time to build up new capital, and deploy it into new investments, before being able to grow BV per share at high rates. If you see how fast Biglari has grown investments in the last 5 years, you get the picture!

premfan,
I have not read all the archives of the board about BH, but I do have read all his annual reports, the ARs of the Lion Fund included (thanks Christopher1!).
You see? I just like the business. It is conceived and structured in a way that makes me believe a good strategist and capital allocator at the helm can compound capital at high rates of return. Mr. Biglari surely is gifted, recognizes a good bargain when he encounters one, and will always be focused on improving fcf and deploying it opportunistically. He also understands the importance of insurance float, and I won’t be surprised if sooner rather than later he gets control over some insurance operations.
Cannot he blow up? Of course he can! Every business deals with the future… and the future is always uncertain… That’s why we must put our attention on the process: is he doing the right things and taking the right choices? If so, odds are future results will be very satisfactory!

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes


I should add that Mr. Biglari obviously understands very well the importance of working with permanent capital and the importance of controlling a machine that constantly generates new capital he can deploy wherever he finds compelling bargains. SNS is exactly that kind of machine. Think of how Mr. Buffett has always talked about See’s Candies: by itself See’s cannot grow to the sky (mature industry, limited market, etc.), but by constantly and predictably generating fcf (even if that fcf doesn’t grow much), and investing it shrewdly elsewhere, See’s has been the instrument through which Mr. Buffett has been able to create much wealth for BRK’s shareholders. The same, imo, applies to SNS.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Title: Re: BH - Biglari Holdings
Post by: ragu on March 11, 2013, 07:33:55 AM
By the way, email me your contact info if you are attending the meeting again in NY.

wescobrk,

No plans as of yet on attending the AM this year. Will let you know if things change.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: ragu on March 18, 2013, 06:37:48 AM
Looks like Biglari has found a winner in CBRL.

The investment case for CBRL from Sardar has been compelling. Not that that's any surprise. I wouldn't call it a winner yet though. You have management that is tremendously challenged when it comes to capital allocation. And that's putting it mildly. CBRL will be a decent, but not great, investment for BH shareholders unless Sardar gets on the board.

Quote from: Redskin212
It will be interesting to see how this fight with CBRL's management is finally resolved.

I find it interesting that, even after 2 failed proxy contests, management is still worried enough that they offered to buy him out. Sardar, quite rightly IMO, told them off in no uncertain terms. Fascinating to see this play out. 

Best,
Ragu

Title: Re: BH - Biglari Holdings
Post by: Kuhndan on April 02, 2013, 03:56:33 PM
Anybody attending the BH annual meeting?
Title: Re: BH - Biglari Holdings
Post by: kam2308 on April 02, 2013, 05:34:26 PM
If biglari holdings increases BV at 15 percent you as a shareholder gains about 10 percent BV and he profits the rest. So to realize shareholder gain of 15 percent BV he would need to average 20 percent BV per year.

Gross BV Increase        Compensation (25% over 6%)       Net BV Increase
         11.33%                                 1.33%                                  10.0%
         15.0%                                    2.25%                                 12.75%
         18.0%                                    3.0%                                   15.0%
         20.0%                                    3.5%                                   16.5%

I believe Biglari's pay is capped at $10 million.  As the equity base rises in absolute dollar amounts, the returns to equity shareholders will come closer to the actual increase in BV.

Here's the quote from the incentive agreement: "[P]rovided that in no event shall the Incentive Compensation Amount payable to the
Executive with respect to any fiscal year exceed $10 million."
Title: Re: BH - Biglari Holdings
Post by: vinod1 on April 03, 2013, 04:52:38 AM

I believe Biglari's pay is capped at $10 million.  As the equity base rises in absolute dollar amounts, the returns to equity shareholders will come closer to the actual increase in BV.

Here's the quote from the incentive agreement: "[P]rovided that in no event shall the Incentive Compensation Amount payable to the
Executive with respect to any fiscal year exceed $10 million."

I would expect Mr. BigLiar to increase the cap as the share holders equity increases. 

Vinod
Title: Re: BH - Biglari Holdings
Post by: Redskin212 on April 03, 2013, 05:08:55 AM
I would be "shocked" if Biglari changed the terms of his agreement  ;)
Title: Re: BH - Biglari Holdings
Post by: GrizzlyRock on April 05, 2013, 05:08:32 AM
Allow me to toss my hat into the ring on Biglari (the company).  Note: I have a materially different approach than Biglari the man and not a fan of his aggressive approach and disregard for corporate governance. Yet, I am a fan of steady, cash-flowing businesses trading at 2.7x EV and 5.6x FCF.

Investors surely can hate the manager but shouldn’t continue to ignore Biglari Holdings’ performance. Biglari Holdings is cheap today on an absolute basis, as evidenced by the company trading at liquidation value with conservative DCF and sum of the parts valuations indicating material upside.

This analysis is not assessment of a 5+ year return investing alongside of Biglari the man. Rather, this analysis is a discussion of a current mis-priced investment with multiple event paths to value realization.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 05, 2013, 05:15:20 AM
Allow me to toss my hat into the ring on Biglari (the company).  Note: I have a materially different approach than Biglari the man and not a fan of his aggressive approach and disregard for corporate governance. Yet, I am a fan of steady, cash-flowing businesses trading at 2.7x EV and 5.6x FCF.

Investors surely can hate the manager but shouldn’t continue to ignore Biglari Holdings’ performance. Biglari Holdings is cheap today on an absolute basis, as evidenced by the company trading at liquidation value with conservative DCF and sum of the parts valuations indicating material upside.

This analysis is not assessment of a 5+ year return investing alongside of Biglari the man. Rather, this analysis is a discussion of a current mis-priced investment with multiple event paths to value realization.

Thank you very much for posting this! I will read your analysis with much attention and interest!  :)

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: dcollon on April 05, 2013, 05:52:25 AM
Thanks for sharing your research.  Very nice of you.
Title: Re: BH - Biglari Holdings
Post by: MYDemaray on April 05, 2013, 09:14:22 PM
Hehe...welcome Kyle
Title: Re: BH - Biglari Holdings
Post by: Hielko on April 06, 2013, 01:31:18 PM
Nice work on the write-up! What I'm wondering though is: have you accounted for the costs of Biglari's compensation? I wouldn't be paying NAV for investments if I have to give away 25% of the upside above 6% (does this have a high water mark?) I also not so sure that his interests are aligned with shareholders when he has to buy Biglari shares with the money from his compensation. Seems like a strong incentive to depress the share price, and he seems to have been doing an excellent job on that front...

I'm the first to believe that the assets underlying the business are worth a lot more than the market cap of the company, but how much of that value is going to shareholders and how much will go to Biglari?
Title: Re: BH - Biglari Holdings
Post by: Greg on April 06, 2013, 02:04:33 PM
  It's more than just giving away 25% of the upside above 6%. When Biglari's current compensation agreement was adopted the economic value of the company vastly exceeded the book value. This economic value was built of over many, many years, a lot of it just because of inflation. A chunk of the value built up over the many, many years was transferred from the stockholders to Mr. Biglari.
Title: Re: BH - Biglari Holdings
Post by: GrizzlyRock on April 06, 2013, 02:55:41 PM
Heiko - sure. For reference here is Sardar's incentive agreement: http://www.biglariholdings.com/IncentiveAgreement.pdf#zoom=100

Sardar receives the lesser of the following: (1) $10 million or (2) 25% of the positive change in Biglari Holdings book value * 6% above the previous high water mark. So this past year he will receive $10 million.  The calc would amount to $13.2 as defined by the previous YE book value of $279.6 * 1.06 = $296.4.  The difference in new book value of $349.1 and 6% above old BV of $296.4 million is $52.7 million.  25% of this amount is $13.2 million. Note: also per the incentive agreement Sardar has to use 30% of this comp to buy BH stock in the open market.

Ok so there are a few ways to look at this: (1) The new high water mark is $370 million ($349.1 million *1.06) So $10 million represents 2.70% of this figure and each year thereafter this % would naturally decrease. This seems fairly reasonable to me.  (what would not be reasonable would be a change in the cap amount)

To your point regarding not wanting to pay NAV for investments for which you would have to pay a performance allocation, what do you think hedge funds are?  Most HFs don't even have a hurdle rate (most do have a high water mark). You may not be a HF investor but many sharp asset allocators pay higher "fees" that those which BH is paying Sardar Biglari.

So for the time being, Sardar can make good $$ on the incentive contract but over time his change in net worth will be determined by the change in BH's share price as more and more of his net worth is directly tied to the price of BH equity.

Lastly, here is one report on BH's AGM held 4/4/12: http://www.thestreet.com/story/11888316/1/biglari-wants-to-make-you-money.html
Title: Re: BH - Biglari Holdings
Post by: Hielko on April 06, 2013, 03:47:20 PM
Smart capital allocators are putting money in hedge funds, but there is probably more dumb money that is put in hedge funds. Just because some of the funds are a good investment doesn't mean that paying a lot of money to someone to manage your money is smart on average. He might be worth it, but if his track record consists of a couple of really big concentrated leveraged bets I'm not that easily convinced that he's really worth his money, because that's not a big track record even if it's spread over a 10+ years. And as far as I understand that is basically what he did to make it.

I would also not be so sure that his compensation will remain at the $10 million/year level. How can you trust him to keep that part of the deal if he's screwing shareholders at will in the past?

So I see how big the pie is, but the question is: will you get your fair share? I'm not that convinced, but I'm probably also not easy to convince...
Title: Re: BH - Biglari Holdings
Post by: onyx1 on April 06, 2013, 04:47:57 PM
Ok so there are a few ways to look at this: (1) The new high water mark is $370 million ($349.1 million *1.06) So $10 million represents 2.70% of this figure and each year thereafter this % would naturally decrease. This seems fairly reasonable to me.  (what would not be reasonable would be a change in the cap amount)

Expect the cap to go up, it's only a matter of time.  If I recall correctly, Phil Cooley has already laid the groundwork when he said publically that the cap will need to be raised (I don't remember exactly where, but maybe someone else on the board does). 
 
Either way, raising the cap would be consistent with my experience with Sardar.  As a member of the 13(d) group that took over SNS in 2008,  I dealt directly with Sardar & Phil Cooley.  I don't regret it as my investment tripled.  Under the right circumstances, I would do it again (but not at today's prices).  Sardar is a good businessman and will do well for himself. But he is also a perfect example of the importance of the old adage "actions speak louder than words."
Title: Re: BH - Biglari Holdings
Post by: bookie71 on April 07, 2013, 12:50:33 PM
My problem is that he changes it whenever he wants. 
Title: Re: BH - Biglari Holdings
Post by: Packer16 on April 07, 2013, 01:21:46 PM
Quote
Allow me to toss my hat into the ring on Biglari (the company).  Note: I have a materially different approach than Biglari the man and not a fan of his aggressive approach and disregard for corporate governance. Yet, I am a fan of steady, cash-flowing businesses trading at 2.7x EV and 5.6x FCF.

Investors surely can hate the manager but shouldn’t continue to ignore Biglari Holdings’ performance. Biglari Holdings is cheap today on an absolute basis, as evidenced by the company trading at liquidation value with conservative DCF and sum of the parts valuations indicating material upside.

This analysis is not assessment of a 5+ year return investing alongside of Biglari the man. Rather, this analysis is a discussion of a current mis-priced investment with multiple event paths to value realization.

Grizzley,

Thanks for the analysis.  I am having a hard time coming up with your level of EBITDA for your analysis.  As far as I can tell, it is around $72.5 million on a consolidarted basis but I have only been able to come up with about $61 million TTM and $66 million of FY 2012.  I must be missing something in your calcs that I did not see in your report.  Thanks.

Packer
Title: Re: BH - Biglari Holdings
Post by: premfan on April 07, 2013, 01:28:29 PM
  I do not wish this on Mr. Biglari but if he were to be run over and killed by a truck what price do you guys think the stock would be? (My number is very different from the current market price.)


whoa man. what kind of statement is that.
Title: Re: BH - Biglari Holdings
Post by: GrizzlyRock on April 07, 2013, 01:58:55 PM
Packer16 - Your figure of TTM at 12/19/12 which has some timing issues in fiscal Q1. 2012 EBITDA of $71.9 million is derived below and I estimate 2013 EBITDA to be directionally in line with this figure:

Net Income                                                               +21.6
Income Allocation from Non-Controlling Interests     +3.2
Taxes                                                                        +6.5
Interest                                                                     +18.2
Depr & Amort                                                             +26.2
Back out "Realized Investment Gains"                       -4.0     
Total Biglari Holdings 2012 EBITDA                            +71.9
Title: Re: BH - Biglari Holdings
Post by: ragu on April 14, 2013, 10:46:44 PM
Either way, raising the cap would be consistent with my experience with Sardar. 

onyx1,

Interesting to hear that you were part of Sardar's group that filed together during the SNS proxy contest. Could you please elaborate on the statement above? What happened then that causes you to think this? Many thanks in advance.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: onyx1 on April 16, 2013, 10:50:27 AM
Either way, raising the cap would be consistent with my experience with Sardar. 

What happened then that causes you to think this?


     Sardar is in a hurry to get rich, and no one within the organization stands in his path.  Shareholder pushing back on the two class voting structure?  It's easy, just find a workaround like the silly licensing deal.  I laughed at this!  Really, how does a functioning BOD allow this?  Shareholders can't effectively protect themselves if the BOD is not doing their job.  With Sardar as Chairman & CEO the only potential voice against overreach is Phil Cooley.  Instead of the "voice of reason", Cooley has acted like a cheerleader.     Where was he when Sardar got into an argument over compensation with shareholders?  Cooley was MIA.   I tried several times to reach him during the shareholder revolt, all unsuccessful.  I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.    In the end,  Sardar pushed his shareholder "partners" to the limit and got his 25% over 6% and agreed on a $10mm hard cap.  The cap has now become a binding constraint on Sardars personal wealth, and it is only a matter of time before tortured logic is presented to justify raising it or eliminating it altogether.  And the BOD will support it!  Despite the pleasant sounding platitudes about respect for shareholders in this annual letters, Sardar's actions have demonstrated that his desire for personal wealth far exceeds his desire to enrich shareholders.   
 
     My point to those trying to judge the IV of BH in the medium term, is that they need to factor in an elimination/increase in the cap going forward.  The more difficult question is to what degree will Sardar's unchecked arrogance have on the long term IV of the firm?  On this measure the potential downside is large.
 
     Arrogance has a way of bringing out the schadenfreude in others and I have witnessed first hand the breathtaking downward spiral of careers because of it.  I once worked for a man who was listed on the Forbes 400.  Two years later he was in the middle class after his arrogant treatment of bank regulators backfired and his S&L was put into receivership.  Another boss of mine was universally considered as brilliant.  He was a tenured professor at Wharton at age 28, and became one of the youngest GS partners after only four years in the business.  He treated people around him with terrible arrogance, and would never allow himself to lose any argument.  Four years later, he entered federal prison for mismarking his book.  He was turned into the authorities by one of his own employees.  (BTW, it works both ways:  I also supervised an intern for two summers.  He was very smart, but also humble and respectful to others.  Today he enjoys life in Greenwich, CT as a hedge fund manager and is worth at least a billion dollars).
 
     Extreme examples?  Yes, not every arrogant person implodes.  But it is a matter of degree, since arrogance as a personality trait almost always turns out to be a net negative.  With Sardar, time will tell us how much.
 
 
 
Title: Re: BH - Biglari Holdings
Post by: Grenville on April 16, 2013, 11:38:44 AM
Either way, raising the cap would be consistent with my experience with Sardar. 

What happened then that causes you to think this?


     Sardar is in a hurry to get rich, and no one within the organization stands in his path.  Shareholder pushing back on the two class voting structure?  It's easy, just find a workaround like the silly licensing deal.  I laughed at this!  Really, how does a functioning BOD allow this?  Shareholders can't effectively protect themselves if the BOD is not doing their job.  With Sardar as Chairman & CEO the only potential voice against overreach is Phil Cooley.  Instead of the "voice of reason", Cooley has acted like a cheerleader.     Where was he when Sardar got into an argument over compensation with shareholders?  Cooley was MIA.   I tried several times to reach him during the shareholder revolt, all unsuccessful.  I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.    In the end,  Sardar pushed his shareholder "partners" to the limit and got his 25% over 6% and agreed on a $10mm hard cap.  The cap has now become a binding constraint on Sardars personal wealth, and it is only a matter of time before tortured logic is presented to justify raising it or eliminating it altogether.  And the BOD will support it!  Despite the pleasant sounding platitudes about respect for shareholders in this annual letters, Sardar's actions have demonstrated that his desire for personal wealth far exceeds his desire to enrich shareholders.   
 
     My point to those trying to judge the IV of BH in the medium term, is that they need to factor in an elimination/increase in the cap going forward.  The more difficult question is to what degree will Sardar's unchecked arrogance have on the long term IV of the firm?  On this measure the potential downside is large.
 
     Arrogance has a way of bringing out the schadenfreude in others and I have witnessed first hand the breathtaking downward spiral of careers because of it.  I once worked for a man who was listed on the Forbes 400.  Two years later he was in the middle class after his arrogant treatment of bank regulators backfired and his S&L was put into receivership.  Another boss of mine was universally considered as brilliant.  He was a tenured professor at Wharton at age 28, and became one of the youngest GS partners after only four years in the business.  He treated people around him with terrible arrogance, and would never allow himself to lose any argument.  Four years later, he entered federal prison for mismarking his book.  He was turned into the authorities by one of his own employees.  (BTW, it works both ways:  I also supervised an intern for two summers.  He was very smart, but also humble and respectful to others.  Today he enjoys life in Greenwich, CT as a hedge fund manager and is worth at least a billion dollars).
 
     Extreme examples?  Yes, not every arrogant person implodes.  But it is a matter of degree, since arrogance as a personality trait almost always turns out to be a net negative.  With Sardar, time will tell us how much.

Appreciate the color and the other stories of arrogance or lack of!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 17, 2013, 07:38:26 AM

     Sardar is in a hurry to get rich, and no one within the organization stands in his path. 

If it is so, I guess he is smart enough to understand that the safest way to get and stay rich is to increase the value of BH at the fastest rate compatible with a margin of safety. Any other way won’t do it. I am positive he knows this very well.


     My point to those trying to judge the IV of BH in the medium term, is that they need to factor in an elimination/increase in the cap going forward.  The more difficult question is to what degree will Sardar's unchecked arrogance have on the long term IV of the firm?  On this measure the potential downside is large.
 

As far as arrogance is concerned, the same things could have surely been said about Mr. Malone or Mr. Icahn some decades ago. Personal character traits are very difficult to judge, and might be misleading.
The evidence, though, is clear enough: Mr. Biglari has successfully built and controls a compounding machine like no one else his age, at least that I know of. Until now he has been much more successful than the great majority of his peers, despite the obstacle that his arrogance might represent.
Like all of us, he has some strengths and some weaknesses. As long as his strengths outnumber his weaknesses, I think BH will be fine. Time will tell. :)

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: Hielko on April 17, 2013, 03:01:34 PM
Quote
If it is so, I guess he is smart enough to understand that the safest way to get and stay rich is to increase the value of BH at the fastest rate compatible with a margin of safety. Any other way won’t do it. I am positive he knows this very well.
The fastest and easiest way to get rich is to extract as much money as possible from outside investors. That doesn't necessarily mean that the IV of BH needs to grow at the fastest rate possible, or he might be able to grow the IV but dilute outside investors at an even faster rate. There are almost an infinite amount of possible ways for BH to increase his wealth without increasing the wealth of outside investors.
Quote
The evidence, though, is clear enough: Mr. Biglari has successfully built and controls a compounding machine like no one else his age, at least that I know of. Until now he has been much more successful than the great majority of his peers, despite the obstacle that his arrogance might represent.
Is the evidence really that clear? He made a few leveraged bets that worked out. How many BH's exist that followed a similar strategy and never made it past the first or second bet?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 17, 2013, 11:22:08 PM
The fastest and easiest way to get rich is to extract as much money as possible from outside investors. That doesn't necessarily mean that the IV of BH needs to grow at the fastest rate possible, or he might be able to grow the IV but dilute outside investors at an even faster rate. There are almost an infinite amount of possible ways for BH to increase his wealth without increasing the wealth of outside investors.

Well, “fastest” and “easiest” perhaps, although I seriously doubt it!, but surely you also want “safest” and “very long lasting”. If so, the ONLY way is to increase IV. I speak out of experience: not that I have ever tried to deceive my partners… ;D, but sometimes I have made the mistake to act or to make a choice, without explaining the facts underlining my reasoning in details to my partners. Some sort of trouble always ensued… Any time, without exception. And my partners are just family members and close friends! And I have never even dreamt of doing something dishonest! I just had the superficiality of not explaining myself clearly enough (mistake that I won’t commit anymore!). Running a productive business, you will never get rich and stay rich without transparency and honest behavior.
Hielko, your experience is different from mine? You run a business without full transparency, and still are successful at it? Or, maybe, you personally know someone who does?

Is the evidence really that clear? He made a few leveraged bets that worked out. How many BH's exist that followed a similar strategy and never made it past the first or second bet?

Well, “concentrated” is very different from “leveraged”. I know that most traders don’t like the idea of being “concentrated” as much as they don’t like the idea of being “leveraged”, but entrepreneurs are not traders. And entrepreneurs are always concentrated. Most of them run just 1 business. Some run 2 or 3, but no more. Once again I speak out of experience: my own firm manages just 2 kinds of operations (engineering services and for profit education), that, by the way, are closely linked. Every entrepreneur with which I do business runs very few operations, only the ones he understands very well. Even when I invest the fcf my firm generates, I choose a concentrated portfolio made of just a few companies that I have studied a lot, and in which I have full confidence. I find it very difficult to switch mindset, and I prefer to stick to what I know. Well, Mr. Biglari behaves like an entrepreneur, and not like a trader. That doesn’t automatically mean he takes foolish risks! I find it very ironic to think that only traders can be “widely diversified”, entrepreneurs don’t have such a “luxury”, and yet there would be no trader without entrepreneurs!!  ;)
Once again, is you experience different from mine? Do you know many entrepreneurs who successfully run 50 different businesses?

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes


Title: Re: BH - Biglari Holdings
Post by: Hielko on April 18, 2013, 02:28:05 AM
The fastest and easiest way to get rich is to extract as much money as possible from outside investors. That doesn't necessarily mean that the IV of BH needs to grow at the fastest rate possible, or he might be able to grow the IV but dilute outside investors at an even faster rate. There are almost an infinite amount of possible ways for BH to increase his wealth without increasing the wealth of outside investors.

Well, “fastest” and “easiest” perhaps, although I seriously doubt it!, but surely you also want “safest” and “very long lasting”. If so, the ONLY way is to increase IV. I speak out of experience: not that I have ever tried to deceive my partners… ;D, but sometimes I have made the mistake to act or to make a choice, without explaining the facts underlining my reasoning in details to my partners. Some sort of trouble always ensued… Any time, without exception. And my partners are just family members and close friends! And I have never even dreamt of doing something dishonest! I just had the superficiality of not explaining myself clearly enough (mistake that I won’t commit anymore!). Running a productive business, you will never get rich and stay rich without transparency and honest behavior.
Hielko, your experience is different from mine? You run a business without full transparency, and still are successful at it? Or, maybe, you personally know someone who does?
I don't run a business, but don't be naive: it's VERY common to see management taking the easy route to getting rich and overpaying themselves. Everything Biglari has done in the past seems to indicate that he is trying to maximize his personal compensation without caring too much what 'his partners' think. His compensation agreement in 2010 was approved by just 80% of votes: that's very low when most items on a proxy statement are routinely voted yes. But what does he tell his partners that don't like the excessive compensation? Sell the stock! Yeah, he really cares...

Quote
Is the evidence really that clear? He made a few leveraged bets that worked out. How many BH's exist that followed a similar strategy and never made it past the first or second bet?

Well, “concentrated” is very different from “leveraged”. I know that most traders don’t like the idea of being “concentrated” as much as they don’t like the idea of being “leveraged”, but entrepreneurs are not traders. And entrepreneurs are always concentrated. Most of them run just 1 business. Some run 2 or 3, but no more. Once again I speak out of experience: my own firm manages just 2 kinds of operations (engineering services and for profit education), that, by the way, are closely linked. Every entrepreneur with which I do business runs very few operations, only the ones he understands very well. Even when I invest the fcf my firm generates, I choose a concentrated portfolio made of just a few companies that I have studied a lot, and in which I have full confidence. I find it very difficult to switch mindset, and I prefer to stick to what I know. Well, Mr. Biglari behaves like an entrepreneur, and not like a trader. That doesn’t automatically mean he takes foolish risks! I find it very ironic to think that only traders can be “widely diversified”, entrepreneurs don’t have such a “luxury”, and yet there would be no trader without entrepreneurs!!  ;)
Once again, is you experience different from mine? Do you know many entrepreneurs who successfully run 50 different businesses?
How many entrepreneurs do you know who went broke at some point in their lives? Most businesses fail at some point in time (a lot of them early), and that's no problem: it's part of the game, and a successful entrepreneur will simply start from scratch is a business fails. Don't fool yourself and think that this kind of risk is acceptable for most stock portfolio's: those can often not be restarted from scratch and still be big enough to provide for, for example, retirement income. Just because BH was successful doesn't mean that he can't have numerous unsuccessful counterparts.

Besides this, my point with leveraged and concentrated bets was mainly that it's simply harder to evaluate if it's luck or not. If a guy wins the lottery it doesn't make him a great lottery number picker, even though he's generating an insane return. But if he picks the winning numbers 10 times in a row we probably should consider that's not luck. The more independent bets in someone tracks record the more it can tell you about his skill.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 18, 2013, 03:28:29 AM
I don't run a business, but don't be naive: it's VERY common to see management taking the easy route to getting rich and overpaying themselves.

Yes! That perfectly applies to the kind of managers Mr. Icahn often refers to! Please, take a look at the video I posted in the IEP thread. They are not entrepreneurs. And I don’t think Mr. Biglari is that kind… but I might surely be wrong!

How many entrepreneurs do you know who went broke at some point in their lives? Most businesses fail at some point in time (a lot of them early), and that's no problem: it's part of the game, and a successful entrepreneur will simply start from scratch is a business fails. Don't fool yourself and think that this kind of risk is acceptable for most stock portfolio's

Why do you think an entrepreneur could restart from scratch if his business fails? Even if he can, why should it be easier for him, than it is for any other investor? An entrepreneur’s job is to shift capital from an area of low returns to an area of higher returns. If he fails in his judgment, he loses the capital at his disposal. Perhaps you think he can easily put it back again the second time?

The more independent bets in someone tracks record the more it can tell you about his skill.

Again, this is a trader mindset. Nothing wrong with it! But entrepreneurs rarely think in terms of “independent bets”. Usually, they just have a few ideas they understand much better than their competitors, and think they have found much value there. By your standard, the great majority of entrepreneurs never get involved with a sufficient number of different businesses to even build a so-called “track record”! That doesn’t mean you cannot recognize who really has skills from charlatans. The soundness of the process, imo, matters a lot.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: Hielko on April 18, 2013, 04:52:29 AM
Again, this is a trader mindset. Nothing wrong with it! But entrepreneurs rarely think in terms of “independent bets”. Usually, they just have a few ideas they understand much better than their competitors, and think they have found much value there. By your standard, the great majority of entrepreneurs never get involved with a sufficient number of different businesses to even build a so-called “track record”! That doesn’t mean you cannot recognize who really has skills from charlatans. The soundness of the process, imo, matters a lot.
I don't think it's a trader mindset, but I recognize the uncertainty that sits between process and outcome. You can have a great process and get bad results, and a bad process and get good results. And yes: for most entrepreneurs you will never know if they are truly great, or if they just had the right idea at the right time and the right place, and almost anyone could have executed it. Judging the process itself is almost never really possible, because of how complex it often it, and how much intangible factors there are. So there is simply a lot of uncertainty, and stuff that you will never know. That's life, and investing.

Quote
Why do you think an entrepreneur could restart from scratch if his business fails? Even if he can, why should it be easier for him, than it is for any other investor?
A lot of successful entrepreneurs are serial entrepreneurs. They always have new ideas, and if they have been successful in the past they can usually find new capital for a new business idea. Failure isn't as big a risk for them as for someone who has put his life savings in the stock market. If you have a 'normal' job and saved money for decades there is no way to can replace that money once lost, unless you get really lucky.
Title: Re: BH - Biglari Holdings
Post by: biaggio on April 18, 2013, 05:38:51 AM
Gio, is BH a 7.5% or 15% holding for you?

Its rare to find a good stock jockey/compounder. Probably rare/uncommon to recognize or properly identify them at an early stage. Perhaps especially rare to have with the integrity of WEB or Watsa.

Maybe its the Wall Street culture. Maybe its a Hedge Fund culture. Sardar after all is a hedge fund manager (no offence to the fine folks here). He is very young with a lot of success, that does effect your brain i.e cockiness and arrogance.

I have to give him credit for being up front. If he is going to "screw"you at least he is going to let you know first, unlike some of our CEO's recently that do it behind secretly (I am thinking Tom Ward, and recently Chad W at FTP). I get the feeling this happens regularily and is acceptable as long as you perform.

Sardar Bigliari- aggressive, arrogant, ambitious, ruthless, impressive track record, perhaps ego maniac- but do you trust him? Will he change/soften as he matures? Do you trust him less than some of these other guys on Wall street? If he ends up being honest you might be getting a bargain i.e. price of BH discounts this risk.

Controversy seems to have started after his hedge fund was acquired. In return he got this sweet pay package  and then the name change and putting picture of himself in all the SNS restaurants-both obnoxious. Having a cap on pay of $10 million is something I could live with it. I might be wrong, but I rationalize this as the price that needed to be paid in order for him to give up the pay he would have gotten running his hedge fund and also to have him committed 100% to BH long term.

Months ago my thinking was that I could not partner with his type of personality. Privately I would not- as its not worth money to put up with the stress. But perhaps as part of a portfolio, a smaller amount at the right price
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 18, 2013, 07:06:52 AM
Gio, is BH a 7.5% or 15% holding for you?

Its rare to find a good stock jockey/compounder. Probably rare/uncommon to recognize or properly identify them at an early stage. Perhaps especially rare to have with the integrity of WEB or Watsa.

Maybe its the Wall Street culture. Maybe its a Hedge Fund culture. Sardar after all is a hedge fund manager (no offence to the fine folks here). He is very young with a lot of success, that does effect your brain i.e cockiness and arrogance.

I have to give him credit for being up front. If he is going to "screw"you at least he is going to let you know first, unlike some of our CEO's recently that do it behind secretly (I am thinking Tom Ward, and recently Chad W at FTP). I get the feeling this happens regularily and is acceptable as long as you perform.

Sardar Bigliari- aggressive, arrogant, ambitious, ruthless, impressive track record, perhaps ego maniac- but do you trust him? Will he change/soften as he matures? Do you trust him less than some of these other guys on Wall street? If he ends up being honest you might be getting a bargain i.e. price of BH discounts this risk.

Controversy seems to have started after his hedge fund was acquired. In return he got this sweet pay package  and then the name change and putting picture of himself in all the SNS restaurants-both obnoxious. Having a cap on pay of $10 million is something I could live with it. I might be wrong, but I rationalize this as the price that needed to be paid in order for him to give up the pay he would have gotten running his hedge fund and also to have him committed 100% to BH long term.

Months ago my thinking was that I could not partner with his type of personality. Privately I would not- as its not worth money to put up with the stress. But perhaps as part of a portfolio, a smaller amount at the right price

Hi biaggio!
Right now it is a 4.5% position (the smallest in my portfolio), that I would gladly increase to 7.5%, if a correction comes.
Here I would also reply to Hielko’s last post.
I tend to focus on the process very much. I really think there are some patterns that I recognize as successful. And I want to partner with entrepreneurs who have molded their business in accordance with those patterns. They are essentially ways of managing operations and ways of deploying capital. In this framework of mine character traits have almost no place. That is because I have an extremely hard time inferring anything from a character trait. I mean, a lot of very successful entrepreneurs have much in common in the ways they manage operations and deploy capital. Yet they might possess very different characters and personalities. Beyond honesty, which is absolutely required for business success, but which I wouldn’t exactly label a character trait, I have a very hard time to judge, for instance, how much humbleness on the one hand and arrogance on the other might influence business success… I dare say sometimes you should be humble, sometimes you should be arrogant… arrogance, for instance, might help you stand your ground when the crowd moves momentarily against you… of course, it would kill you, if because of it you cannot recognize your errors… yet, I am not sure arrogance per sé always keeps you from admitting your mistakes... I have met many arrogant people who weren’t endowed with a bit of self-criticism, but I also know some arrogant people who instead are... Likewise, arrogance per sé won’t certainly give you power of will... You see? Imo, too many shades of grey!
Then, why not a 15% position? Because the patterns I recognize might certainly be incomplete. Just because I cannot infer much from character traits doesn’t automatically mean character traits are not crucial to business success. In fact, a lot of people, that I have much respect for on this board, actually think they are! So, I like how Mr. Biglari manages BH’s operations and how he deploys its capital very much. Yet I must acknowledge my inability to judge how much behavioral flaws might get in the way and spoil things. How have I chosen to cope with that limitation of mine? Capping for now my position in BH at 4.5%.

Just a few words about “serial entrepreneurs”: I had already heard the expression, so my best guess is that they exist… though, if they actually do, I have still to meet one! I agree that failure might be catastrophic for a retiree (of course, then, he shouldn’t have dabbled with stock picking in the first place, and be content buying an index!), but failure is not benign to entrepreneurs either.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 18, 2013, 10:35:29 AM
Controversy seems to have started after his hedge fund was acquired. In return he got this sweet pay package  and then the name change and putting picture of himself in all the SNS restaurants-both obnoxious. Having a cap on pay of $10 million is something I could live with it. I might be wrong, but I rationalize this as the price that needed to be paid in order for him to give up the pay he would have gotten running his hedge fund and also to have him committed 100% to BH long term.

Don't forget "Biglari Designs" as well.  That cap will only stay as long as they don't have the votes to remove it.  It will go eventually. 

Incidentally, think about the people who have left Biglari Holdings.  People who were there from the beginning when he wanted to take over Western Sizzlin, then helped him turn around Steak'n Shake, and then the manager whose fund business he bought.  How many people have left Buffett, the Markels, Prem et al?  You can count them on one hand after 20, 30, 40, 50 years of business. 

If the stock tanked, I would buy some, regardless of Sardar, because at some point it will be a value.  But once that cap is removed, a greater portion of the intrinsic value of the company gets reallocated to Sardar.  Buyer beware...make sure the margin is adequate with BH.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: biaggio on April 18, 2013, 01:23:27 PM
``Don't forget "Biglari Designs" as well.``

Is there some sort of side deal with Sardar

Do you think he would need 51% of shares to change cap. Maybe by that time it won t matter , heck he ll own more than half the company. Maybe he ll be older and wiser.

At some point a man has to worry about his reputation, have some self respect, especially when you re in the public light- who wants there moms or kids to hear of how much of a douche bag you are. How much is enough. If you re a sociopath then there is not much hope-by definition you have no consideration for others, ever.

Having folks quit your team is not a good sign.

I really would like to believe that the bad optics are mistakes due to his youth and in 10 or 15 years he will be seen differently.

Probably the young, really ethical, trust worthy, compounders of the future were at your Fairfax meeting and are not well known yet.
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 18, 2013, 01:57:06 PM
``Don't forget "Biglari Designs" as well.``

Is there some sort of side deal with Sardar

Do you think he would need 51% of shares to change cap. Maybe by that time it won t matter , heck he ll own more than half the company. Maybe he ll be older and wiser.

At some point a man has to worry about his reputation, have some self respect, especially when you re in the public light- who wants there moms or kids to hear of how much of a douche bag you are. How much is enough. If you re a sociopath then there is not much hope-by definition you have no consideration for others, ever.

Having folks quit your team is not a good sign.

I really would like to believe that the bad optics are mistakes due to his youth and in 10 or 15 years he will be seen differently.

Probably the young, really ethical, trust worthy, compounders of the future were at your Fairfax meeting and are not well known yet.

When you are constantly fearful of others usurping your position, it doesn't matter how old you are.  Every move from when he got control of Steak'n Shake has been to solidify that control.  Buffett created loyal shareholders through mutual respect and enormous humility...as did Prem.  That's not what is going on at BH.

What does Berkshire Hathaway's name represent to Buffett...his worst investment mistake!

What does Fairfax's name represent to Prem...fair and friendly acquisitions!

What does Biglari Holdings name represent to Sardar?   ;D

David Lau sent me a quote from Ghandhi yesterday:

Keep your thought positive, because your thoughts become YOUR WORDS.
Keep your words positive, because your words become YOUR BEHAVIOR.
Keep your behavior positive, because your behaviour becomes YOUR HABITS.
Keep your habits positive, because your habits become YOUR VALUES.
Keep your values positive, because your values become YOUR DESTINY.


If I read that right now, and looked at much of what has transpired at BH outside of the economic gains, I would be shitting myself right now if I was a shareholder!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 19, 2013, 12:03:30 AM
When you are constantly fearful of others usurping your position, it doesn't matter how old you are.  Every move from when he got control of Steak'n Shake has been to solidify that control.  Buffett created loyal shareholders through mutual respect and enormous humility...as did Prem.  That's not what is going on at BH.

It is precisely because he is afraid of and threatened by losing control that his behavior might have been questionable...
I remember Mr. Munger referring to the Mr. Buffett of the early ‘70s as “the serial acquirer”… Probably, way back then it wouldn’t have been pleasant to stand in Mr. Buffett’s way… Mr. Watsa has full control over Fairfax, if not as a majority shareholder, at least through the ownership of voting shares. Right?
I say this not to excuse improper behavior, but just to point out that maybe biaggio is right, and when Mr. Biglari finally gets full control, he will also behave very differently…
In business the threat of losing control is a very real and dangerous one! It is impossible to always be proven right by the market and to always grow with the same high speed… year after year, month after month! And, if you have not full control, it is easy that people, who, instead of focusing on the process, focus just on results (even worse, quarterly results!), might start questioning your judgment and your way of managing operations and deploying capital. Then, you are in serious trouble, the whole organization actually is!

Parsad,
Don’t you think this might somehow explain Mr. Biglari’s behavior until now?

Thank you,

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Title: Re: BH - Biglari Holdings
Post by: ragu on April 19, 2013, 07:38:50 AM
I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.   

onyx1,

Appreciate your response. I misunderstood what you were saying. I thought you'd seen something during the time of the SNS proxy contest that lead to your conclusions re. Sardar.

FWIW, the cap doesn't matter to me. Neither does the hurdle rate. I am certain that the incentive agreement will be rescinded in time. And so long as Sardar stays healthy, long-term shareholders will do well.

Best,
Ragu

Title: Re: BH - Biglari Holdings
Post by: Saidal on April 19, 2013, 08:04:24 AM
Did anyone on the board attend the agm or see any notes posted? I'm curious what was discussed/brought up.
Title: Re: BH - Biglari Holdings
Post by: premfan on April 19, 2013, 09:05:54 AM
I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.   

onyx1,

Appreciate your response. I misunderstood what you were saying. I thought you'd seen something during the time of the SNS proxy contest that lead to your conclusions re. Sardar.

FWIW, the cap doesn't matter to me. Neither does the hurdle rate. I am certain that the incentive agreement will be rescinded in time. And so long as Sardar stays healthy, long-term shareholders will do well.

Best,
Ragu

I'm thinking i heard something similar on american greed last week.  To each its own man. good luck
Title: Re: BH - Biglari Holdings
Post by: ragu on April 19, 2013, 09:42:28 AM
I'm thinking i heard something similar on american greed last week.  [...]

premfan,

I am not sure I understand. Could you elaborate on that?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: premfan on April 19, 2013, 10:05:30 AM
I'm thinking i heard something similar on american greed last week.  [...]

premfan,

I am not sure I understand. Could you elaborate on that?

Best,
Ragu

The statement above was a joke :D.  Shareholders dont need to rationalize shady behavior just accept it. Just accept that the people you do business with doesnt matter if they promise riches.  Just be honest and say you are looking for the next brk/luk and actions dont matter.  You did which is great cause most shareholders try to rationalize cognitive dissonance.  Investing in biglari holdings above BV where fairfax is trading around BV is madness if you are looking for compounders and the next brk/luk.  To make money you need leverage. Many types of leverage:  hedge funds, royalty fees, cheap debt, insurance float, and etc  Biglari is the master of leveraging his shareholders for personal income gain. The shareholders are his leverage.  How does biglari use his shareholders? Easy the blueprint is there.  Model Buffet and target market value investors. Biglari holding is his leverage for becoming rich. Yes shareholders will get a little piece of the pie. Beggars cant be choosers. I'm done talking about this topic.
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 19, 2013, 10:12:23 AM
I'm thinking i heard something similar on american greed last week.  [...]

premfan,

I am not sure I understand. Could you elaborate on that?

Best,
Ragu

The statement above was a joke :D.  Shareholders dont need to rationalize shady behavior just accept it. Just accept that the people you do business with doesnt matter if they promise riches.  Just be honest and say you are looking for the next brk/luk and actions dont matter.  You did which is great cause most shareholders try to rationalize cognitive dissonance.  Investing in biglari holdings above BV where fairfax is trading around BV is madness if you are looking for compounders and the next brk/luk.  To make money you need leverage. Many types of leverage:  hedge funds, royalty fees, cheap debt, insurance float, and etc  Biglari is the master of leveraging his shareholders for personal income gain. The shareholders are his leverage.  How does biglari use his shareholders? Easy the blueprint is there.  Model Buffet and target market value investors. Biglari holding is his leverage for becoming rich. Yes shareholders will get a little piece of the pie. Beggars cant be choosers. I'm done talking about this topic.

Fantastic post!  I couldn't agree more. 

Investors are choosing BH at above book, compared to Fairfax at or below book...crazy!  Prem or Sardar?  Hands down there is only one rational choice there!  Especially when one has the enormous advantage of float and their team has a far superior record to creating shareholder value.  You don't even have to consider ethics...just common sense would dictate you pick Fairfax over BH!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: ragu on April 19, 2013, 11:35:43 AM
You did which is great cause most shareholders try to rationalize cognitive dissonance. 


premfan,

I don't believe you understand me. I didn't say Sardar's actions don't matter. Of course they do. And, in my assessment (and those of his longest-tenured partners), the intent behind those actions is fine.

Buffett has oft spoken about the importance of an "internal scorecard". IMO, Biglari has a pretty good (and functioning) internal scorecard. I don't worry about Biglari's integrity not because it doesn't matter, but because he has it.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: rranjan on April 19, 2013, 01:28:14 PM
I don't worry about Biglari's integrity not because it doesn't matter, but because he has it.

Best,
Ragu

Bilgari and having integrity? I guess you have different scale of integrity then.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 20, 2013, 01:06:15 AM
I'm thinking i heard something similar on american greed last week.  [...]

premfan,

I am not sure I understand. Could you elaborate on that?

Best,
Ragu

The statement above was a joke :D.  Shareholders dont need to rationalize shady behavior just accept it. Just accept that the people you do business with doesnt matter if they promise riches.  Just be honest and say you are looking for the next brk/luk and actions dont matter.  You did which is great cause most shareholders try to rationalize cognitive dissonance.  Investing in biglari holdings above BV where fairfax is trading around BV is madness if you are looking for compounders and the next brk/luk.  To make money you need leverage. Many types of leverage:  hedge funds, royalty fees, cheap debt, insurance float, and etc  Biglari is the master of leveraging his shareholders for personal income gain. The shareholders are his leverage.  How does biglari use his shareholders? Easy the blueprint is there.  Model Buffet and target market value investors. Biglari holding is his leverage for becoming rich. Yes shareholders will get a little piece of the pie. Beggars cant be choosers. I'm done talking about this topic.

Fantastic post!  I couldn't agree more. 

Investors are choosing BH at above book, compared to Fairfax at or below book...crazy!  Prem or Sardar?  Hands down there is only one rational choice there!  Especially when one has the enormous advantage of float and their team has a far superior record to creating shareholder value.  You don't even have to consider ethics...just common sense would dictate you pick Fairfax over BH!  Cheers!

Parsad & premfan,
no one is saying buy BH instead of FFH! My firm’s portfolio is 31.1% in FFH and only 4.8% in BH.
But what I call “the man at the helm risk” should always be considered.

If I could trade like Eric, whose portfolio was 0% in FFH 4 months ago, whose portfolio now is 50% in FFH, and whose portfolio will yet again be 0% in FFH after the next crisis, well, I wouldn’t care at all about “the man at the helm risk”! Yet, unfortunately…, I am not like Eric! Think of it: to trade like Eric, you not only have to get the big picture right, you must also get it more right than Mr. Watsa. Your timing must be better than Mr. Watsa’s. Otherwise, why bother jumping in and out FFH?! Clearly, I am not that person.

Instead, when I make an investment, or when I start a new business venture, I always think in terms of 10 years at least, and I always ask myself: what’s the quality of the people I am partnering with? How long will the partnership last? Alas, the answer to the second question is always at best only a guess. For instance, even young, talented, and trustworthy people cannot control illness or accident…

Therefore, you must have some diversification. That’s the only reason I put some capital in my second, third, fourth, etc. best ideas.
Do you think it is so crazy?

Thank you! :)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragu on April 23, 2013, 07:07:29 AM
Bilgari and having integrity? I guess you have different scale of integrity then.

The moral high horse you are riding on is blind to reason.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Kraven on April 23, 2013, 07:15:55 AM
Last year in Omaha I found myself standing next to him at a bar.  He looked like he could have stepped right out of the pages of GQ.  His hair was perfectly coiffed and from the distance I could hear Fleckenstein howling with jealousy.  Warren Zevon would have approved.
Title: Re: BH - Biglari Holdings
Post by: rranjan on April 23, 2013, 09:23:07 AM
Bilgari and having integrity? I guess you have different scale of integrity then.

The moral high horse you are riding on is blind to reason.

Best,
Ragu

Most people will find it very difficult to say that Bilgari is man with high integrity. He has changed rules of the game in middle so many times for only one reason. All evidence points to contrary.
Title: Re: BH - Biglari Holdings
Post by: ragu on April 23, 2013, 12:57:41 PM
All evidence points to contrary.

Hmm. I asked a couple of questions (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/sardar-biglari-i'm-calling-some-of-you-out-on-this-guy/msg110933/#msg110933) on another thread that hasn't elicited a response.

Those aren't hard questions by any stretch of the imagination, but the answers-and their implications-might be pretty uncomfortable to face up to if you are a Sardar detractor. I'd be happy for you (or anyone else) to give those questions a go and see where that gets you.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 23, 2013, 01:19:21 PM
All evidence points to contrary.

Hmm. I asked a couple of questions (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/sardar-biglari-i'm-calling-some-of-you-out-on-this-guy/msg110933/#msg110933) on another thread that hasn't elicited a response.

Those aren't hard questions by any stretch of the imagination, but the answers-and their implications-might be pretty uncomfortable to face up to if you are a Sardar detractor. I'd be happy for you (or anyone else) to give those questions a go and see where that gets you.

Best,
Ragu

mpauls,

Couple of things that should provide some food for thought to you (and the other detractors):

1. Which set of investors have been with Sardar the longest?
2. How have they responded to the incentive agreement and Sardar's subsequent actions?

Best,
Ragu


Why don't you let me give it a shot:

1.  I received numerous calls from a subset of that set of investors when those issues came to light...they were distressed and upset.  I also received calls from SNS shareholders...both individual and institutional.  I also turned away requests from the media on the subject, as we do not speak to the media...but I certainly could have.  Many investors have made money with him over the years...people are willing to overlook many flaws when they are making money.  Hands down, I would much prefer to be aligned with Berkshire Hathaway, Fairfax Financial, Markel and Leucadia.  He has even told you guys that they are not the next Berkshire Hathaway...he will make money, but not how many will perceive to be the "right" way.

2.  Some have sold.  Several of the closest allies to Sardar have left, including those that helped him take over Western Sizzlin and Steak'n Shake.  I was one of his biggest proponents at one time, if the archive here does not indicate that!  We were also the only people who sent a letter to the board when the name change was initiated.  Again, people are willing to overlook errors in judgment when they are making money.  We weren't willing to do so!  We sold half our stake then, and we sold the other half after the compensation agreement was announced.  I had a two hour conversation with Sardar and Phil in Omaha that weekend at their initiation...not unlike Onyx1.  I tried to talk them out of it to no avail, to even raise the hurdle or lower the incentive as they had an advantage with captive capital.  They would not listen.  We sold our shares the next week after they had gone up 4 times in a year and a half.  We've made more money for our partners by selling BH, than we would have made by holding it since.  And I don't lose any sleep as we did what was ethical, and fought for a fair compensation plan for all shareholders.  Your CEO didn't listen and he's not going to!  As long as you understand that, it doesn't matter what any of us say and you are comfortable with that.   

Sardar will make money over time...lots!  He will undoubtedly be rich.  The question is, upon whose back is he going to make his fortune on?  Again, there is nothing wrong with what he is doing...he just wants to make money.  But so does Kim Kardashian!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: bookie71 on April 23, 2013, 01:27:38 PM
Parsad,
Well put!
Title: Re: BH - Biglari Holdings
Post by: ragu on April 23, 2013, 02:00:00 PM
1.  I received numerous calls from a subset of that set of investors when those issues came to light...they were distressed and upset.

If you are talking about the LP's in the Lion Fund, then it must have been a very small subset indeed, seeing as the overwhelming majority have stayed on. In fact, by staying on, they are paying more than they were paying before by virtue of the Lion Fund's ownership of BH stock.

The problem here was that Sardar didn't have a meaningful ownership stake in BH. He said as much at last year's AM. They tried addressing it though this arrangement. You can argue all day long about the mechanics, but the intent wasn't to advantage Sardar over shareholders. In the fullness of time, I expect you'll see that the present value of the cash flows from the Lion Fund to BH will outweigh the present value of the compensation payments to Sardar.

The outcome with respect to the incentive agreement is so clear that I'll make a wager with you (and anyone else that's interested, up to a maximum of 3 individual wagers):

The incentive agreement will no longer be in force on or before the date of the 2021 Annual Meeting (10 full years since it was first approved).

At stake will be a share of BH (or cash equivalent to market value on the date the wager is considered ended). The winner gets to pick the charity that the proceeds will go to. Sound alright?

Best,
Ragu


Title: Re: BH - Biglari Holdings
Post by: Parsad on April 23, 2013, 02:16:39 PM
1.  I received numerous calls from a subset of that set of investors when those issues came to light...they were distressed and upset.

If you are talking about the LP's in the Lion Fund, then it must have been a very small subset indeed, seeing as the overwhelming majority have stayed on. In fact, by staying on, they are paying more than they were paying before by virtue of the Lion Fund's ownership of BH stock.

The problem here was that Sardar didn't have a meaningful ownership stake in BH. He said as much at last year's AM. They tried addressing it though this arrangement. You can argue all day long about the mechanics, but the intent wasn't to advantage Sardar over shareholders. In the fullness of time, I expect you'll see that the present value of the cash flows from the Lion Fund to BH will outweigh the present value of the compensation payments to Sardar.

The outcome with respect to the incentive agreement is so clear that I'll make a wager with you (and anyone else that's interested, up to a maximum of 3 individual wagers):

The incentive agreement will no longer be in force on or before the date of the 2021 Annual Meeting (10 full years since it was first approved).

At stake will be a share of BH (or cash equivalent to market value on the date the wager is considered ended). The winner gets to pick the charity that the proceeds will go to. Sound alright?

Best,
Ragu

Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.  Once he has the votes or enough control, the cap and the incentive agreement will disappear.  He put the incentive agreement in place, because he felt that if Steak'n Shake had gone down, he would have lost everything after years of work, because he had bet it all on SNS.  He decided then he was going to worry about number one...himself! 

As for those partners who have not left, they should ask themselves what would have happened if the SNS experience was repeated and he lost that bet!  Think Ackman with Target, Herbalife or JC Penny.  This guy loves leverage and letting the dice roll.  Unfortunately, one day you will learn the hard way.  Cheers! 
Title: Re: BH - Biglari Holdings
Post by: ragu on April 23, 2013, 02:27:52 PM
Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.

Like you did in this (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/new-steak'n-shake-prototype-store/msg71626/#msg71626) post, eh?

First line from that post:

Quote
What?!     Why would he terminate the incentive agreement at any point?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 23, 2013, 02:45:12 PM
Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.

Like you did in this (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/new-steak'n-shake-prototype-store/msg71626/#msg71626) post, eh?

First line from that post:

Quote
What?!     Why would he terminate the incentive agreement at any point?

Best,
Ragu

You read the whole post above...right?

Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.  Once he has the votes or enough control, the cap and the incentive agreement will disappear.

He won't remove the incentive agreement or cap until he has control.  That's what was meant by that previous post you linked.  He will keep them in place until he doesn't need them anymore, and he won't remove them as he will own more and more of the company over time.  But it's your investment...do what you want!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: rranjan on April 23, 2013, 02:53:40 PM

The problem here was that Sardar didn't have a meaningful ownership stake in BH. He said as much at last year's AM. They tried addressing it though this arrangement. You can argue all day long about the mechanics, but the intent wasn't to advantage Sardar over shareholders.

That problem should be fixed by him earning and then buying shares, simple as that. You don't take away shareholder's money to fix such personal problems of CEO. You can also make a case of transferring 50% of company to him immediately at expense of shareholders because that solves this problem even quicker. What he says is not worth anything because his actions have been lot different than what he said few years ago.

There is no need to argue all day for this. For me action speaks louder than words. Based on Bilgari actions, I will have hard time to keep a straight face while stating that he is a man with high integrity. If you think that he is a man with high integrity , then good luck to you. Hopefully you make lot of money but watch out for your wallet.

We just need to agree to disagree and move on.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on April 23, 2013, 05:08:41 PM
That's another interesting way to make a lot of money, the problem is it would be off shareholders.
It has been hinted the 10 million cap will be removed in the future (it was originally proposed for unlimited of course) if he can buy stock for 8 years at depressed prices because 1/4th of the cash flows are diverted to him and then remove the cap the stock would definitely skyrocket.

I don't have an opinion either way what will happen but that is definitely a way for him to make a ton of money.

So far the lion fund (without Bh) has 50 million the past 3 years and if he is earning 15-20% on that 50 million he is forgoing about 1.5 million a year from the lion fund. That's a big gap from 10 million or higher once the cap is removed. I'm not sure the present value argument of what he gave up and what has accreted to Bh shareholders is valid, at least so far.

On a completely different topic, he's definitely done a great job with cracker barrel so far.
Title: Re: BH - Biglari Holdings
Post by: ragu on April 23, 2013, 10:17:37 PM
Once he has the votes or enough control, the cap and the incentive agreement will disappear.

I can only presume that you mean that the cap will go away once he has enough votes and the incentive agreement will disappear once he has enough control . However, that wasn't your stance in the post that I linked to.

You said (and the quotes are below) that he wouldn't terminate the agreement at any point and that he will remove the cap once he has enough votes for it to pass.

Quote
What?!     Why would he terminate the incentive agreement at any point?

Quote
The $10m cap right now keeps Sardar from getting more and more of the company, but once he has enough votes, do you think he will really retain the cap after the behavior he has shown in the past already?  Greed and power know no bounds!

You really haven't said "all along" that the incentive agreement would disappear. If you think now that the incentive agreement won't last forever, then it represents a change in your stance.

I only proposed the wager because I knew you'd been incredulous when I'd suggested that the incentive agreement would be terminated at some point in the future. My last word in this matter.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 23, 2013, 11:47:47 PM
Once he has the votes or enough control, the cap and the incentive agreement will disappear.

I can only presume that you mean that the cap will go away once he has enough votes and the incentive agreement will disappear once he has enough control . However, that wasn't your stance in the post that I linked to.

You said (and the quotes are below) that he wouldn't terminate the agreement at any point and that he will remove the cap once he has enough votes for it to pass.

Quote
What?!     Why would he terminate the incentive agreement at any point?

Quote
The $10m cap right now keeps Sardar from getting more and more of the company, but once he has enough votes, do you think he will really retain the cap after the behavior he has shown in the past already?  Greed and power know no bounds!

You really haven't said "all along" that the incentive agreement would disappear. If you think now that the incentive agreement won't last forever, then it represents a change in your stance.

I only proposed the wager because I knew you'd been incredulous when I'd suggested that the incentive agreement would be terminated at some point in the future. My last word in this matter.

Best,
Ragu

Think what you like.  Are you seeking approval from the board...if so, you are barking up the wrong tree.  I'll simplify and qualify exactly what I want to say on this matter once and for all:

Many actions in the last few years, from the name change, salary changes, incentive agreement, eventual cap on the compensation, dual class structure, restructuring of the board and licensing of the name have been to achieve one thing...greater control of the company.  Some occurred right away, and some issues were put on the back burner because he could not get approval from shareholders. 

Your objectivity on the matter is skewed because you REALLY want to believe that this person will not screw you over, yet so many of the above actions indicate that you are either with the CEO or you are perceived to be against him.  Yet the CEO is the employee of the shareholders! 

And this is the distinction you are missing here between this CEO and others who like Buffett, Prem, the Markels, Patrick Byrne and many others, are there to SERVE the shareholders!  A very marked distinction that breeds loyalty, trust and mutual respect between the executives and the true OWNERS of the business! 

It's something I take very seriously with the partners in my funds.  I would much rather I come out on the wrong end and lose everything, while my partners gain everything, than to lose an ounce of reputation with our partners or change the game on them at various points.  We don't do that...money isn't that important to me or Alnesh!  You cannot make people respect you...you have to earn it!  And you breed the wrong type of respect if you think it comes from just "making some damn money".  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 24, 2013, 12:08:07 AM
The outcome with respect to the incentive agreement is so clear that I'll make a wager with you (and anyone else that's interested, up to a maximum of 3 individual wagers):

The incentive agreement will no longer be in force on or before the date of the 2021 Annual Meeting (10 full years since it was first approved).

At stake will be a share of BH (or cash equivalent to market value on the date the wager is considered ended). The winner gets to pick the charity that the proceeds will go to. Sound alright?

Best,
Ragu

Well, you certainly cannot say that ragu lacks the conviction of his ideas!!  ;D ;D

As far as I am concerned, I tend to just stick to the process. Because I don’t believe in devils as much as I don’t believe in angels. Good businessmen just understand that to create truly lasting wealth the only way is to make their business grow and thrive. Cheating all your life simply is the riskiest of policies!! And, believe me, in Italy we are the masters of cheating… yet, I do not personally know of a single case that at the end wasn’t reached by disappointment and failure…

So, in my experience the only ones who go on cheating are those forced to do so, because they lack a good process.

Mr. Biglari is clearly not the case. On the contrary, I like how he conducts his business very much. And to those who go on repeating he uses a lot of leverage, I go on answering that I disagree: he just concentrates BH capital on a few ideas he understands very well, like any entrepreneur does! Ok, he will never be a widely diversified trader, but to be a widely diversified trader is not the only way to financial success… like many great entrepreneurs have shown throughout history.
Moreover, as BH grows, also the number of businesses it controls will. That way automatically increasing diversification. ;)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: premfan on April 24, 2013, 07:03:32 AM
Can this thread be closed? Its like in the movie groundhog's day with bill murray where he relives the same day over and over again. Every post is essentially saying the same thing.  I think we all can agree to disagree and focus on making some damn money!
Title: Re: BH - Biglari Holdings
Post by: shalab on April 24, 2013, 07:37:13 AM
I think it is very educational - Ragu, if you don't mind can you share what percentage of your portfolio is in BH.
Title: Re: BH - Biglari Holdings
Post by: GrizzlyRock on April 24, 2013, 08:34:08 AM
I agree with premfan - this thread is dead.

Most guys dislike BH and some like BH. Either Sardar blows up or doesn't and he either screws minority shareholders or not. 

Peace out.
Title: Re: BH - Biglari Holdings
Post by: bookie71 on April 24, 2013, 08:47:50 AM
I agree with premfan - this thread is dead.

Most guys dislike BH and some like BH. Either Sardar blows up or doesn't and he either screws minority shareholders or not. 

Peace out.
Yep and most of his distractors were supporters early on.
Title: Re: BH - Biglari Holdings
Post by: Kraven on April 24, 2013, 09:22:47 AM
People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

So I say to you, people, please stop, we're all value investors here. 
Title: Re: BH - Biglari Holdings
Post by: infinitee00 on April 24, 2013, 09:35:20 AM
People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

So I say to you, people, please stop, we're all value investors here.

LOL ! Nice one Kraven. Enjoyed it especially after the cat fight above ;-D
Title: Re: BH - Biglari Holdings
Post by: ragu on April 24, 2013, 09:44:11 AM
I think it is very educational - Ragu, if you don't mind can you share what percentage of your portfolio is in BH.

shalab,

Don't mind at all. BH is 71.5% of my portfolio based on latest market values. One of 2 current positions.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: twacowfca on April 24, 2013, 09:49:55 AM
People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

So I say to you, people, please stop, we're all value investors here.

Good advice, and as one of your inlaws from a related tribe, I will pray for Mr. Biglari that Giofranchi's vision for him will come to pass.  :)
Title: Re: BH - Biglari Holdings
Post by: Kraven on April 24, 2013, 09:58:26 AM
People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

So I say to you, people, please stop, we're all value investors here.

LOL ! Nice one Kraven. Enjoyed it especially after the cat fight above ;-D

I'm just truly hoping this doesn't turn into the coat room at the Palladium all over again.
Title: Re: BH - Biglari Holdings
Post by: onyx1 on April 24, 2013, 10:52:37 AM
I will pray for Mr. Biglari that Giofranchi's vision for him will come to pass.  :)
+1 
 
I won't hurt me a bit to see BH thrive.  So in the spirit of Vilfredo Pareto, I hope the BH dreams of Giofranchi, Ragu, and all other boardmember longs come true!   
 
P.S.  LOL @ Kraven story!
Title: Re: BH - Biglari Holdings
Post by: bookie71 on May 19, 2013, 09:46:26 AM
fyi
http://seekingalpha.com/news-article/6589521-biglari-holdings-inc-news-release?source=email_portfolio&ifp=0
Title: Re: BH - Biglari Holdings
Post by: ragu on June 12, 2013, 08:25:40 AM
I agree with premfan - this thread is dead.

GrizzlyRock,

Sorry you feel that way. In the interest of thread resuscitation - and hopefully some learning, I'd like to offer some thoughts on your write-up (I've been meaning to for a while). FWIW, I'm in agreement in with your conclusion, but not with most of the reasoning.

I'll start with the one that stands out the most.

You come up with a then-current price/book ratio of 1.5 (we'll set aside an issue with this calculation for now, which will likely reduce the size of the error, but not eliminate it).  Yet, in your liquidation value analysis, you estimate that BH was selling essentially at liquidation value.

Given that your liquidation value analysis discounts the value of certain assets, this is a mathematical impossibility. What are you missing?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: cogitator99 on July 09, 2013, 06:29:40 AM
Anyone have recent thoughts on the company after CBRL's rise?
Title: Re: BH - Biglari Holdings
Post by: TheValueDude on July 25, 2013, 03:17:10 PM
Anybody want to help me make sense of the most recent SEC filing http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9406804-1120-194920&type=sect&TabIndex=2&companyid=11049&ppu=%252fdefault.aspx%253fsym%253dBH (http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9406804-1120-194920&type=sect&TabIndex=2&companyid=11049&ppu=%252fdefault.aspx%253fsym%253dBH) (7/19)? Looks like he's doing a rights offering trying to raise $75mm. Then it goes into how he's restructured the arrangement with The Lion Fund and sold Biglari Capital to himself...

Also, how does http://www.mysanantonio.com/business/local/article/Biglari-funds-raise-combined-415M-4668659.php (http://www.mysanantonio.com/business/local/article/Biglari-funds-raise-combined-415M-4668659.php) fit in with all this?

Anybody keeping up with it have thoughts?
Title: Re: BH - Biglari Holdings
Post by: wescobrk on July 25, 2013, 04:21:05 PM
It's a bit cumbersome to go through it all.
BH gave about 350 million to the lion fund which Sardar owns and bh is now a limited partner.
I'm still not clear if he still gets the 10.9 million for running Bh and if it exceeds book value.
If this is converted to a franchise for steak n shake instead of company owned primarily the roe will soar and he'll earn 11 million every year. If the cap is removed he'll earn a lot more than that.
It looks like he'll earn about 15 million ballpark if he earns close to 20 percent in year 1 for the lion funds since it's about 415 million.
So close to 26 million and more each year and a lot more if converts steak n shake all to franchise instead of company owned
Title: Re: BH - Biglari Holdings
Post by: gg on August 06, 2013, 01:45:14 PM
Filings about BH's rights offering just released -
http://edgar.sec.gov/Archives/edgar/data/93859/000092189513001537/ex991to8k07428_08062013.htm

Title: Re: BH - Biglari Holdings
Post by: kh812000 on August 06, 2013, 02:07:30 PM
Seems like a steal.  $265 strike vs $428.
Even at $428 is a 50c dollar considering 50mm FCF from restaurant ops and 20% stake in CRBL....
Why is this stock trading so cheap?
Title: Re: BH - Biglari Holdings
Post by: Parsad on August 06, 2013, 02:15:36 PM
Good way to raise capital.  Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy.  Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book.  But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. 

Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea.  That's when I first became a shareholder...about 6-7 months before they did this.  I have no clue why more companies don't do this!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on August 06, 2013, 02:27:48 PM
any thoughts on what BH will do with the capital raised?

My guess is a small, boring insurance company with excellent underwriting...maybe the rest of UNAM?
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 06, 2013, 02:37:18 PM
Good way to raise capital.  Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy.  Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book.  But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. 

Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea.  That's when I first became a shareholder...about 6-7 months before they did this.  I have no clue why more companies don't do this!  Cheers!

it tends to be used by savvy capital allocators as a way to increase their grip on the company.
Title: Re: BH - Biglari Holdings
Post by: gg on August 06, 2013, 03:13:10 PM
My understanding after reading:

3 possible outcomes:
1) you don't subscribe = you lose because you just subsidized others' purchases
2) you subscribe, and everyone else subscribes = you are in a similar position as when this started but with larger exposure to BH
3) you subscribe and others don't subscribe and you then purchase those additional discounted shares = you win because non-subscribers just subsidized your purchases (From 8-K - "Shareholders...will also be entitled to subscribe for and purchase additional shares of common stock not purchased by other Rights holders")

The real opportunity seems to be scenario #3; if other investors decline participation in the transfer right, and then you hope to subscribe for, and get to purchase, those additional shares that were declined by other investors for the largely discounted price. Seems like a way of not just raising capital, but also a way to shift the investor base towards those shareholders that are more aligned with Biglari's longer-term plans (at the expense of those shareholders who are less willing/able to increase their financial exposure to BH).

No commentary here on the pros or cons of this sort of deal, just trying to make sure I understand it. And to that point, this is my understanding of the filing after one reading--I'd be interested to hear from others if I am missing something.


Title: Re: BH - Biglari Holdings
Post by: wescobrk on August 06, 2013, 03:13:38 PM
any thoughts on what BH will do with the capital raised?

My guess is a small, boring insurance company with excellent underwriting...maybe the rest of UNAM?

I agree
Title: Re: BH - Biglari Holdings
Post by: Parsad on August 06, 2013, 03:17:51 PM
Good way to raise capital.  Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy.  Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book.  But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. 

Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea.  That's when I first became a shareholder...about 6-7 months before they did this.  I have no clue why more companies don't do this!  Cheers!

it tends to be used by savvy capital allocators as a way to increase their grip on the company.

Only if you have owners who do not subscribe.  It tends to increase ownership of anyone who subscribes and also purchases the maximum they can in the over-allotment from left-over unsubscribed units...not just any single shareholder.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: rkbabang on August 06, 2013, 06:09:29 PM
Good way to raise capital.  Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy.  Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book.  But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. 

Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea.  That's when I first became a shareholder...about 6-7 months before they did this.  I have no clue why more companies don't do this!  Cheers!

They did this more than once with Wester Sizzlin, I remember participating in this type of rights offering at least twice.

*EDIT:  I may be wrong about that.  I tried to look up the dates in my records and only found one in November of 2007.  I'm not sure why I thought I remembered another one.  Maybe I was thinking of something else.
Title: Re: BH - Biglari Holdings
Post by: GrizzlyRock on August 06, 2013, 08:18:33 PM
Why is this stock trading so cheap?

Because Sardar figured a nefarious way around his payment cap...

I bet he has a target in mind / LOI signed for the ~$76 million
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 06, 2013, 09:46:47 PM

Only if you have owners who do not subscribe.  It tends to increase ownership of anyone who subscribes and also purchases the maximum they can in the over-allotment from left-over unsubscribed units...not just any single shareholder.  Cheers!

but lots of owners don't subscribe. which is a well known fact by savvy allocators like Greenblatt, Price, Lampert, Malone, Ashner, Gabelli, Biglari. He will oversubscribe and increase his grip on bh at a discount. in fact just a cursory reading of this plan reveals that over subscription privileges here are not transferable. if I have that correct, if you sell your rights the person buying them can't oversubscribe. less competition. I was in a rights offering where I was able to double my position (via over subscription) in a company at $4.50 and a few weeks later the stock is over $6. cheers!
Title: Re: BH - Biglari Holdings
Post by: Parsad on August 06, 2013, 10:19:37 PM
if I have that correct, if you sell your rights the person buying them can't oversubscribe. less competition.

Wouldn't that mean that Biglari can't over subscribe as well? 

If you own 2% and he owns 15%, then the two of you would both increase your ownership the same on an overall percentage basis, if you both maxed out on your own shares and any excess warrants you could purchase.  Correct?  Cheers!
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 06, 2013, 10:42:54 PM
if I have that correct, if you sell your rights the person buying them can't oversubscribe. less competition.

Wouldn't that mean that Biglari can't over subscribe as well? 

If you own 2% and he owns 15%, then the two of you would both increase your ownership the same on an overall percentage basis, if you both maxed out on your own shares and any excess warrants you could purchase.  Correct?  Cheers!

you lose over subscription privileges only if you sell your rights. I could be wrong.
you are correct and I agree with your point. each shareholder has the same rights. some shareholders don't understand them or can't be bothered. rich get richer. :)  however, if someone has a grip on a company, he can increase his grip by oversubscribing. I can increase my ownership as well. but I don't have a grip (control) and won't, even if I increase my stake.

Malone famously got control of Liberty via a complex rights offering where he oversubscribed, when most shareholders were asleep at the wheel. cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 07, 2013, 09:17:30 AM
I have doubled my firm's investment in BH today. And I will buy as many shares at $265 as possible!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 07, 2013, 09:21:11 AM
I have doubled my firm's investment in BH today. And I will buy as many shares at $265 as possible!

giofranchi

do you know when the record date is for participation? thanks.
Title: Re: BH - Biglari Holdings
Post by: gg on August 07, 2013, 09:22:05 AM
And I will buy as many shares at $265 as possible!

giofranchi

That's only going to be beneficial in the "oversubscription privilege", so it's ultimately a bet on other shareholders not exercising their option. Any idea what level participation this type of deal usually attracts?
Title: Re: BH - Biglari Holdings
Post by: gg on August 07, 2013, 09:22:56 AM

do you know when the record date is for participation? thanks.


"The Rights are expected to trade “when issued” on the NYSE beginning on August 22, 2013, and shares of common stock of the Company are expected to trade “ex-Rights” on August 23, 2013. The Rights are expected to begin trading for normal settlement on the NYSE on or about August 29, 2013 and continue through the opening of trading on the expiration date."
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 07, 2013, 09:49:33 AM
And I will buy as many shares at $265 as possible!

giofranchi

That's only going to be beneficial in the "oversubscription privilege", so it's ultimately a bet on other shareholders not exercising their option. Any idea what level participation this type of deal usually attracts?

No, I am not sure... But, the way I see it, 1) BH already is cheap, 2) Mr. Biglari wouldn't do such a thing, if he hadn't the opportunity to use the new capital in an equity and earnings per share accreative way. If 1) and 2) are true, you basically get the rights to buy deeply undervalued shares for free. And, if you are lucky, you can buy more due to undersubsciption.

You must be a shareholder by August 27 to receive the rights.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: gg on August 07, 2013, 11:45:11 AM
The math looks like this:

Outstanding shares: 1.435 million
Book value ( accounting for tax liability): ~400 million
New book value: ~760 million
New book value per share: ~$265.00

Current market cap: ~$615 million



I don't understand where you are getting "new book value" from. My understanding of the valuation is below -- I assume there is no additional value being created in this situation aside from the increase in cash balance, and that the market values that additional cash on a dollar for dollar basis.

Pre-Offering         
   share price      428   
   old # shares    1,433,783    
   mkt cap           613,659,124    =(428*1,433,783)
         
Post offering         
   # new shares    286,756.60    =(old # shrs / 5)
   # total shares    1,720,540    =(old # shrs + new shrs)
   new cash           75,990,499    =(new shrs * 265)
   new mkt cap     689,649,623    =(old mkt cap + new cash)
   new share price   401            =(new mkt cap / new shares)



Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on August 07, 2013, 12:23:54 PM
I am with you  gg....it's a wash
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 07, 2013, 12:40:14 PM
I am with you  gg....it's a wash

unless you oversubscribe and get some shares.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 07, 2013, 12:44:55 PM
Equity right now is $440 million, because I think you should add the BH’s pro-rata ownership of its common stock through the Lion Fund, 99,800 shares.
So, with a market cap of $615 million, BH is trading for 615 / 440 = 1.4 x BV.
New BV will be $440 million + the cash received = $440 + $76 = $516.
With 1,720,540 share outstanding BVPS will be $300.
At the same multiple of 1.4, I expect a share price of $300 x 1.4 = $420.
If my reasoning is wrong, please correct me!
Of course, given the rate of growth in BH’s investments and given how shrewdly Mr. Biglari could deploy the newly raised $76 million, I think BH deserves a much higher multiple than 1.4, and I think the market will realize it, when Mr. Biglari announces his new target.
If you want, it can be viewed this way: Mr. Biglari’s new acquisition could become the catalyst this stock is waiting for a long time.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 07, 2013, 12:47:09 PM
I am with you  gg....it's a wash

unless you oversubscribe and get some shares.

wellmont,
how exactly do you oversubscribe? Do you have to purchase rights on the market?
Thank you,

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 07, 2013, 12:47:51 PM
Equity right now is $440 million, because I think you should add the BH’s pro-rata ownership of its common stock through the Lion Fund, 99,800 shares.
So, with a market cap of $615 million, BH is trading for 615 / 440 = 1.4 x BV.
New BV will be $440 million + the cash received = $440 + $76 = $516.
With 1,720,540 share outstanding BVPS will be $300.
At the same multiple of 1.4, I expect a share price of $300 x 1.4 = $420.
If my reasoning is wrong, please correct me!
Of course, given the rate of growth in BH’s investments and given how shrewdly Mr. Biglari could deploy the newly raised $76 million, I think BH deserves a much higher multiple than 1.4, and I think the market will realize it, when Mr. Biglari announces his new target.
If you want, it can be viewed this way: Mr. Biglari’s new acquisition could become the catalyst this stock is waiting for a long time.

giofranchi
sir new to the story. can you explain why you think this is worth more than 1.4 x book. isn't this an investment company? regards
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 07, 2013, 12:59:37 PM

sir new to the story. can you explain why you think this is worth more than 1.4 x book. isn't this an investment company? regards

Well, that for me is the easy part! Given its relatively small size, I think Mr. Biglari has still many opportunities to go on increasing capital at a 20% CAGR for many years to come. And anything which compounds capital near 20% yearly for many years is worth much more than 1.4 x BV.

I don’t want to talk about Mr. Biglari’s ethics here! That subject has already been touched too many times!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wellmont on August 07, 2013, 01:04:03 PM
I am with you  gg....it's a wash

unless you oversubscribe and get some shares.

wellmont,
how exactly do you oversubscribe? Do you have to purchase rights on the market?
Thank you,

giofranchi

gio ---exercise all your rights. then tell your broker that you want to oversubscribe  X number of shares where X = # of shares you are subscribing to with your issued rights. you give instructions for both at the same time. good luck!
Title: Re: BH - Biglari Holdings
Post by: gg on August 07, 2013, 01:09:19 PM
Equity right now is $440 million, because I think you should add the BH’s pro-rata ownership of its common stock through the Lion Fund, 99,800 shares.
So, with a market cap of $615 million, BH is trading for 615 / 440 = 1.4 x BV.
New BV will be $440 million + the cash received = $440 + $76 = $516.
With 1,720,540 share outstanding BVPS will be $300.
At the same multiple of 1.4, I expect a share price of $300 x 1.4 = $420.
If my reasoning is wrong, please correct me!
Of course, given the rate of growth in BH’s investments and given how shrewdly Mr. Biglari could deploy the newly raised $76 million, I think BH deserves a much higher multiple than 1.4, and I think the market will realize it, when Mr. Biglari announces his new target.
If you want, it can be viewed this way: Mr. Biglari’s new acquisition could become the catalyst this stock is waiting for a long time.

giofranchi


Giofranchi - I didn't look up the equity number, but let's assume you are correct, and the company trades at a 1.4x multiple. Adding a highly liquid asset to the balance sheet, such as cash, which has a readily available market price, is unlikely to command the same 1.4x multiple on book value, as, say, an increase in earnings. Essentially, your argument is that the company has a book value of X, and the market values the company at 1.4*X. If they increase cash levels by Y, you are saying that the market should value them at 1.4*(X+Y). While anything is possible in terms of how the market ultimately values information in the short term, I don't think that is how you should account for a cash-raise in valuation. In my opinion, the modeled "new mkt cap" should be = 1.4*X + Y
Title: Re: BH - Biglari Holdings
Post by: wescobrk on August 07, 2013, 04:13:42 PM
Equity right now is $440 million, because I think you should add the BH’s pro-rata ownership of its common stock through the Lion Fund, 99,800 shares.
So, with a market cap of $615 million, BH is trading for 615 / 440 = 1.4 x BV.
New BV will be $440 million + the cash received = $440 + $76 = $516.
With 1,720,540 share outstanding BVPS will be $300.
At the same multiple of 1.4, I expect a share price of $300 x 1.4 = $420.
If my reasoning is wrong, please correct me!
Of course, given the rate of growth in BH’s investments and given how shrewdly Mr. Biglari could deploy the newly raised $76 million, I think BH deserves a much higher multiple than 1.4, and I think the market will realize it, when Mr. Biglari announces his new target.
If you want, it can be viewed this way: Mr. Biglari’s new acquisition could become the catalyst this stock is waiting for a long time.

giofranchi

Your equity "right now" is incorrect, Cbrl alone added over 80 million from last q
You need to add another 80-100 million to your "right now" post.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on August 07, 2013, 04:18:42 PM
Just curious for Bh shareholders, why not just buy what he buys and keep 100% instead of roughly 75% through Bh?
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on August 07, 2013, 05:49:19 PM

Your equity "right now" is incorrect, Cbrl alone added over 80 million from last q
You need to add another 80-100 million to your "right now" post.

Liquidity my friend. Liquidity!

He won't be able to add another 80-100mm from CBRL in the next year, as he can't just dump the stock and move on. Additionally, it will be increasingly difficult to repeat that success with equity prices where they are... Imposible? No. However, it isn't as if he can roll the profits from CBRL into some other value stock, which as you point out, is likely the rationale for this capital raise, but that still gets us to the problem where equity prices are higher than they were a year or 2 ago.

Another item, is that it will be a lot more tax efficient to mirror the BH portfolio than to go through BH. The notable exception being, if he makes a bid for a whole company where he has no disclosed position. However, that doesn't seem to be how he operates historically.

Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 08, 2013, 02:08:58 AM

sir new to the story. can you explain why you think this is worth more than 1.4 x book. isn't this an investment company? regards

Well, that for me is the easy part! Given its relatively small size, I think Mr. Biglari has still many opportunities to go on increasing capital at a 20% CAGR for many years to come. And anything which compounds capital near 20% yearly for many years is worth much more than 1.4 x BV.

I don’t want to talk about Mr. Biglari’s ethics here! That subject has already been touched too many times!

giofranchi

Thank you wellmont, for the explanation about how oversubscription works! :)

I would like to explain a little bit better why I think a 20% increase in BVPS is achievable by BH for many years into the future.
BH has $400 million in equity + $40 million of its own shares held by the Lion Fund. So let’s see what would be required to increase those $400 million in equity by 20%, the $40 million invested in BH shares will follow suit.
20% of $400 million is an increase of $80 million. Now, from restaurant operations alone BH enjoys an earning power in between $35 million and $40 million, that’s to say 9% to 10% of equity. Therefore, investment should make up for the remaining $40 to $45 million. Investments are worth $386 million, and a gain of $40 to $45 million would mean a return in between 10.5% and 11.5%. This kind of required return from investments could be further decreased, if Mr. Biglari is successful in getting control of a soundly managed and conservatively reserved insurance company, adding its float as a source of cheap and safe leverage. That’s why I like the announced raising of capital!
Moreover, operating earnings from restaurants are still growing: they grew 9% in 2012, and franchise royalties and fees still count for only a tiny fraction of revenues. They could go on growing very fast for a long time! So, I don’t see the contribution of operating earnings to BV growth become irrelevant anytime soon. Actually, the way Mr. Biglari invests in the stock market leads me to believe that operating earnings will become ever more meaningful: in fact, once he has invested in a business through the stock market, Mr. Biglari very often strives to acquire the whole company. And, when successful, he will increase earning power substantially.
So, yes! BH is an holding company, but also with meaningful earning power. Imo, a great platform for doing business!

Of course the ethics issue remains… But the fact is what I have just written is clear and easily understood… ethics and behavioral traits, on the other hand, are extremely difficult to fathom… at least for me!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 08, 2013, 02:12:05 AM
Equity right now is $440 million, because I think you should add the BH’s pro-rata ownership of its common stock through the Lion Fund, 99,800 shares.
So, with a market cap of $615 million, BH is trading for 615 / 440 = 1.4 x BV.
New BV will be $440 million + the cash received = $440 + $76 = $516.
With 1,720,540 share outstanding BVPS will be $300.
At the same multiple of 1.4, I expect a share price of $300 x 1.4 = $420.
If my reasoning is wrong, please correct me!
Of course, given the rate of growth in BH’s investments and given how shrewdly Mr. Biglari could deploy the newly raised $76 million, I think BH deserves a much higher multiple than 1.4, and I think the market will realize it, when Mr. Biglari announces his new target.
If you want, it can be viewed this way: Mr. Biglari’s new acquisition could become the catalyst this stock is waiting for a long time.

giofranchi

Your equity "right now" is incorrect, Cbrl alone added over 80 million from last q
You need to add another 80-100 million to your "right now" post.

Yes! You are right... I meant at the end of Q2 2013. Also the numbers I used in my last post make reference to the 10q-q2-2013 file.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wescobrk on August 08, 2013, 06:33:26 AM
You need to adjust the book value down for taxes - check the wesco acquisition by Berkshire.

Otoh, copying Biglari ideas is the way to go...

Fair enough, but one only has to subtract 15% as half of his position is already long term gains and knowing sardar I bet the second half he'll only pay long term as well, thus, the 80 million figure I think still stands.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on August 08, 2013, 06:37:53 AM
Actually about 60 million is a more accurate figure.
Title: Re: BH - Biglari Holdings
Post by: dcollon on August 21, 2013, 02:06:57 PM
Biglari Holdings Inc. News Release
Wednesday, August 21, 2013 08:52:33 PM (GMT)


SAN ANTONIO, TX, Aug. 21, 2013 /PRNewswire/ -- Biglari Holdings Inc. (NYSE: BH) ("Biglari Holdings" or the "Company") announced that it has commenced its offering of transferable subscription rights (the "Rights Offering") initially announced on February 5, 2013. Pursuant to the Rights Offering, the Company will distribute one transferable subscription right ("Right") for each share of its common stock to shareholders of record at the close of business on August 27, 2013.

Every five (5) Rights will entitle a shareholder to subscribe for one share of common stock at a price of $265.00 in cash per share. The Rights (excluding oversubscription privileges) will be transferable and will be admitted for trading on the New York Stock Exchange (the "NYSE") (NYSE: BH WS) during the course of the Rights Offering. The subscription period will commence on August 27, 2013 (the record date) and terminate 20 days later on September 16, 2013 (the expiration date), unless the Rights Offering is extended.

Shareholders on the record date who fully exercise the Rights distributed to them will also be entitled to subscribe for and purchase additional shares of common stock not purchased by other Rights holders through their basic subscription privileges. The maximum number of shares that a shareholder may purchase under this oversubscription privilege is equal to the number of shares such shareholder purchased under its basic subscription privilege, subject to pro-rata allotment.  A shareholder will be entitled to exercise the oversubscription privilege only if he or she is a shareholder on the record date and exercises the basic subscription privilege in full.

The Rights will begin trading "when issued" on the NYSE on August 22, 2013, and shares of common stock of the Company are expected to trade "ex-Rights" on August 23, 2013. The Rights are expected to begin trading for normal settlement on the NYSE on or about August 29, 2013 and continue through the opening of trading on the expiration date.

The Company expects to mail subscription certificates evidencing the Rights and a copy of the prospectus for the Rights Offering to record date shareholders beginning on or about August 28, 2013.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any offer or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  The Rights Offering will be made only by means of a prospectus.  A copy of the prospectus, when available, may be obtained from the information agent, Morrow & Co., LLC, at (877) 849-0763.
Title: Re: BH - Biglari Holdings
Post by: keerthiprasad on August 22, 2013, 07:25:08 PM
Biglari in the WSJ:

http://online.wsj.com/article/SB10001424127887323455104579014972501456820.html?mod=WSJ_hp_EditorsPicks
Title: Re: BH - Biglari Holdings
Post by: APG12 on August 23, 2013, 11:29:24 AM
welp, BH is getting crushed today on that WSJ 'news.' All of that info has been available to anyone with access to Google for a while now. Considering revenue from franchisees was up significantly this quarter and same store sales rose 4%+ this move seems even more ridiculous. Mr. Market never ceases to amaze me.  :o
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 23, 2013, 11:41:23 AM
welp, BH is getting crushed today on that WSJ 'news.' All of that info has been available to anyone with access to Google for a while now. Considering revenue from franchisees was up significantly this quarter and same store sales rose 4%+ this move seems even more ridiculous. Mr. Market never ceases to amaze me.  :o

Hi agaglio,
Like you can read in David's post, BH shares started trading "ex-Rights" today.
The correspondig decrease in price has nothing to do with the WSJ article...

giofranchi
Title: Re: BH - Biglari Holdings
Post by: APG12 on August 23, 2013, 12:21:04 PM
Haha. My post should have read, my stupidity never ceases to amaze me.  ;D
Title: Re: BH - Biglari Holdings
Post by: APG12 on August 23, 2013, 01:23:23 PM
By the way, did anyone notice this in the prospectus: "You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights.  We will not distribute any fractional shares of common stock or pay cash in lieu of fractional shares.  We will round up the aggregate number of shares of common stock you are entitled to receive to the nearest whole number provided you fully exercise your rights and pay the full subscription price."

In other words, you could buy one share for $467 and exercise your right for $265. In the end you'll have spent $732 and have two shares worth $866 @ $433 a piece. That's a free $134! Hey, it might not be much but at least you can order 33 things off of the $4 Steak and Shake menu.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 24, 2013, 07:09:58 AM
On August 07, 2013, like I have written in a post of mine, I doubled my firm’s investment in BH. The price I paid was little less than $430. After the shares started trading “ex-Rights” yesterday, BH stock price closed at $431.71. Of course, it might fall from here, but on Monday morning, if I wish so, I will be able to sell half of my shares for the same price I paid on August 07, and yet receive a number of Rights that are double the number I would receive, if I had kept my firm’s investment in BH like it was on August 06, 2013. So basically, I enjoy the possibility to buy twice the number of BH shares at $265 for free.
Furthermore, my average cost on August 06 was $370, and so, if I decide to keep my whole investment in BH, I will see an average cost not much higher than it was previously: ($430 + $370) / 2 = $400, ($400 x 5 + $265) / 6 = $377.5. And I will possess 2.2 x the number of shares I possessed previously. This means that, whatever paper profit I was seeing on August 06, next Tuesday, when I will be buying shares at $265, and if BH stock price stays around $430, that paper profit will be more than double: ($370 / $377.5) x 2.2 = 2.15.
And this is without taking into account any more share that I might be able to buy oversubscribing, which I will certainly do.
It surely might have been just good luck, but it doesn’t look like a wash to me at all! :)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: vpagano on August 26, 2013, 11:03:08 AM
By the way, did anyone notice this in the prospectus: "You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights.  We will not distribute any fractional shares of common stock or pay cash in lieu of fractional shares.  We will round up the aggregate number of shares of common stock you are entitled to receive to the nearest whole number provided you fully exercise your rights and pay the full subscription price."

In other words, you could buy one share for $467 and exercise your right for $265. In the end you'll have spent $732 and have two shares worth $866 @ $433 a piece. That's a free $134! Hey, it might not be much but at least you can order 33 things off of the $4 Steak and Shake menu.

agaglio - this section is worded oddly to me. Have you confirmed this with your broker? Mine says this section refers to treatment of fractional shares of BH and the rights associated you will receive is based on the next whole number. Personally, the rep wasn't that knowledgeable (probably very wrong) and I had her reference it to the Reorg. department to read over and email me back.

The reason I ask is because if what you say is true, you could simply buy one right and exercise it to buy a discounted share. As long as right + exercise cost + $265 < $430 then you made a few dollars. Non-retail guys around here can laugh but hey it's free beer money.
Title: Re: BH - Biglari Holdings
Post by: APG12 on August 26, 2013, 11:26:56 AM
Hey Vince,

I actually have no idea if it would work as I described. I have a number of shares divisible by 5 so it doesn't affect me. Sorry I'm not more help.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 27, 2013, 11:31:18 PM
From what I can see on its 10q-q3-2013 filing, BH equity at July 3, 2013, was $482 million.
The Company’s proportional share of its common stock, as held by the investment partnerships and recorded as Treasury stock, amounted to 105,670 shares, which at yesterday price of $408 are worth $43 million.
BH will receive $76 million in cash from the issuance of 286,767 shares.
Therefore, total equity will be: $482 + $43 + $76 = $601 million.

Shares outstanding at August 5, 2013, were 1,433,835. With the issuance of new shares the total outstanding will be: 1,433,835 + 286,767 = 1,720,602.
At yesterday share price of $408, market cap is: $408 x 1,720,602 = $702 million.

Therefore, BH is selling for $702 / $601 = 1.17 x BV.

If my numbers are wrong, please correct me!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: gg on August 28, 2013, 06:53:54 AM
Giofranchi - are you sure that the $43m treasury shares are not already accounted for in the $482m figure? I'm not entirely sure how BH accounts for stock that they own in themselves through an 'investment partnership'. If the company-owned BH stock is held in the Lion Fund, then that $43m might be included in the "Equity in investment partnerships" of $337m, in which case you are double counting it.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on August 28, 2013, 07:35:55 AM
Giofranchi - are you sure that the $43m treasury shares are not already accounted for in the $482m figure? I'm not entirely sure how BH accounts for stock that they own in themselves through an 'investment partnership'. If the company-owned BH stock is held in the Lion Fund, then that $43m might be included in the "Equity in investment partnerships" of $337m, in which case you are double counting it.

Quote
As of July 3, 2013 the carrying value of the equity in the investment partnerships was $337,479, excluding $43,581 classified as Treasury stock representing our proportional share of Company common stock held by the investment partnerships.
--page 8

Treasury stock on the Balance Sheet are a reduction to Shareholders’ equity. Therefore, I don’t think I am double counting it.
But I might be wrong… If anyone is sure about this, I would gladly hear from her/him! :)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 16, 2013, 06:47:30 AM
Today I already see on my firm’s bank account not only the BH shares I should have received through regular subscription, but also all the shares I could have received through oversubscription…
Is this possible?! ???

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragu on September 16, 2013, 07:04:14 AM
Today I already see on my firm’s bank account not only the BH shares I should have received through regular subscription, but also all the shares I could have received through oversubscription…
Is this possible?! ???

giofranchi,

I'd say unlikely seeing as the representative at my brokerage said it'd be around 2 weeks after the offering closed before the shares are allotted (and I checked, the shares from the rights aren't there for me yet). Yet, you see yours. Interesting.

Just out of curiosity, what % of shares (based on what was potentially available to you) did you get from the over-allotment?

Best,
Ragu


Title: Re: BH - Biglari Holdings
Post by: wellmont on September 16, 2013, 07:09:51 AM
Today I already see on my firm’s bank account not only the BH shares I should have received through regular subscription, but also all the shares I could have received through oversubscription…
Is this possible?! ???

giofranchi

that's a placeholder showing your total possible exposure. if you don't get all the over subscribed shares you will get rebated.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 16, 2013, 07:15:27 AM
Just out of curiosity, what % of shares (based on what was potentially available to you) did you get from the over-allotment?

Best,
Ragu

100% of the over-allotment!! There surely must be something wrong… Yet I don’t see the Rights anymore… Instead, I see all the shares!!
I also thought the shares would be allotted 2 weeks after the closing of the offering, because that’s exactly what was written on the prospectus too…
It is probably my bank that is messing something up… >:(
What a pity!!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 16, 2013, 07:32:22 AM
that's a placeholder showing your total possible exposure. if you don't get all the over subscribed shares you will get rebated.

Ah! Ok! That makes sense.
Thank you wellmont! :)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: dcollon on September 17, 2013, 06:16:54 AM
Biglari Holdings Inc. News Release
Tuesday, September 17, 2013 11:00:00 AM (GMT)


SAN ANTONIO, TX, Sept. 17, 2013 /PRNewswire/ -- Biglari Holdings Inc. (NYSE: BH) ("Biglari Holdings" or the "Company") announced the completion of its previously announced rights offering, which expired at 5:00 p.m. (New York City time) on September 16, 2013. 

Preliminary results indicate that the rights offering was over-subscribed. As a result, Biglari Holdings expects to receive net proceeds of approximately $75.7 million from the offering.

Following the issuance of the newly subscribed shares, which is expected to occur within seven to 10 business days after the expiration date, Biglari Holdings will have approximately 1,720,602 shares outstanding.

If you requested and paid for more shares of common stock than are allocated to you pursuant to your oversubscription privilege, Biglari Holdings will refund that overpayment, without interest. 
Title: Re: BH - Biglari Holdings
Post by: ragu on September 17, 2013, 09:14:36 AM
As a result, Biglari Holdings expects to receive net proceeds of approximately $75.7 million from the offering.

[...]Biglari Holdings will have approximately 1,720,602 shares outstanding.

Selling for about 1.2 times book by my calculation using this and information from the last quarterly report (and ignoring increase in CBRL stock since that report).

It'd be interesting to see BH's acquisition with this capital raise.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 17, 2013, 09:19:14 AM
As a result, Biglari Holdings expects to receive net proceeds of approximately $75.7 million from the offering.

[...]Biglari Holdings will have approximately 1,720,602 shares outstanding.

Selling for about 1.2 times book by my calculation using this and information from the last quarterly report (and ignoring increase in CBRL stock since that report).

It'd be interesting to see BH's acquisition with this capital raise.

Best,
Ragu

In a previous post on page 23 of this thread I had calculated 1.17 x BVPS...  ;)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 17, 2013, 09:29:11 AM
Anyone read his latest letter to cbrl?
Very entertaining read. He holds nothing back. Calls management asinine several times.
I find his persistence to be very impressive.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 17, 2013, 09:30:25 AM
Here is the link
http://www.sec.gov/Archives/edgar/data/1067294/000092189513001908/ex991to13da2507428021_091713.htm
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 17, 2013, 09:31:49 AM
Here is the link
http://www.sec.gov/Archives/edgar/data/1067294/000092189513001908/ex991to13da2507428021_091713.htm

Thank you for posting! :)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: dcollon on September 17, 2013, 10:22:23 AM
I'm somewhat confused.  Does Sardar think management and the board are doing a good job?   ;)

Thanks for posting the letter. 
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 17, 2013, 10:35:10 AM
I believe from an operational standpoint he said they are doing a reasonable job but from a capital allocation standpoint they are being asinine:)
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 17, 2013, 10:38:50 AM
"It'd be interesting to see BH's acquisition with this capital raise."

Hello Ragu,
I'd be surprised if it isn't unam. I wasn't able to make the meeting in April but I heard he said he guarantees they have an insurance company within 2 years.
It should be unam and I would expect an announcement within 90 days for around 1.3x book.
Title: Re: BH - Biglari Holdings
Post by: dcollon on September 17, 2013, 10:42:57 AM
wescobrk,

Thanks for your reply.  I was joking, sorry it didn't come across that way.  Aside from Mr. Loeb, I haven't read any letters quite this direct. 
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on September 17, 2013, 10:59:10 AM
http://www.denverpost.com/breakingnews/ci_23927800/undercover-steak-n-shake-customer-testifies-he-was
Title: Re: BH - Biglari Holdings
Post by: APG12 on September 17, 2013, 01:01:27 PM
This disagreement keeps garnering attention. Seems like an immaterial distraction to me but, I do tend to side with Biglari on this issue.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 17, 2013, 03:47:38 PM
wescobrk,

Thanks for your reply.  I was joking, sorry it didn't come across that way.  Aside from Mr. Loeb, I haven't read any letters quite this direct. 

Sorry dcollon, I had a Sheldon from Big Bang theory moment there.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 18, 2013, 02:59:04 AM
Here is the link
http://www.sec.gov/Archives/edgar/data/1067294/000092189513001908/ex991to13da2507428021_091713.htm

Frankly, it seems to me a fantastic letter and, which is more important, a very good and lucrative idea! ;)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wellmont on September 23, 2013, 08:51:52 PM
looks like rights offering was fully subscribed. no over subscription granted. or else I need a new broker. :)
Title: Re: BH - Biglari Holdings
Post by: Redskin212 on September 23, 2013, 08:55:28 PM
I actually got 4 additional shares or an extra 10% allocation.  I use Fidelity.
Title: Re: BH - Biglari Holdings
Post by: gg on September 23, 2013, 09:01:17 PM
I use Fidelity too, but got no additional shares
Title: Re: BH - Biglari Holdings
Post by: Gopinath on September 23, 2013, 09:09:23 PM
Strange, I got 2 shares from over-subscription which is 6.6% over allocation!
Title: Re: BH - Biglari Holdings
Post by: ragu on September 23, 2013, 09:25:28 PM
looks like rights offering was fully subscribed.

It wasn't (and the press release from BH after the offering closed said as much).

FWIW, I got a 13.7% allotment via the exercise of my over-subscription privileges (and I exercised about 89% of my over-subscription privileges).

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: wellmont on September 23, 2013, 09:42:09 PM
I don't see any press releases. I was due a fractional share only...
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 24, 2013, 05:51:14 AM
I had exercised 100% of my over-subscription privileges and I got a 10.8% allotment.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 24, 2013, 11:35:35 PM
wellmont,
I attach a series of articles in which the author summarizes the whole Biglari’s story until now.

Hope this helps,

giofranchi
Title: Re: BH - Biglari Holdings
Post by: Kuhndan on September 27, 2013, 03:58:55 AM
GIo, I had a caveat in Part VIII of the Seeking Alpha articles that it would be important to closely monitor Biglari's compenpensation. I'm not going to write Part IX, but the sale of Biglari Capital back to Sardar and the five year tie up of BH cash in the fund was a step too far for me. He gets to keep the original incentive compensation plan on the operating company and gains a hedge fund compensation arrangement as well. His take out of the company will serve to mute future returns going forward. Best of luck.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 27, 2013, 04:22:55 AM
GIo, I had a caveat in Part VIII of the Seeking Alpha articles that it would be important to closely monitor Biglari's compenpensation. I'm not going to write Part IX, but the sale of Biglari Capital back to Sardar and the five year tie up of BH cash in the fund was a step too far for me. He gets to keep the original incentive compensation plan on the operating company and gains a hedge fund compensation arrangement as well. His take out of the company will serve to mute future returns going forward. Best of luck.

Hi kuhndan,
what a pity you won’t write Part IX… you really should! ;)
Do you think Mr. Biglari wants to get control over BH and grow the company for many years to come, or is he only aiming to get rich through the compensation plan?

Thank you!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 27, 2013, 05:16:36 AM
....He gets to keep the original incentive compensation plan on the operating company and gains a hedge fund compensation arrangement as well.....

This bothered me. So, I did not subscribe to rights issue, sold BH rights and bought into SHLD.
Compensation structure must be changed.

Yes, you might be right! But I wouldn’t swap fast-food and fast-food franchising for retailing, only because of the compensation structure.

Of course, I don’t follow closely SHLD, and I cannot say how cheap the stock really is right now. Therefore, if you swapped because SHLD right now is a great bargain, that’s a completely different story! ;)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: APG12 on September 27, 2013, 05:49:47 AM
....He gets to keep the original incentive compensation plan on the operating company and gains a hedge fund compensation arrangement as well.....

This bothered me. So, I did not subscribe to rights issue, sold BH rights and bought into SHLD.
Compensation structure must be changed.

There was over-subscription value in the rights that was immediately lost upon sale. I guess it's really not a big deal because it only amounted to ~10% of the 20% subscription, or ~2% of your position size.

Anyhoo, that statement sounds kind of misleading. He doesn't get compensated twice- he removed the CBRL stock from the operating company and put it into the hedge fund. He essentially removed the compensation cap. Whatever you think of his compensation, the fact remains that he doesn't get a big pay day unless the shareholders do well too. That's my bottom line on it.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on September 27, 2013, 06:26:58 AM
Anyhoo, that statement sounds kind of misleading. He doesn't get compensated twice- he removed the CBRL stock from the operating company and put it into the hedge fund. He essentially removed the compensation cap. Whatever you think of his compensation, the fact remains that he doesn't get a big pay day unless the shareholders do well too. That's my bottom line on it.

Yes! But it cannot go on changing so frequently, don’t you agree? I really want him to get full control over BH, so that he might stop worrying about control and concentrate only on achieving the best economic results possible. The faster we get there, the better. Then, I would want to see things stabilize!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 27, 2013, 08:19:36 AM
Cbrl is allowing a vote for his 20 dollar dividend. They advise against it but said in the proxy they will do it if more than half of shareholders vote for it.
We know 20 percent is for it. I would be surprised if more than half didn't vote for it.
Bh will have another almost hundred million.
It's been 5 years and they have only bought western so far.
Maybe we'll finally see an acquisition in the next few months.
Title: Re: BH - Biglari Holdings
Post by: APG12 on September 27, 2013, 11:23:45 AM
Yes! But it cannot go on changing so frequently, don’t you agree? I really want him to get full control over BH, so that he might stop worrying about control and concentrate only on achieving the best economic results possible. The faster we get there, the better. Then, I would want to see things stabilize!

giofranchi

Well, I don't see what you mean by 'changing so frequently'. I think the transaction will result in a greater pay day for Biglari and it also cleans up the accounting and makes the company easier to value correctly. There's nothing wrong with change in general so long as it's done for a rational purpose. They could transfer ownership back and forth all day but it's not going to change the economic outcome of the situation (other than his comp). The important thing is the investment strategy which has not been changing. Biglari already has full effective control over BH so I don't think him gaining majority voting share (if that's what you mean by full control) will change much. BH's investments have been performing spectacularly and I don't think the distraction of the hedge fund transaction can be blamed for anything either.

The CBRL dividend vote is really just an issue of what debt level is safe for CBRL. Management has been paying down CBRL debt, and given the atrocious return on capital that this entails, that would imply that they believe the current debt level is already too high. It could be that Biglari is too aggressive with leverage or CBRL is too conservative. Has anyone looked into historical/safe restaurant leverage amounts?
Title: Re: BH - Biglari Holdings
Post by: LC on September 27, 2013, 01:43:54 PM
Here are the 2012 coverage ratios for a few others:

Wendy's coverage is about 1x
Jack in the Box is 7x
Burger king's is 2x
Mcdonalds is 16x
Denny's is about 3x
Sonic is about 3x

CBRL is presently about 5.5x...a $20 dividend (if they can get the debt @ 4%) would drop the coverage ratio to just under 4x 2012's EBIT, or about 3x if we take a more normalized 5 years of history.
Title: Re: BH - Biglari Holdings
Post by: APG12 on September 27, 2013, 02:22:20 PM
Here are the 2012 coverage ratios for a few others:

Wendy's coverage is about 1x
Jack in the Box is 7x
Burger king's is 2x
Mcdonalds is 16x
Denny's is about 3x
Sonic is about 3x

CBRL is presently about 5.5x...a $20 dividend (if they can get the debt @ 4%) would drop the coverage ratio to just under 4x 2012's EBIT, or about 3x if we take a more normalized 5 years of history.

Ah, awesome! I'll be taking a good look at this when I get some time. Did you happen to take into account operating leases? I don't look forward to untangling all of that.  :-\
Title: Re: BH - Biglari Holdings
Post by: wescobrk on September 27, 2013, 02:29:13 PM
Biglari already has full effective control over BH"

I disagree with this. He's failed 3x getting the votes for the b shares (postponed special meeting)
I agree he can pretty much do anything else though.
Title: Re: BH - Biglari Holdings
Post by: LC on September 27, 2013, 02:31:08 PM
Unfortunately not! It was a quick back of the envelope calc for a friend just to see what the I/S would look like after Sardar's proposed dividend.
Title: Re: BH - Biglari Holdings
Post by: APG12 on September 27, 2013, 04:39:43 PM
Biglari already has full effective control over BH"

I disagree with this. He's failed 3x getting the votes for the b shares (postponed special meeting)
I agree he can pretty much do anything else though.

True! There are some things he can't do, hence the compensation cap.

Quote from: LC
Unfortunately not! It was a quick back of the envelope calc for a friend just to see what the I/S would look like after Sardar's proposed dividend.

Ah shoot. I was hoping I could be lazy. heh.
Title: Re: BH - Biglari Holdings
Post by: nwoodman on September 27, 2013, 05:07:17 PM
Cbrl is allowing a vote for his 20 dollar dividend. They advise against it but said in the proxy they will do it if more than half of shareholders vote for it.
We know 20 percent is for it. I would be surprised if more than half didn't vote for it.
Bh will have another almost hundred million.
It's been 5 years and they have only bought western so far.
Maybe we'll finally see an acquisition in the next few months.

Fingers crossed that is about to change and he makes Cheldin at UNAM an offer he can't refuse, like $17-$18 per share ;)

cheers

nwoodman
Title: Re: BH - Biglari Holdings
Post by: ragu on October 01, 2013, 06:14:54 AM
[But it cannot go on changing so frequently, don’t you agree?

giofranchi,

I believe the timing of this change was linked to the rights offering. To the best of my understanding, the BH stock held through the Lion Fund on behalf of the LP's (prior to the sale back to Sardar) would not have been eligible to participate in the rights offering(seeing as it was accounted for as Treasury stock).

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 01, 2013, 11:34:37 PM
giofranchi,

I believe the timing of this change was linked to the rights offering. To the best of my understanding, the BH stock held through the Lion Fund on behalf of the LP's (prior to the sale back to Sardar) would not have been eligible to participate in the rights offering(seeing as it was accounted for as Treasury stock).

Best,
Ragu

Thanks, ragu!
This of course makes a lot of sense. Somehow, I hadn’t thought of it… ::)

Cheers!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragu on October 02, 2013, 12:29:41 AM
This of course makes a lot of sense.

giofranchi,

Welcome. I fear I didn't get this at first either. Phil had been pretty clear at the 2012 AM that the compensation cap would go away. So, my initial thought here was that this was a way to remove the cap and avoid a shareholder vote that wasn't likely to be favourable at any rate (time was also running out on Sardar's option to buy it back from BH).

A day or two back, I ran into a filing that detailed the Lion Fund's change in shares owned as a result of the rights offering and it struck me that the rights could not have been exercised if the LF were still owned by BH.

I find this handy when I analyze Sardar's actions:

Never attribute to malice that which can be adequately explained by rationality.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 02, 2013, 02:59:49 AM
I find this handy when I analyze Sardar's actions:

Never attribute to malice that which can be adequately explained by rationality.

Best,
Ragu

I couldn’t agree with this more!! (even though we are the only ones... ;D ;D)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragu on October 02, 2013, 09:57:28 AM
I couldn’t agree with this more!! (even though we are the only ones... ;D ;D)

I console myself with the knowledge that we're right.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: wescobrk on October 02, 2013, 10:09:39 PM
I believe the timing of this change was linked to the rights offering. To the best of my understanding, the BH stock held through the Lion Fund on behalf of the LP's (prior to the sale back to Sardar) would not have been eligible to participate in the rights offering(seeing as it was accounted for as Treasury stock)."

Are you sure? The lion fund participated in multiple rights offerings when it had a huge stake in western sizzlin.
Western didn't own the lion fund then, granted. Seems like a big oversight by someone if that is true.

On a separate note, I don't expect to see any acquisition news until after the Cracker Barrel meeting, more specifically, after he receives the 95 million from the special dividend.
His letter today by the way removes his two week notice to shareholders for selling cbrl.
He can sell cbrl effective nov 15th unless he gets his board seats which looks very unlikely.
The special dividend I expect will pass though.
Title: Re: BH - Biglari Holdings
Post by: ragu on October 03, 2013, 10:50:34 AM
wescobrk,

A request. Could you please use the quote tags to enclose portions of the message that you are responding to? It'd make your responses much more readable.

The lion fund participated in multiple rights offerings when it had a huge stake in western sizzlin.
Western didn't own the lion fund then, granted.

My understanding is that's precisely the difference between the 2 situations.


Seems like a big oversight by someone if that is true.

I am not sure I understand this. Big oversight by who and on what?

His letter today by the way removes his two week notice to shareholders for selling cbrl.

I saw the proxy solicitation after I saw your message.

Sardar's notice of revocation suggests he is unlikely to get the nod of the proxy advisory firms again. It defies logic that they should advise against Sardar on the board. Mind-boggling doesn't even begin to describe it. 

They must've either read none of Sardar's correspondence on this issue or they simply don't understand what he has plainly demonstrated: CBRL management is duplicitous, been unable to address operational issues at a satisfactory pace and don't have the foggiest clue about capital allocation.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: APG12 on October 07, 2013, 12:39:24 PM
Fingers crossed that is about to change and he makes Cheldin at UNAM an offer he can't refuse, like $17-$18 per share ;)

cheers

nwoodman

While I also hope that's the case, I wouldn't expect the purchase price to be so high. I also don't think the risk/reward of purchasing UNAM right now is very good. UNAM is an EXTREMELY conservatively run company. Their investment portfolio is 85% in treasuries, 9% in CDs and 6% in money market accounts. The portfolio is yielding a measly ~1.2%!! Under current management, the stock is not worth book value even though it's trading close to that. I could see buying UNAM if you thought it was fairly valued to undervalued with the hope that biglari buys it and the valuation as your downside protection. However, I just don't think the downside protection is there. Money invested in this company at BV is probably not going to provide a very good long-term rate of return in my opinion.  :-\

Edit: Fixed the quote.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on October 07, 2013, 03:13:38 PM
wescobrk,

"A request. Could you please use the quote tags to enclose portions of the message that you are responding to? It'd make your responses much more readable."

Ragu,

I usually use my phone and I noticed that although the quote tags appeared at the end of someone else's post it didn't included the quotes at the beginning. I'll be sure it isn't truncated in the future. Thanks for pointing it out.

My statement about being a big oversight is regarding TLF did multiple rights offerings in the past then as the new comp agreement was passed it didn't allow TLF to participate in rights offerings. My point was that was a big oversight since Sardar knew he would be doing rights offerings with BH as well (or at least he would want to have the option)

Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on October 17, 2013, 10:28:39 AM
http://files.shareholder.com/downloads/CBRL/2690748385x0x697771/5D849123-9CA0-417B-9CD3-1090832B40EA/2013_Investor_Presentation_Final_16-Oct-2013.pdf

pretty interesting take down of Biglari Holdings and corporate governance starting on page 28


Cheers!
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 17, 2013, 10:43:15 AM
Love slide 37!  More of indictment than a take-down. 

How do you go and cure the ails of other corporate boards, when you have borderline unethical conduct happening at your own...people in glass houses shouldn't throw stones!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: ragu on October 17, 2013, 11:21:26 AM
pretty interesting take down of Biglari Holdings and corporate governance starting on page 28


From Pg 32:
-------------
Quote

(2) Earnings per Store as measured by Steak ‘n Shake’s earnings before income taxes and noncontrolling interests as reported by BH over period average store count. Quarters relate to BH fiscal year.
(3) Earnings per Store as measured by Cracker Barrel’s adjusted operating income as reported by CBRL over period average store count.

They can't make a cogent argument, so they resort to outright deceit (not for the first time) like the above. I suppose the voting shareholders aren't reading the footnotes. Neither are the proxy advisory firms.

Best,
Ragu
 

Title: Re: BH - Biglari Holdings
Post by: JBird on October 17, 2013, 11:34:36 AM
Quote
They can't make a cogent argument, so they resort to outright deceit (not for the first time) like the above. I suppose the voting shareholders aren't reading the footnotes. Neither are the proxy advisory firms.

Can you explain the deceit?
Title: Re: BH - Biglari Holdings
Post by: wescobrk on October 17, 2013, 11:38:34 AM
Slide 36 shows his name on the outside of three different stores.
I wonder if his name will be on all restaurants at some point?
Title: Re: BH - Biglari Holdings
Post by: ragu on October 17, 2013, 12:06:36 PM
Can you explain the deceit?

The quote from the BH proxy makes it sound like they are talking about operating income.

Yet, in the SNS calculation, they use pre-tax income (not operating income) to "demonstrate" a deterioration in per-store performance. Rationality would dictate that you ignore the effect of capital structure in making business performance comparisons, but deceitfulness imposes no such constraints.

No such issues with the CBRL calculation, of course. They not only use operating income, but "adjust" it further to bolster their claims of operational superiority over SNS.

The label for both sets of numbers is the same, though: Earnings per store.

Intended to mislead and, sadly, it will likely work. Again. Even if Sardar calls them out on it (as he has with similar financial transgressions in the past).

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Grenville on October 17, 2013, 12:32:43 PM
Slide 36 shows his name on the outside of three different stores.
I wonder if his name will be on all restaurants at some point?

Wow. It's crazy how he's attaching his name on the storefront and attaching his name to the brand. It makes sense based on his past actions, but seems a bit over the top. It reminds me how Ferrari's and Mazerati's are signed by Pininfarina on the side....
Title: Re: BH - Biglari Holdings
Post by: Rabbitisrich on October 17, 2013, 01:15:39 PM
 

From Pg 32:
-------------
Quote

(2) Earnings per Store as measured by Steak ‘n Shake’s earnings before income taxes and noncontrolling interests as reported by BH over period average store count. Quarters relate to BH fiscal year.
(3) Earnings per Store as measured by Cracker Barrel’s adjusted operating income as reported by CBRL over period average store count.

They can't make a cogent argument, so they resort to outright deceit (not for the first time) like the above. I suppose the voting shareholders aren't reading the footnotes. Neither are the proxy advisory firms.

Best,
Ragu

Yeah, an astonishingly clumsy manipulation. They must have thought that readers would accept the % change figures without being shocked by the difference in levels between CBRL and SNS figures.

Ironically, Biglari does something similar on the annual report by reporting 5 year operating profits per store, comparing full operating profits to only company-owned stores.
Title: Re: BH - Biglari Holdings
Post by: ragu on October 17, 2013, 08:28:28 PM
They must have thought that readers would accept the % change figures without being shocked by the difference in levels between CBRL and SNS figures.

Well, being deceptive has worked well for them so far.

However, I am in agreement with you that, even given their (low) standards, this is "astonishingly" manipulative.

Quote from: Rabbitisrich
Ironically, Biglari does something similar on the annual report by reporting 5 year operating profits per store, comparing full operating profits to only company-owned stores.

Are you referring to the table on pg. 9 of the 2012 letter (http://www.biglariholdings.com/letters/2012.pdf#zoom=100)?

If so, what is the issue with those numbers?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on October 17, 2013, 08:44:00 PM
Love slide 37!  More of indictment than a take-down. 

How do you go and cure the ails of other corporate boards, when you have borderline unethical conduct happening at your own...people in glass houses shouldn't throw stones!  Cheers!

The picture in the middle of slide 37 is one that I took and posted on my site... One could question the ethics of a corporation that simply uses the picture as their own, without crediting the source or asking permission to use it. ;)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 17, 2013, 10:56:57 PM
people in glass houses shouldn't throw stones!  Cheers!

Well, I guess there is a difference though… All Mr. Biglari’s investments are performing extremely well, instead the results of those executives he is ranting against are invariably lagging behind their peers… Imo, not a small difference!
If you want to talk about glass houses, let’s say that Mr. Biglari’s house is made of the glass you see in the picture attached! ;D ;D

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 17, 2013, 11:23:22 PM
Hey! Com’n! The whole presentation is a real shame!
They first brag about recent results and stock performance, when we all know those results and that performance materialized only because Mr. Biglari got actively involved in the business and pushed for changes…
Then, they just concentrate on attacking Mr. Biglari’s strategy for CBRL, without proposing anything else worth of mentioning…
If it weren’t for the soon to be received special dividend, and if I were a CBRL’s shareholder, I would sell my shares at once! ;)

By the way, the slide I enjoyed the most is slide n.33:
Cracker Barrel Shares Currently Account for ~69% of BH’s Market Capitalization
Nothing can speak louder about BH’s current under-valuation!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: dcollon on October 24, 2013, 08:33:19 AM
Biglari Capital Corp. Has Received A Highly Confident Letter From Jefferies On Cracker Barrel's Required Financing For The Proposed Special Dividend Of $20 Per Share
Thursday, October 24, 2013 03:11:00 PM (GMT)


SAN ANTONIO, TX, Oct. 24, 2013 /PRNewswire/ -- Biglari Capital Corp. today announced that it has obtained a highly confident letter from Jefferies LLC to arrange for debt financing to fund a $20 per share dividend paid to all shareholders of Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL). Jefferies' highly confident letter is set forth below.

Jefferies

Jefferies LLC
520 Madison Avenue
New York, NY 10022
Tel: 212.284.2300
Jefferies.com

October 23, 2013

Biglari Capital Corp.
17802 IH 10 West, Suite 400
San Antonio, TX 78257

Attention: Sardar Biglari

Ladies and Gentlemen:

We understand that Biglari Capital Corp. and its affiliates ("Biglari", "you" or "your") own approximately 20% of the outstanding shares of Cracker Barrel Old Country Store, Inc. (the "Company").  We further understand that Biglari would like the Company to pay a cash dividend to shareholders (the "Special Dividend") of approximately $20 per share.  You have further advised us that you would like the Company to raise up to $800.0 million of funded debt in the form of a new undrawn five year Revolver and a new six year Term Loan (together, the "Debt Financing") to refinance the Company's existing debt and fund the Special Dividend.

We are pleased to confirm that Jefferies LLC ("Jefferies", "we", "us" or "our") is highly confident of its ability to arrange the Debt Financing, subject to: (i) satisfactory market conditions and no material adverse change in the business or prospects of the Company; (ii) receipt of ratings from Moody's and Standard and Poor's and delivery of customary documentation each that are satisfactory to Jefferies and the purchasers of the Debt Financing; (iii) satisfactory completion of our due diligence on the Company; (iv) Jefferies receipt of an executed engagement agreement with terms, including indemnification, acceptable to Jefferies; and (v) approval from our internal committees.  We estimate the Company would be rated by Moody's and S&P pro forma for the Debt Financing as a B1/B+ credit, respectively, and the Debt Financing should price at a credit spread consistent with the broader B1/B+ index at the time of issuance.

Confidence in our ability to successfully arrange the Debt Financing is based on:

Our review of publicly available financial statements of the Company;
The Company's steady track record of revenue and EBITDA growth;
Our continuing activity in the U.S. Institutional Loan market; and
Our success in placing debt financing for other restaurant companies, including 34 restaurant debt financings since 2010 for an aggregate value of over $7.8 billion.
For the avoidance of doubt, this letter is not a guarantee of the availability of the Debt Financing.  Nothing herein shall be deemed to constitute any commitment by Jefferies to purchase or arrange the Debt Financing; such a commitment shall be evidenced only by the execution and delivery of, and shall be subject to the terms and conditions of, definitive documentation satisfactory to Jefferies in its sole discretion.

Sincerely,
JEFFERIES LLC

By /s/ Chris Burns
Name:  Chris Burns
Title:    Managing Director

SOURCE Biglari Capital Corp.
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 24, 2013, 10:37:42 AM
Just a stupid, simple-minded way to suck cash out of a business.  I'm not a fan of this type of behavior.  One time jackpot for an activist investor, while the company gets saddled with more debt...mind you at a lower rate debt to justify the action.  My personal opinion if I were a long-time shareholder of the company...go fu*k yourself Biglari!  The board would be a bunch of spineless idiots to cede to this type of behavior if they have an iota of ethics...mind you they are dealing with someone whose conviction does not falter as much as his word. 

Why not refinance the debt at lower rates, and pay higher quarterly dividends to shareholders, instead of adding debt?  Because so this asshole can take the cash out of the company and walk over to his next target with a larger warchest...with or without taking over the board.  Icahn 2.0!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: wescobrk on October 24, 2013, 10:54:06 AM
He seems to be waffling.
Originally he asked for 20, now he is asking for 13-20.
Maybe he doesn't have the votes after all.
The board said they would go with majority.
Since biglarli controls 20 per cent they only need 30 percent (I'm assuming the boards definition is counting biglari).
We should see in about 3 weeks.
Title: Re: BH - Biglari Holdings
Post by: gg on October 24, 2013, 11:21:57 AM
Parsad - you  might be right that a special dividend like this is not the ideal way to increase CBRL's long term value. However, put yourself in Biglari's shoes. He owns 20% of a company that is undervalued due to the fact that they are underperforming. They are underperforming mostly because they are more interesting in growing revenue and store count than increasing true earnings or FCF. He spends a few years trying to get them to understand their mistakes in the growth plans, and they ignore him. They use a few of his ideas, which are mostly very successful. They offer to buy him out to at market price to get rid of his annoyance, and he turns them down. He continues to show how they are miscalculating the benefits of opening additional stores, and they continue to ignore him.

Maybe lighting a fire under the Board like a shareholder vote for a special dividend is the only way for Biglari to shake things up from his non-board position....Can you think of a better way?
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 24, 2013, 02:23:49 PM
Parsad - you  might be right that a special dividend like this is not the ideal way to increase CBRL's long term value. However, put yourself in Biglari's shoes. He owns 20% of a company that is undervalued due to the fact that they are underperforming. They are underperforming mostly because they are more interesting in growing revenue and store count than increasing true earnings or FCF. He spends a few years trying to get them to understand their mistakes in the growth plans, and they ignore him. They use a few of his ideas, which are mostly very successful. They offer to buy him out to at market price to get rid of his annoyance, and he turns them down. He continues to show how they are miscalculating the benefits of opening additional stores, and they continue to ignore him.

Maybe lighting a fire under the Board like a shareholder vote for a special dividend is the only way for Biglari to shake things up from his non-board position....Can you think of a better way?

How about in a non-confrontational manner?  This was a shitstorm brewing because Biglari is automatically identified as the type of investor he is...my way or the highway...your shareholders, my shareholders, and everyone else be damned. 

He is doing nothing illegal, nor any different than many other Wall Street types.  My opinion is that as a student of Buffett, maybe he should have gone that route...especially when you were pretty much writing your annual letters verbatim to Buffett's, including font type, structure, shareholders, etc. 

The wool was pulled over too many eyes, including mine.  Now he's doing it on a bigger venue with a bigger audience.  I'm tired of the minion of activists...both long and short!  It's about time for a major stock market correction, because everytime one happens, many of these assholes disappear for a few years!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: premfan on October 24, 2013, 03:07:40 PM
Parsad - you  might be right that a special dividend like this is not the ideal way to increase CBRL's long term value. However, put yourself in Biglari's shoes. He owns 20% of a company that is undervalued due to the fact that they are underperforming. They are underperforming mostly because they are more interesting in growing revenue and store count than increasing true earnings or FCF. He spends a few years trying to get them to understand their mistakes in the growth plans, and they ignore him. They use a few of his ideas, which are mostly very successful. They offer to buy him out to at market price to get rid of his annoyance, and he turns them down. He continues to show how they are miscalculating the benefits of opening additional stores, and they continue to ignore him.

Maybe lighting a fire under the Board like a shareholder vote for a special dividend is the only way for Biglari to shake things up from his non-board position....Can you think of a better way?

How about in a non-confrontational manner?  This was a shitstorm brewing because Biglari is automatically identified as the type of investor he is...my way or the highway...your shareholders, my shareholders, and everyone else be damned. 

He is doing nothing illegal, nor any different than many other Wall Street types.  My opinion is that as a student of Buffett, maybe he should have gone that route...especially when you were pretty much writing your annual letters verbatim to Buffett's, including font type, structure, shareholders, etc. 

The wool was pulled over too many eyes, including mine.  Now he's doing it on a bigger venue with a bigger audience.  I'm tired of the minion of activists...both long and short!  It's about time for a major stock market correction, because everytime one happens, many of these assholes disappear for a few years!  Cheers!

Wow ! That was powerful! If someone has a huge ego they will rationalize any action. The mere rationalization creates a feedback loop ( pos or neg how ever you label it) that creates more rationalizations and more and more. Sooner or later they blow up. Emotionally and mentally ( see ichan vs ackman interview on cnbc) they become unstable and reactive. The key word is "reactive" and they stop listening to anyone else.

Can money be made? Absolutely! Buyers beware these type of people blow up usually after a string of rationalizations that ultimately creates a sense of invincibility. The invincibility is what creates dictators and erroneous data that gets rationalized as the "truth".  This ultimately leads to your and my friend mr. cognitive dissonance. The mental disease where your actions don't  match your words. 

Cognitive dissonance works at a subconscious level and once conscious you can work on lessening mr cog's impact. The key is be conscious, not reactive, and have a humble go with the flow mindset.  There are  more than enough ways to make money with people that are emotionally stable and don't have mr. cog. Most importantly they are under or at bv  8)
Title: Re: BH - Biglari Holdings
Post by: GrizzlyRock on October 24, 2013, 04:00:57 PM
I thought we killed this thread...
Title: Re: BH - Biglari Holdings
Post by: gg on October 24, 2013, 04:06:38 PM
How about in a non-confrontational manner?  This was a shitstorm brewing because Biglari is automatically identified as the type of investor he is...my way or the highway...your shareholders, my shareholders, and everyone else be damned. 

He is doing nothing illegal, nor any different than many other Wall Street types.  My opinion is that as a student of Buffett, maybe he should have gone that route...especially when you were pretty much writing your annual letters verbatim to Buffett's, including font type, structure, shareholders, etc. 

The wool was pulled over too many eyes, including mine.  Now he's doing it on a bigger venue with a bigger audience.  I'm tired of the minion of activists...both long and short!  It's about time for a major stock market correction, because everytime one happens, many of these assholes disappear for a few years!  Cheers!

I was not present at Biglari's initial meetings with CBRL, so I don't know the answer to this, but do you believe he came in on day one with that attitude? I honestly doubt it. There's no denying that most large public companies face major agency probles, and there are too many management teams that own too little stock in their companies to be truly aligned with the business's true owners, its shareholders. Executives are so fearful of hedge funds that they immediately react to news that hedge funds have taken positions in their company by enacting anti-shareholder provisions.  Would it be better if management teams were able to never have to worry about their shareholders taking more active roles in the company to hold the executives responsible? Absolutely not. Thankfully, we have a system of laws that activists can use to protect themselves and other shareholders from these type of management teams.

Obviously not all activists are created equal. Some are purely short-term minded, and would gladly destroy the long-term prospects of a decent company if they could just take on excessive leverage to fund near-term dividends. Some would buy a company with a sliver of equity and fund the rest with the surplus of a defined benefit employee retirement plan. But then there are also good activists who do not risk the long-term prospects of companies, they do their homework and realize that a company is miscalculating or misreporting their metrics. Someone like Muddy Waters goes out and finds out all a company's assets were transferred to the CEO's spouse, or Dan Loeb and Mick McGuire figure out that Sotheby's is lending money to their art dealer network at interest rates that are significantly below their cost of capital. 99% of investors don't consider some of these analytics--many executives and boards dont even look at the right analytics or track the right data to be able to track relevant metrics. There's no denying that Biglari probably does more analysis on the economics of CBRL's additional store openings than CBRL's entire Board does combined. And that's how he figures out that they are not doing it profitably. And that's the beauty of the stock market--the prospect of getting richly rewarded for doing your homework meticulously and more thorough than anyone else...
Title: Re: BH - Biglari Holdings
Post by: premfan on October 24, 2013, 04:14:30 PM
I thought we killed this thread...

Haha. I got caught in the moment.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 24, 2013, 11:18:00 PM
Just a stupid, simple-minded way to suck cash out of a business.  I'm not a fan of this type of behavior.  One time jackpot for an activist investor, while the company gets saddled with more debt...mind you at a lower rate debt to justify the action.  My personal opinion if I were a long-time shareholder of the company...go fu*k yourself Biglari!  The board would be a bunch of spineless idiots to cede to this type of behavior if they have an iota of ethics...mind you they are dealing with someone whose conviction does not falter as much as his word. 

Why not refinance the debt at lower rates, and pay higher quarterly dividends to shareholders, instead of adding debt?  Because so this asshole can take the cash out of the company and walk over to his next target with a larger warchest...with or without taking over the board.  Icahn 2.0!  Cheers!

Quote
We should borrow whenever we can safely extend the business by doing so.
--John D. Rockefeller

Clearly, to increase debt is very often dangerous, but this doesn’t mean it is always the wrong thing to do (just ask Mr. John Malone!).

In his letter, where he proposes the special dividend, Mr. Biglari explains very well:
1) That CBRL could and should increase its debt,
2) That it is wrong to leave a lot of cash in the hands of people who are very poor at allocating capital,
3) How and why the paying of a special dividend and the increasing of debt might turn out to be value accretive.
He has also many times suggested what management should do with all CBRL’s cash, but management has recently published a presentation to shareholders, in which they do nothing but attacking BH, and what they propose instead is just loose talk.

Sincerely, if I were a CBRL shareholder, and my fellow shareholders vote against the special dividend, I would be greatly disappointed! ;)

giofranchi
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 24, 2013, 11:45:02 PM
Parsad - you  might be right that a special dividend like this is not the ideal way to increase CBRL's long term value. However, put yourself in Biglari's shoes. He owns 20% of a company that is undervalued due to the fact that they are underperforming. They are underperforming mostly because they are more interesting in growing revenue and store count than increasing true earnings or FCF. He spends a few years trying to get them to understand their mistakes in the growth plans, and they ignore him. They use a few of his ideas, which are mostly very successful. They offer to buy him out to at market price to get rid of his annoyance, and he turns them down. He continues to show how they are miscalculating the benefits of opening additional stores, and they continue to ignore him.

Maybe lighting a fire under the Board like a shareholder vote for a special dividend is the only way for Biglari to shake things up from his non-board position....Can you think of a better way?

How about in a non-confrontational manner?  This was a shitstorm brewing because Biglari is automatically identified as the type of investor he is...my way or the highway...your shareholders, my shareholders, and everyone else be damned. 

He is doing nothing illegal, nor any different than many other Wall Street types.  My opinion is that as a student of Buffett, maybe he should have gone that route...especially when you were pretty much writing your annual letters verbatim to Buffett's, including font type, structure, shareholders, etc. 

The wool was pulled over too many eyes, including mine.  Now he's doing it on a bigger venue with a bigger audience.  I'm tired of the minion of activists...both long and short!  It's about time for a major stock market correction, because everytime one happens, many of these assholes disappear for a few years!  Cheers!

Wow ! That was powerful! If someone has a huge ego they will rationalize any action. The mere rationalization creates a feedback loop ( pos or neg how ever you label it) that creates more rationalizations and more and more. Sooner or later they blow up. Emotionally and mentally ( see ichan vs ackman interview on cnbc) they become unstable and reactive. The key word is "reactive" and they stop listening to anyone else.

Can money be made? Absolutely! Buyers beware these type of people blow up usually after a string of rationalizations that ultimately creates a sense of invincibility. The invincibility is what creates dictators and erroneous data that gets rationalized as the "truth".  This ultimately leads to your and my friend mr. cognitive dissonance. The mental disease where your actions don't  match your words. 

Cognitive dissonance works at a subconscious level and once conscious you can work on lessening mr cog's impact. The key is be conscious, not reactive, and have a humble go with the flow mindset.  There are  more than enough ways to make money with people that are emotionally stable and don't have mr. cog. Most importantly they are under or at bv  8)

This all may enjoy some underlying truths… but a simple business reality cannot be ignored (or, better, of course it can be ignored, but you should not!):

Many businesses are undervalued because of bad management. And simply solving that problem gets the business from undervalued to fairly valued. You make something work better (and the businessman in me loves it!), while getting rich in the meantime (the investor in me loves it too! ;)).

Period.

You try to talk and calmly reason with management once, twice, even three times. Then, when you finally realize you are talking to a concrete wall, you simply go to Caterpillar and hire a Bulldozer! ;D

giofranchi
Title: Re: BH - Biglari Holdings
Post by: APG12 on October 25, 2013, 05:57:39 AM
Just a stupid, simple-minded way to suck cash out of a business.  I'm not a fan of this type of behavior.  One time jackpot for an activist investor, while the company gets saddled with more debt...mind you at a lower rate debt to justify the action.  My personal opinion if I were a long-time shareholder of the company...go fu*k yourself Biglari!  The board would be a bunch of spineless idiots to cede to this type of behavior if they have an iota of ethics...mind you they are dealing with someone whose conviction does not falter as much as his word. 

Why not refinance the debt at lower rates, and pay higher quarterly dividends to shareholders, instead of adding debt?  Because so this asshole can take the cash out of the company and walk over to his next target with a larger warchest...with or without taking over the board.  Icahn 2.0!  Cheers!

Is this really a fair characterization? Remember the board was recently going to use $13 just to buy Biglari's shares.

Also, it seems strange to imply that this is a short-term, one time, 'simple-minded' way to suck cash out of a business (I'm not sure what else you could be criticizing by that statement).  His time frame is not short-term because if it were, he would have taken their offer to buy back his shares. Also, when he was asked about his exit strategy in an interview, he replied with something along the lines of, "We have one of the longest time horizons in the investment world." And since you don't seem to believe anything that comes out of his mouth it should at least be obvious that he doesn't have an exit strategy and doesn't seem to care. In fact, I can't think of anything that has occurred to indicate this is a simple-minded way to 'suck cash out of the business.'

This is capital allocation 101. If the business does not need the capital to operate safely, it should be invested or returned to shareholders. It's clear Biglari can invest the capital better than CBRL management and so it's obvious why he wants the dividend paid. If you think that his proposed debt level is too high, that's one thing. However, I've yet to see anyone make that criticism. I'd be interested in an intelligent discussion on the matter. How can you have an opinion on whether they should pay the dividend without an opinion on CBRL's optimal capital structure?
Title: Re: BH - Biglari Holdings
Post by: Parsad on October 25, 2013, 06:59:46 AM
Just a stupid, simple-minded way to suck cash out of a business.  I'm not a fan of this type of behavior.  One time jackpot for an activist investor, while the company gets saddled with more debt...mind you at a lower rate debt to justify the action.  My personal opinion if I were a long-time shareholder of the company...go fu*k yourself Biglari!  The board would be a bunch of spineless idiots to cede to this type of behavior if they have an iota of ethics...mind you they are dealing with someone whose conviction does not falter as much as his word. 

Why not refinance the debt at lower rates, and pay higher quarterly dividends to shareholders, instead of adding debt?  Because so this asshole can take the cash out of the company and walk over to his next target with a larger warchest...with or without taking over the board.  Icahn 2.0!  Cheers!

Is this really a fair characterization? Remember the board was recently going to use $13 just to buy Biglari's shares.

Also, it seems strange to imply that this is a short-term, one time, 'simple-minded' way to suck cash out of a business (I'm not sure what else you could be criticizing by that statement).  His time frame is not short-term because if it were, he would have taken their offer to buy back his shares. Also, when he was asked about his exit strategy in an interview, he replied with something along the lines of, "We have one of the longest time horizons in the investment world." And since you don't seem to believe anything that comes out of his mouth it should at least be obvious that he doesn't have an exit strategy and doesn't seem to care. In fact, I can't think of anything that has occurred to indicate this is a simple-minded way to 'suck cash out of the business.'

This is capital allocation 101. If the business does not need the capital to operate safely, it should be invested or returned to shareholders. It's clear Biglari can invest the capital better than CBRL management and so it's obvious why he wants the dividend paid. If you think that his proposed debt level is too high, that's one thing. However, I've yet to see anyone make that criticism. I'd be interested in an intelligent discussion on the matter. How can you have an opinion on whether they should pay the dividend without an opinion on CBRL's optimal capital structure?

This is subjective.  Is optimal capital structure to pull cash out of the SNS subsidiary, so as to allocate it into a one-shot all or nothing bet on CBRL, while same store sales stagnate at SNS?  CBRL management did many things wrong, but they were far from negligent.  Also, BH's horizon isn't anywhere as long as you think...that's a veiled threat to intimidate incumbent management.  BH's horizon only extends to their next action to release capital or take control.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 25, 2013, 07:11:36 AM
This is subjective.  Is optimal capital structure to pull cash out of the SNS subsidiary, so as to allocate it into a one-shot all or nothing bet on CBRL, while same store sales stagnate at SNS? 

It doesn’t look like they have really stagnated… Of course, they won’t keep growing at the rate they did during the very successful turnaround, but nobody should expect that!

giofranchi
Title: Re: BH - Biglari Holdings
Post by: gg on October 25, 2013, 07:25:32 AM

This is subjective.  Is optimal capital structure to pull cash out of the SNS subsidiary, so as to allocate it into a one-shot all or nothing bet on CBRL, while same store sales stagnate at SNS?  CBRL management did many things wrong, but they were far from negligent.  Also, BH's horizon isn't anywhere as long as you think...that's a veiled threat to intimidate incumbent management.  BH's horizon only extends to their next action to release capital or take control.  Cheers!

One way to look at this information set is to say, how could Biglari invest a few hundred million dollars into a different restaurant brand and demand better operational execution from their management, when his own restaurant chain isn't growing to quickly? How could he take so much risk with an "all or nothing bet". (although I'm not sure where the "nothing" comes to play, it's not like Cracker Barrel is highly levered or likely to cease to exist any time soon).

The second way to look at it is to say, if Biglari sees that his store base and sales at Steak n Shake are not growing as fast as they were during his turn-around, maybe it would be smart if he reinvested excess cash in other businesses which he understood extremely well (restaurant industry), where he knew the business was undervalued due to bad capital allocation and poor business execution, and had significant real estate assets that accounted for a significant part of the market's valuation at the time. Maybe that type of investment would have a higher return on capital than making marginal improvements to the SNS menu...
Title: Re: BH - Biglari Holdings
Post by: APG12 on October 25, 2013, 07:30:34 AM
Quote
This is subjective.  Is optimal capital structure to pull cash out of the SNS subsidiary, so as to allocate it into a one-shot all or nothing bet on CBRL, while same store sales stagnate at SNS?  CBRL management did many things wrong, but they were far from negligent.  Also, BH's horizon isn't anywhere as long as you think...that's a veiled threat to intimidate incumbent management.  BH's horizon only extends to their next action to release capital or take control.  Cheers!

Yeah, I guess you're right about it being subjective in some sense.

I'm just trying to take a step back here and look at the big picture objectively. There are some things that this guy has done that are indefensible and designed to increase his power over BH (such as the name licensing fiasco). However, there are a LOT of people on here that see him as the devil incarnate and that colors their opinion on everything he does. Using your SNS sub example, should we look at his actions and conclude that he was wrong to remove capital from the SNS sub as it has lead to stagnant SSS? Or should we look at what he did with the capital, which was to invest it in CBRL, and conclude that it was smart to allocate the capital as he did because it has gotten much higher returns than it would have in the SNS sub?

Let me preface this by saying that I've agreed with nearly everything I've ever seen you post on here, Parsad. I just think that when you've gotten to the point of "go fu*k yourself Biglari" your emotions may be affecting your opinion more than you think. I try to remain introspective and monitor my own emotions and I have to admit that in the case of BH I find my immediate response is generally to side with Biglari. I don't know if this is because I'm naturally combative or what. All in all, I just don't think Biglari's plan is the insanity that it's made out to be.
Title: Re: BH - Biglari Holdings
Post by: ragu on October 29, 2013, 07:07:29 AM
If you think that his proposed debt level is too high, that's one thing. However, I've yet to see anyone make that criticism. I'd be interested in an intelligent discussion on the matter.

agaglio,

From Sardar's letter to management (http://www.enhancecrackerbarrel.com/pdfs/special%20dividend%20letter_10_3_13.pdf) dated September 16th:

Quote
Net debt would be around $800 million for a real estate, restaurant, and retail company with over $1 billion worth of real estate.
Moreover, the cash flow coverage, in our view, would be more in line with that of its peer group.

(emphasis supplied)

The latest presentation (http://www.sec.gov/Archives/edgar/data/1067294/000092189513002059/dfan14a07428021_10282013.htm) from Sardar to CBRL shareholders has the cash flow coverage data for CBRL and peers(Slide 7).

Best,
Ragu

Title: Re: BH - Biglari Holdings
Post by: giofranchi on October 29, 2013, 07:30:23 AM
The latest presentation (http://www.sec.gov/Archives/edgar/data/1067294/000092189513002059/dfan14a07428021_10282013.htm) from Sardar to CBRL shareholders has the cash flow coverage data for CBRL and peers(Slide 7).

Best,
Ragu

Thank you ragu, for posting the presentation. :)
Yesterday I sold some investments of mine, which had appreciated in price, and increased my firm’s investment in BH by 10%.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragu on October 30, 2013, 09:39:50 AM
Yesterday I sold some investments of mine, which had appreciated in price, and increased my firm’s investment in BH by 10%.

giofranchi,

Welcome. As I started reading that line of yours, I thought you'd sold some BH!

From the proxy (http://www.sec.gov/Archives/edgar/data/93859/000092189511001353/pre14a07428_08052011.htm) for the dual class structure issued on July 6th 2011:

Quote
Furthermore, the Board and the management do not believe the Company’s stock is overvalued.

Based on the latest quarterly numbers prior to this proxy, the stock's closing price on July 5th 2011, the subsequent (conservative) increase in business value since then, it is clear that BH is undervalued today.

My numbers suggest a price/share that is somewhere between $487 and $531.5 to achieve a similar level of "not overvalued" (based on last quarter's numbers + impact of rights offering and ignoring changes to book from the increase in CBRL's market price and potential addition to retained earnings from the restaurant businesses).


Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: APG12 on October 30, 2013, 11:09:33 AM

The latest presentation (http://www.sec.gov/Archives/edgar/data/1067294/000092189513002059/dfan14a07428021_10282013.htm) from Sardar to CBRL shareholders has the cash flow coverage data for CBRL and peers(Slide 7).


Ah, thanks for posting! This is the only thing that matters in my opinion and his case is pretty convincing.
Title: Re: BH - Biglari Holdings
Post by: globalfinancepartners on November 01, 2013, 01:52:39 PM
http://www.businesswire.com/news/home/20131101005925/en/ISS-Glass-Lewis-Egan-Jones-Endorse-Cracker-Barrel
Title: Re: BH - Biglari Holdings
Post by: wescobrk on November 01, 2013, 04:04:03 PM
Anyone know why iss and glass Lewis has so much prestige?
I don't know anything about these organizations.
I can understand giving so much respect to Buffett and other great investors but why is the above accorded so much weight?
Title: Re: BH - Biglari Holdings
Post by: Hielko on November 01, 2013, 04:40:05 PM
A lot of large passive investors follow their advice as part of their corporate governance strategy.
Title: Re: BH - Biglari Holdings
Post by: fareastwarriors on November 01, 2013, 05:03:14 PM
Some managers give complete control of their proxy duties to ISS/Glass Lewis. These firms then can vote according to their own policies without any input from the investment manager.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on November 01, 2013, 06:02:29 PM
Thanks, how did the market choose them? Are they private organizations or some type of federal connection?
If the former, I'm presuming they must have done some quality work outside of marketing to have such a giant market share. It appears to be a oligopoly for corp governance.
Thanks.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on November 01, 2013, 07:52:10 PM
I'm guessing biglari will lose the special dividend vote now since everyone follows iss like sheep.
I guess it's similar to Moody's and S&P for people that don't want to think for themselves.
Title: Re: BH - Biglari Holdings
Post by: bargainman on November 02, 2013, 08:24:43 AM
You try to talk and calmly reason with management once, twice, even three times. Then, when you finally realize you are talking to a concrete wall, you simply go to Caterpillar and hire a Bulldozer! ;D

giofranchi

Well I think this is exactly what Prasad tried to do with Biglari back in the day before it was called BH and before the incentive agreement and before all of the ego maniac actions that he took. I think Prasad tried talking to him a number of times about this and was rudely ignored. The biggest problem that I have with big Larry is that he is incredibly egotistical and particularly hypocritical. The egotistical part doesn't bother me quite as much as the hypocritical part. Primarily because the hypocritical part is the non-introspective part which will prevent him from seeing his own mistakes and could lead to a black swan type downfall.

I do have a question for you and for Raju as well. What is your criteria for no longer trusting Biglari?

At least a couple of members of this board including the moderator have gone from being huge fans and even investors with him, even believing that he was the next coming of Warren Buffett, to almost viscerally distrusting the man. I'm truly curious given both your large investments with him what it would take given all of his egotistical actions to make you turn away? I'm really not criticizing, I do want to understand however.

As a full disclosure I do own a reasonable size position which I bought back when steak and Shake was about three or four dollars if I remember correctly.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on November 02, 2013, 08:45:09 AM
I do have a question for you and for Raju as well. What is your criteria for no longer trusting Biglari?

I am terrible at judging character traits in people… Or better, I am terrible at judging those traits and inferring from them investment decisions.
Therefore, I will part ways with Mr. Biglari when he starts making business decisions, strategic decisions, capital allocation decisions, that make no sense to me. That’s exactly when I will part ways with any of the owner/manager I now trust and respect.

giofranchi
Title: Re: BH - Biglari Holdings
Post by: ragu on November 05, 2013, 05:38:34 AM
What is your criteria for no longer trusting Biglari?

As things stand, the only thing that I expect will cause me to reconsider is any sale of BH shares by Sardar.

I also believe that the odds on such a possibility are somewhere between zero and none.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on November 05, 2013, 05:58:16 AM
What is your criteria for no longer trusting Biglari?

As things stand, the only thing that I expect will cause me to reconsider is any sale of BH shares by Sardar.

I also believe that the odds on such a possibility are somewhere between zero and none.

Best,
Ragu

As I have said before, no one can say ragu lacks conviction in his ideas!! ;D ;D ;D

giofranchi
Title: Re: BH - Biglari Holdings
Post by: dcollon on November 13, 2013, 09:43:01 AM
Cracker Barrel announces preliminary results indicate all nominees elected to board; special dividend rejected
Wednesday, November 13, 2013 05:16:45 PM (GMT)


The preliminary results indicate shareholders:
elected by an overwhelming margin all of the company's nominees to the board, once again rejecting both Sardar Biglari and Phil Cooley as directors (see linked comments below).
rejected by an overwhelming margin the non-binding, advisory proposal on a $20 per share special dividend, which was publicly proposed by affiliates of Biglari Holdings (see linked comments below).
Final results will be announced when they are certified.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on November 13, 2013, 10:10:21 AM
No surprise there once iss said this is how you should vote.
I originally thought they would lose the board seats but had a shot at the dividend but post iss decision it seems a forgone conclusion since most managers let iss make their decisions.
Hopefully biglari will announce acquisition soon (insurance)
5 years at the helm and only one acquisition so far.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on November 13, 2013, 05:07:05 PM
For Bh shareholders on the board:
Do you guys think he can obtain the same type of returns in the future with his activist campaigns?
I know he made a ton on cbrl but if iss et all will continue to recommend to vote against him because of corporate governance, unless he can buy 35-40 percent of a company, it looks very difficult he will be able to get on a board in the future (caw doesn't count, too small in my opinion).
Title: Re: BH - Biglari Holdings
Post by: APG12 on November 14, 2013, 07:19:31 AM
That's an interesting point and could definitely be a negative. On the other hand, he didn't need to get on the board of CBRL to light a fire under management. Furthermore, I don't think you can place the blame for his loss totally at the feet of ISS. The stock's performance surely didn't help his cause.
Title: Re: BH - Biglari Holdings
Post by: ragu on November 18, 2013, 06:48:26 AM
For Bh shareholders on the board:
Do you guys think he can obtain the same type of returns in the future with his activist campaigns?

Sardar has said that, with control (read as  influence in capital allocation at least), a CAGR of 32% is possible (probable?) in activist situations. I suspect that number will go down considerably if he can't get on the board. It is a significant negative, IMO.

Re. the CBRL proxy, to channel WEB: Nothing sedates rationality like a rising stock price.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: gg on November 18, 2013, 07:21:10 AM
Just a reminder about Biglari's investment in CBRL since so many of you seem to be talking about it as if it's a failure....

Biglari was buying shares starting in April 2011, and was amassing an enormous stake in the $45-$55 range. He believed the company was undervalued based on its current value (i.e. 50 cent dollar). He also believed that with better decision making at the top, operations and results could be significantly improved (i.e. 1 dollar's value growing into 2).
Original 13D - http://www.sec.gov/Archives/edgar/data/93859/000092189511001292/sc13d07428cra_06032011.htm

CBRL has been a tremendously successful investment by any measure. This was all done WITHOUT Biglari being on the board. Part of the returns have come form the valuation discount narrowing (probably in part due to the press from his activism), and part has come from the fact that Biglari was able to cause some changes to operations and management without having a board seat, and from holding a flame under management.

It is silly to extrapolate what future returns will be if BH can't get board seats on future targets. Even more silly to use CBRL as an example of why BH won't be successful in the future when this has been such a great outcome for BH investors already without a seat on CBRL's board .
Title: Re: BH - Biglari Holdings
Post by: giofranchi on November 18, 2013, 07:29:04 AM
Re. the CBRL proxy, to channel WEB: Nothing sedates rationality like a rising stock price.

Best,
Ragu

I agree 100%. And great quote! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: APG12 on November 18, 2013, 07:52:26 AM
No surprise there once iss said this is how you should vote.

One more thought on this. Voting based upon the recommendation of ISS is completely asinine (my new favorite word). How many times do investors need to be taught how important it is to be independent?? Do your own research and come to your own conclusions. This is the exact same principle that was violated when people thought they could rely on the rating agencies' opinions. We know how that ended and we know how this is going to end- with more idiotic capital allocation. Principles are important, follow em!
Title: Re: BH - Biglari Holdings
Post by: gg on November 18, 2013, 08:32:48 AM
Interesting article on proxy advisor firms:
http://blogs.wsj.com/riskandcompliance/2013/10/31/msci-puts-iss-on-block-amid-proxy-firm-headwinds/

Quote
MSCI Inc. announced in its third quarter earnings release that it was exploring strategic alternatives for its influential proxy advisor and governance-services provider Institutional Shareholder Services Inc.

The announcement comes as the proxy advisory business is facing regulatory scrutiny, market headwinds, and questions about the validity of its analytical models.

The announcement quoted Henry A Fernandez, chairman and chief executive of MSCI, saying of ISS that, “Over the past three years, MSCI has worked hard to return that business to a growth track.” Mr. Fernandez further said, “the Governance business reported organic revenue growth of 7% and Adjusted [earnings before interest, tax, depreciation and amortization] growth of 12%. We believe the time is right to explore our strategic alternatives.”

A spokesman for ISS declined to comment beyond the release.

MSCI acquired ISS in June 2010 as part of its $1.8 billion acquisition of RiskMetrics Group, which had paid $553 million to buy ISS in 2006. MSCI reported only about $59 million in governance revenue for 2010, but it had only owned the business for half the year. That’s consistent with $120 million in 2011, and $123 million in 2012. Revenue reported in the MSCI release for the first nine months of 2013 was about $91.5 million, down slightly from $92 million at the same point last year. The numbers confirm that governance hasn’t been a big growth business for MSCI.

Not only is the growth record moderate, but regulatory scrutiny is intensifying. Congressional hearings in June aired criticism by business groups and others who want to see proxy advisors reined in, and in July, in a speech before the Society of Corporate Secretaries and Governance Professionals, Commissioner Daniel M. Gallagher of the Securities and Exchange Commission  said, “I believe that the Commission should fundamentally review the role and regulation of proxy advisory firms and explore possible reforms…”

Regulation isn’t the only possible headwind for ISS. There is some evidence to suggest that its influence over institutional votes, while still substantial, may be declining. Combine the facts that the institutions are foregoing income from lending shares in order to vote those shares with the fact that they are voting independently of ISS, and it seems they are not merely outsourcing their votes to the proxy advisor.

Professor Reena Aggarwal of Georgetown University’s McDonough School of Business said in an interview her research shows that institutional investors value their votes enough to give up lending revenue in order to recall the shares, especially in situations where governance is weak, or there are important issues such as mergers and acquisitions on the ballot. “They obviously consider it important to vote and are putting in the effort to do this,” she said.

Yet in other research, she and coauthors found that institutional investors have become more independent of both management and proxy advisors, writing that “from 2004 to 2010, the percentage of votes following management’s recommendation has declined as has the percentage of votes following ISS’s recommendation.”

Meanwhile, there is some evidence that bad things may happen to companies that follow the recommendations of proxy advisors. Professor David Larcker of the graduate school of business at Stanford drew attention to the influence of ISS over executive compensation in a note released earlier this week. He and his fellow researchers claim that not only do proxy advisors influence the design of executive compensation programs, but that the recommendations destroy shareholder value.  In research published earlier this year, the researchers showed how the stock market turned thumbs down on companies that adopted proxy advisor recommendations on executive pay. “I think it’s worth stating that you do want these people out there, firms like that, to be experts and highlight the bad guys. The question is, are these guys able to do that given their model,” said Prof. Larcker in an interview.

ISS could be the second proxy advisory firm to change hands in recent months. In August, Canada’s Alberta Investment Management Corp. acquired a 20% stake in ISS’s smaller competitor, Glass Lewis & Co., for undisclosed terms. The seller was Ontario Teachers’ Pension Plan, which had bought Glass Lewis in 2007 for $46 million from China’s Xinhua Finance Ltd., which had purchased the company in 2006 for an implied equity value of $56 million, according to S&P Capital IQ.
Title: Re: BH - Biglari Holdings
Post by: rkbabang on November 18, 2013, 08:43:53 AM
No surprise there once iss said this is how you should vote.

One more thought on this. Voting based upon the recommendation of ISS is completely asinine (my new favorite word). How many times do investors need to be taught how important it is to be independent?? Do your own research and come to your own conclusions. This is the exact same principle that was violated when people thought they could rely on the rating agencies' opinions. We know how that ended and we know how this is going to end- with more idiotic capital allocation. Principles are important, follow em!

If you look at the prospectus of your average mutual fund you'll see that they hold hundreds of stocks.  You can't really know that much about each one of them.  And even if you could it would be irrational to do so. Your time isn't well spent doing a lot of research on a company that is less than half of 1% of your fund.  Thus they outsource this kind of thing to an advisory firm to save time and save themselves the responsibility of making the decision, and you have the situation as it currently is.
Title: Re: BH - Biglari Holdings
Post by: APG12 on November 18, 2013, 09:52:29 AM
If you look at the prospectus of your average mutual fund you'll see that they hold hundreds of stocks.  You can't really know that much about each one of them.  And even if you could it would be irrational to do so. Your time isn't well spent doing a lot of research on a company that is less than half of 1% of your fund.  Thus they outsource this kind of thing to an advisory firm to save time and save themselves the responsibility of making the decision, and you have the situation as it currently is.

Oh certainly. Your point is well taken. The same thing was said in defense of ratings agencies and I definitely see the logic of it. But at what point do you take responsibility for what you've invested your shareholder's money in? Again, I don't think the problem is the fault of ISS but rather fund managers who think it's OK to own 100 stocks that they don't have the time to follow.
Title: Re: BH - Biglari Holdings
Post by: rkbabang on November 18, 2013, 11:02:34 AM
If you look at the prospectus of your average mutual fund you'll see that they hold hundreds of stocks.  You can't really know that much about each one of them.  And even if you could it would be irrational to do so. Your time isn't well spent doing a lot of research on a company that is less than half of 1% of your fund.  Thus they outsource this kind of thing to an advisory firm to save time and save themselves the responsibility of making the decision, and you have the situation as it currently is.

Oh certainly. Your point is well taken. The same thing was said in defense of ratings agencies and I definitely see the logic of it. But at what point do you take responsibility for what you've invested your shareholder's money in? Again, I don't think the problem is the fault of ISS but rather fund managers who think it's OK to own 100 stocks that they don't have the time to follow.

I agree with you. This is why I hate mutual funds.  I don't know what the solution is, or if there is one.
High tax rates coupled with tax exempt retirement funds which create intensives for employers to offer matching funds, along with a sustained inflation (never allowing deflation) which discourages savings in cash, all force a lot of people into stocks who wouldn't normally be.  These people put their money into mutual funds, which means there is a lot of money in these funds.  Which means these problems are not going away any time soon.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on November 18, 2013, 03:36:00 PM
Looks like the Washington post company is taking a page from biglari.
They changed their name to Graham holdings.
Title: Re: BH - Biglari Holdings
Post by: JSArbitrage on November 18, 2013, 03:54:00 PM
Looks like the Washington post company is taking a page from biglari.
They changed their name to Graham holdings.

I believe they sold the newspaper assets to Bezos.  So it's really not WaPo anymore.  A name change was overdue.
Title: Re: BH - Biglari Holdings
Post by: ragu on December 05, 2013, 03:12:44 AM
It is silly to extrapolate what future returns will be if BH can't get board seats on future targets. Even more silly to use CBRL as an example of why BH won't be successful in the future when this has been such a great outcome for BH investors already without a seat on CBRL's board .

Sardar has told you what he expects the returns are likely to be from simply purchasing dollar bills for 50 cents (15% over 5 years compounded). He also says that a presence on the board with the ability to influence operational/capital decisions gets you to a potential 32% return over 5 years compounded.

In fact, what is truly silly is to dispute what is axiomatic: BH's future returns will be lower if Sardar is not able to get on the boards of underperforming companies and exert meaningful influence over capital allocation decisions than if he did.

And, you have Sardar's illustration for what the potential range of gains might be for each scenario.

CBRL was effectively SNS part deux.

Clueless capital allocation: Check
Underperformance relative to history: Check
Expansion at the cost of profitability: Check
Declining customer traffic: Check
Increased prices in response to declining traffic: Check
More decline in traffic as a result of increasing prices: Check

If there was one board that Sardar was supremely qualified to be on given the SNS history, it was CBRL.

As a BH shareholder, I am disappointed that empty rhetoric and fear mongering, not to mention a rising stock price, has stood between Sardar and CBRL's board. With the vote against a dividend, CBRL remains a risky position for BH, especially at current prices.

Best,
Ragu


Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 05, 2013, 06:05:08 AM
With the vote against a dividend, CBRL remains a risky position for BH, especially at current prices.

I was wondering why Mr. Biglari doesn’t sell CBRL at this point. No board, no special dividend, same obtuse management, a stock that is not clearly undervalued anymore… what is he seeing now in CBRL?! Of course, if CBRL’s stock should decline in price, that would automatically make Mr. Biglari more persuasive with other shareholders… but that would also entail forfaiting important paper gains… I don’t know… I hope at least that he can unload the CBRL position, without forfaiting the majority of paper gains: given BH’s 20% stake in CBRL, it shouldn’t be easy to sell all those shares, without affecting negatively the stock price…

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on December 05, 2013, 06:16:45 AM
At $100+/per share, I would imagine that Biglari no longer finds CBRL to be "cheap" today based on current earnings. However, relative to what he thinks the company would be worth if it had better management (leading to higher earnings), and relative to his other available investable options, I imagine Biglari thinks that CBRL still presents a reasonable risk/reward.

In addition, CBRL management wants Biglari to exit the investment. While selling all those shares on the open market, if done quickly, would likely negatively affect the stock, CBRL management has already indicated its willingness to repurchase the shares directly in a private transaction. It's actually almost as if Biglari has a put option on the CBRL shares...
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 05, 2013, 06:23:47 AM
In addition, CBRL management wants Biglari to exit the investment. While selling all those shares on the open market, if done quickly, would likely negatively affect the stock, CBRL management has already indicated its willingness to repurchase the shares directly in a private transaction. It's actually almost as if Biglari has a put option on the CBRL shares...

Yes! This is true. :)
Thank you,

Gio
Title: Re: BH - Biglari Holdings
Post by: rkbabang on December 05, 2013, 06:24:59 AM
At $100+/per share, I would imagine that Biglari no longer finds CBRL to be "cheap" today based on current earnings. However, relative to what he thinks the company would be worth if it had better management (leading to higher earnings), and relative to his other available investable options, I imagine Biglari thinks that CBRL still presents a reasonable risk/reward.

In addition, CBRL management wants Biglari to exit the investment. While selling all those shares on the open market, if done quickly, would likely negatively affect the stock, CBRL management has already indicated its willingness to repurchase the shares directly in a private transaction. It's actually almost as if Biglari has a put option on the CBRL shares...

If he exercises that "option" though, the next company he goes after will spin it as "he held CBRL management hostage and they had to pay him off".  It is his best way out now, but it isn't a good P/R move.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 05, 2013, 06:33:12 AM
It is his best way out now, but it isn't a good P/R move.

Yes! This ALSO is true. ;D
Thank you,

Gio
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 05, 2013, 06:34:27 AM
His shareholder letter comes out on sat.
I wonder how long it'll be until he offers buyout for insurance company.
He has about 120 million in cash at Bh.
So far he hasn't bought any company where he isn't the CEO.
Title: Re: BH - Biglari Holdings
Post by: ragu on December 05, 2013, 09:51:38 AM
I was wondering why Mr. Biglari doesn’t sell CBRL at this point.

gio,

I expect that he doesn't want to be seen as going away having "failed". 

He was desperate for the dividend, even going so far as to quote an "analyst" in support in the presentation (http://www.enhancecrackerbarrel.com/pdfs/prudent_proposal%20_cbrl_3.4.pdf) (page eight).

I suspect Sardar must've been dragged out of the room kicking and screaming at the inclusion of this (same page):

Quote
“We think a special dividend would likely be supportive of CBRL shares near-term…”


Ugh, especially for someone who is as wedded to long-term value as Sardar is.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: bookie71 on December 05, 2013, 12:19:03 PM
It is nothing but old fashioned "green mail" from the 80's.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 05, 2013, 11:39:40 PM
It is nothing but old fashioned "green mail" from the 80's.

Could you explain what you mean by “green mail”? During the 80’s I still was in elementary school!! ;D ;D ;D

Gio
Title: Re: BH - Biglari Holdings
Post by: Kraven on December 06, 2013, 04:28:40 AM
It is nothing but old fashioned "green mail" from the 80's.

Could you explain what you mean by “green mail”? During the 80’s I still was in elementary school!! ;D ;D ;D

Gio

Gio, "green mail" was primarily an 80s phenomenom.  Raiders like Icahn, etc would buy up a big slug of stock, not unlike they do today, but at the time entrenched management would panic and in order to save their jobs they would buy back the stock.  Of course the raider didn't just want what the current market price was, they could get that more or less by just dumping the stock.  So to get rid of them they would be paid a premium.  It was called green mail because it was essentially blackmail, just given a cutesy Wall Street name.  They would buy the stock, make a lot of noise, but really have no intention of actually following through on any of it, they just wanted a big payday. 
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 06, 2013, 04:42:55 AM
They would buy the stock, make a lot of noise, but really have no intention of actually following through on any of it, they just wanted a big payday.

Ok, thank you, Kraven!
Then, I sincerely don’t understand how “green mail” could be compared to what Mr. Biglari has already done for BH’s investment in CBRL… ???

Gio
Title: Re: BH - Biglari Holdings
Post by: Kraven on December 06, 2013, 05:11:13 AM
They would buy the stock, make a lot of noise, but really have no intention of actually following through on any of it, they just wanted a big payday.

Ok, thank you, Kraven!
Then, I sincerely don’t understand how “green mail” could be compared to what Mr. Biglari has already done for BH’s investment in CBRL… ???

Gio

Sure.  Sorry, I can't answer that.  I am not familiar enough with the situation.
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on December 06, 2013, 09:16:51 AM
I was wondering why Mr. Biglari doesn’t sell CBRL at this point.

gio,

I expect that he doesn't want to be seen as going away having "failed". 

He was desperate for the dividend, even going so far as to quote an "analyst" in support in the presentation (http://www.enhancecrackerbarrel.com/pdfs/prudent_proposal%20_cbrl_3.4.pdf) (page eight).

I suspect Sardar must've been dragged out of the room kicking and screaming at the inclusion of this (same page):

Quote
“We think a special dividend would likely be supportive of CBRL shares near-term…”


Ugh, especially for someone who is as wedded to long-term value as Sardar is.

Best,
Ragu

For what it's worth, I attended the annual meeting (been a shareholder since early SNS days), and Biglari said a few interesting things relevant to this conversation:
1) To paraphrase, he would not sell CBRL because it would hurt his credibility in future investments. He wants to make money, and he thinks a controlling stake allows him to do this better than investing and being bought out.
2) He said he'd be "very surprised" if BH did not buy an insurance company by EOY 2013. Clearly the clock is ticking and this seems unlikely. However he was adamant that this is core to his strategy.

If there's interest I can dig up my notes and post the whole thing.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 06, 2013, 11:07:42 AM
"For what it's worth, I attended the annual meeting (been a shareholder since early SNS days), and Biglari said a few interesting things relevant to this conversation:
1) To paraphrase, he would not sell CBRL because it would hurt his credibility in future investments. He wants to make money, and he thinks a controlling stake allows him to do this better than investing and being bought out.
2) He said he'd be "very surprised" if BH did not buy an insurance company by EOY 2013. Clearly the clock is ticking and this seems unlikely. However he was adamant that this is core to his strategy.

If there's interest I can dig up my notes and post the whole thing."

Thanks for posting!
I intended to go to the meeting but had to go to a funeral unexpectedly.
I bought quite a bit of unam thinking there would be a buyout this month but so far I've been dead wrong.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 07, 2013, 01:06:55 AM
If there's interest I can dig up my notes and post the whole thing.

Please, do it! That would be very kind of you! ;)

And welcome to the board!! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 07, 2013, 08:19:18 AM
Bh letter is now posted on the website (biglariholdings.com)
He didn't mention acquisitions at all. Mostly talked about franchising for sns.
Someone must have said something to him about his letter last year with so many i's in it.
This letter only has we, no I.
Nothing about insurance companies or plans for cash.
Title: Re: BH - Biglari Holdings
Post by: maxprogram on December 07, 2013, 11:53:54 AM
Wow, it's a good thing they've got an office in Monaco now. Otherwise the international expansion might be doomed to fail.
Title: Re: BH - Biglari Holdings
Post by: Parsad on December 08, 2013, 12:18:25 PM
Wow, it's a good thing they've got an office in Monaco now. Otherwise the international expansion might be doomed to fail.

My father's cousin lives in Monaco...not a cheap place to live or keep an office...incredibly limited supply.  Her husband owns a firm that designs and builds luxury yachts, sailboats, etc.  For him, setting up his business made logical sense, since so many luxury yachts are registered and docked there.  But it's hard for me to see how Monaco could be the most cost-efficient place to set up an international expansion office.  Ireland, from almost every aspect, would have been far better and cheaper.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: skanjete on December 09, 2013, 01:19:37 AM
Wow, it's a good thing they've got an office in Monaco now. Otherwise the international expansion might be doomed to fail.

My father's cousin lives in Monaco...not a cheap place to live or keep an office...incredibly limited supply.  Her husband owns a firm that designs and builds luxury yachts, sailboats, etc.  For him, setting up his business made logical sense, since so many luxury yachts are registered and docked there.  But it's hard for me to see how Monaco could be the most cost-efficient place to set up an international expansion office.  Ireland, from almost every aspect, would have been far better and cheaper.  Cheers!

Monaco isn't cost efficient, but very tax-efficient, especially for rich individuals (for corporations I'm not so sure...).
Title: Re: BH - Biglari Holdings
Post by: skanjete on December 09, 2013, 01:58:44 AM
I read the letter to shareholders and annual report.

He starts his letter by writing that he wants to provide information to his shareholders that he would want as a shareholder.  Well, as a shareholder I would want information on following points :

- I'm lacking an overall metric by which Biglari evaluates his achievements. He talks about "intrinsic value", but doesn't specify what metric he considers best to evaluate intrinsic value. Buffett uses book value as a (understated) proxy for intrinsic value. I suppose book value would also be best to use in Biglari's case, but of course, results wouldn't be as impressive as suggested in his annual report : book value grew 33% this year, but only compounded at 11,6% over the last 5 years.
- He fails to explain why the investment business was sold. This would have been the place to do it. What regulatory or accounting reasons could there have been?
- He doesn't explain the rights offering and his intentions with the money
- Since his pay package is out of the ordinary for corporations, I would have appreciated some elaboration  (with numbers!) on how he thinks his value creation over the last 5 years justifies his pay package.
- What's the rationale for international expansion for S&S? They have about 500 stores now. That's about 10 per state in the US. Is the US really that fully supplied that an incremental dollar of investment has a higher return internationally than in the US, where the whole back office infrastructure is already in place?

Other remarks :
- Did he create an opening to sell the investment in C.B.? He suggests that non controlled invested are a possible sale.
- In his letter he tries to copy Buffett, and although at a first read, you get a Buffett-letter feeling, it's content is a far cry from Buffett's letter content. Biglari's letter wasn't coherent in my view and comes over as sloganesque. You can read any letter from Buffett and it will as pertinent and relevant today as the day it was written. I suspect this won't be the case with Biglari's letters.
- Of course, as a shareholder, you can't expect to know everything that's going on in a business. For these unknowns, you just have to trust management. After the BH shenanigans of the last few years, I seem to have trouble "just trusting BH".
- It's clear that a lot of my questions haven't been answered by the BH letter. But hey, it could be me of course, because "BH is no stock for dummies".

If ever someone asks me the apex of arrogance, I'll know what to answer.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 09, 2013, 02:49:20 AM
- I'm lacking an overall metric by which Biglari evaluates his achievements. He talks about "intrinsic value", but doesn't specify what metric he considers best to evaluate intrinsic value. Buffett uses book value as a (understated) proxy for intrinsic value. I suppose book value would also be best to use in Biglari's case, but of course, results wouldn't be as impressive as suggested in his annual report : book value grew 33% this year, but only compounded at 11,6% over the last 5 years.

I don’t think this is the right way to look at it… Let me explain:
When you purchase a whole business and most of your capital is used for such an investment, and you have to reorganize it, you simply cannot take the growth in BV of that business after the reorganization as a metric to evaluate the quality of that investment. Simply because most of your capital is locked into a business the growth potential of which is not 20% per year! Therefore, what you want to compare is always your initial investment in that business with its BV, and you want to make sure the CAGR of your initial investment is satisfactory.
In BH’s case, only after “other investments”, which instead have the potential to grow 20% per year, have become large enough to have a true impact on BV, BVPS growth could be used as the right metric to evaluate performance. Imo that moment came at year end 2012.

Gio
Title: Re: BH - Biglari Holdings
Post by: skanjete on December 09, 2013, 04:47:57 AM
Gio,

Of course you're completely right that value creation was higher than book value growth.

But I think it is healthy to have an objective metric to evaluate the progress in the company. If necessary, management can point out why intrinsic value growth was higher or lower than the objective metric. Investors can then make their own interpretation.

In the early days of Berkshire, Markel and Fairfax, and especially Leucadia there was also something to be said as to why book value wasn't a good proxy. But nonetheless, they created their metric/benchmark and evaluated their performance against their metric.

The notion "intrinsic value" is too subjective to be used as an objective metric.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 09, 2013, 05:51:17 AM
But I think it is healthy to have an objective metric to evaluate the progress in the company. If necessary, management can point out why intrinsic value growth was higher or lower than the objective metric. Investors can then make their own interpretation.

Yes, with this I agree. IV could have been explained in a somewhat clearer way…

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 09, 2013, 07:27:13 AM
Quote
While cumulative investment gains in capital allocation outbid the cumulative cash production from operating businesses, without the latter, there would be no possibility for the former.
--Mr. Sardar Biglari

This is EXACTLY how I feel about my own company (albeit on a much smaller scale…). And that’s why I invest in BH.

Gio
Title: Re: BH - Biglari Holdings
Post by: Morgan on December 09, 2013, 08:08:41 AM
Sardar is building a company that will prbably do very well over the next 10, 20, 30 years, barring some extemely damaging event. He's not prioritizing on shareholders religiously or promoting the company to death. I like how he lays out his thoughts in his letters and it makes sense what he seems to want to do big picture wise, but his arrogance in those communications may cause problems in the future. People just may not like him. Why create bad feelings or feelings of arrogance or suporioity when you can appear folksy and nice al la Buffett.

He has good business sense and a strong drive. Hopefully he'll relax some in the coming years.
Title: Re: BH - Biglari Holdings
Post by: onyx1 on December 09, 2013, 08:53:51 AM
He has good business sense and a strong drive. Hopefully he'll relax some in the coming years.

Yes.  When you stop wanting things in a hurry, life will begin to offer them up to you!
Title: Re: BH - Biglari Holdings
Post by: ragu on December 11, 2013, 09:35:16 AM
Yes.  When you stop wanting things in a hurry, life will begin to offer them up to you!

onyx1,

You are quite easily the classiest of the "detractors" on this board, so I'll ask you this, especially since you've made this "in a hurry" statement now more than once.

How much of a hurry is Sardar in given:

a. The investments in SNS that hurt short-term profits (two years and running now) in order to set the stage for growth through franchising
b. The lack of an acquisition in 5 years of running the company (WEST notwithstanding)

It's not been perfect by any stretch of the imagination (Sardar himself admits as much), but I don't really see the "hurry".

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Parsad on December 11, 2013, 10:40:34 AM
Yes.  When you stop wanting things in a hurry, life will begin to offer them up to you!

onyx1,

You are quite easily the classiest of the "detractors" on this board, so I'll ask you this, especially since you've made this "in a hurry" statement now more than once.

How much of a hurry is Sardar in given:

a. The investments in SNS that hurt short-term profits (two years and running now) in order to set the stage for growth through franchising
b. The lack of an acquisition in 5 years of running the company (WEST notwithstanding)

It's not been perfect by any stretch of the imagination (Sardar himself admits as much), but I don't really see the "hurry".

Best,
Ragu

You guys like to act like we have no clue about Sardar, or we simply hate the guy which were the words a couple of people put in my mouth a few weeks ago. 

Onyx and myself, among many others, have dealt with Sardar from back when he took over Western Sizzlin.  Onyx was a huge shareholder and backer.  He's been screwed over like a number of other people who no longer have anything to do with him, including people who were key in the turnarounds at Western Sizzlin and Steak'n Shake. 

We were all big-time supporters of Biglari...for years...so obviously something significant must have happened to make us disillusioned, sell our stakes, and avoid the guy like the plague!  Other shareholders can come to their own conclusion, be it positive or negative, but it doesn't take away the stain that is left with the ones who had a negative experience.  You guys will have to get over that, just like we'll have to get over the glowing reviews some of you guys give him.  Cheers! 
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 11, 2013, 11:27:54 PM
We were all big-time supporters of Biglari...for years...so obviously something significant must have happened to make us disillusioned, sell our stakes, and avoid the guy like the plague!  Other shareholders can come to their own conclusion, be it positive or negative, but it doesn't take away the stain that is left with the ones who had a negative experience.  You guys will have to get over that, just like we'll have to get over the glowing reviews some of you guys give him.  Cheers!

Sanjeev,
I understand your point of view and Onyx’s very well! And it keeps reminding me that I have to constantly scrutinize every new move by Mr. Biglari! And, depending on what I see, my judgment might very well change over time.
For now, what I see is an extremely well designed platform for doing business. If Mr. Biglari’s flaws of character truly are important, they will gradually mar the effectiveness of that platform. And business will suffer. I am not saying it won’t happen. All I am saying is I will take the evidence as it comes. Today the evidence that I see is this one: despite all his flaws of character, Mr. Biglari has devised a platform for doing business which, with the only exception of Fairfax and Lancashire, has no equal.
If someone can show me one that is better, I will gladly shift capital from BH to that other platform I ignore the existence of.

Gio
Title: Re: BH - Biglari Holdings
Post by: onyx1 on December 12, 2013, 06:25:23 AM
Yes.  When you stop wanting things in a hurry, life will begin to offer them up to you!

onyx1,

You are quite easily the classiest of the "detractors" on this board, so I'll ask you this, especially since you've made this "in a hurry" statement now more than once.

How much of a hurry is Sardar in given:

a. The investments in SNS that hurt short-term profits (two years and running now) in order to set the stage for growth through franchising
b. The lack of an acquisition in 5 years of running the company (WEST notwithstanding)

It's not been perfect by any stretch of the imagination (Sardar himself admits as much), but I don't really see the "hurry".

Best,
Ragu

Ragu,
 
My comment wasn't directed at capital allocation decisions where he has complete control.  Rather, I was observing that in matters where he needs the cooperation of others, Sardar should slow down and relax!  He is in a hurry.  He wants others to respond according to his script.  How many times has he been shot down at CBRL?  Three, four, I've lost count!  He's had two compensation structure battles, are there more to come?    Acting needy and impatient puts people on the defensive.  When people are on the defensive, trust evaporates and they look for ways to avoid cooperation.   
 
It makes a world of difference when people around you are receptive and look for common ground.  Deals become easy and you don't need to fight. If Sardar wants to be an acquirer, he should take a page from Prem, or even better call and seek a meeting for advice.  Prem has a reputation for fairness and enriching those around him.   He has droves of loyal supporters to show for it, and he uses his social proof to avoid hostility.  It's no surprise that he has completed scores of acquisitions.   
 
Sardar is smart, has good business sense, and I'm confident he will enrich his shareholders.  But it will come a lot easier, faster, and the rewards will be greater if he slows down a bit and works to get others on his side.
 
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 12, 2013, 07:16:32 AM
Ragu,
 
My comment wasn't directed at capital allocation decisions where he has complete control.  Rather, I was observing that in matters where he needs the cooperation of others, Sardar should slow down and relax!  He is in a hurry.  He wants others to respond according to his script.  How many times has he been shot down at CBRL?  Three, four, I've lost count!  He's had two compensation structure battles, are there more to come?    Acting needy and impatient puts people on the defensive.  When people are on the defensive, trust evaporates and they look for ways to avoid cooperation.   
 
It makes a world of difference when people around you are receptive and look for common ground.  Deals become easy and you don't need to fight. If Sardar wants to be an acquirer, he should take a page from Prem, or even better call and seek a meeting for advice.  Prem has a reputation for fairness and enriching those around him.   He has droves of loyal supporters to show for it, and he uses his social proof to avoid hostility.  It's no surprise that he has completed scores of acquisitions.   
 
Sardar is a smart, has good business sense, and I'm confident he will enrich his shareholders.  But it will come a lot easier, faster, and the rewards will be greater if he slows down a bit and works to get others on his side.

This is simply perfect!
I have just read that Mr. Rockefeller slowed down and relaxed in his mid-sixties… As good as Mr. Biglari is, he most probably is no Rockefeller… The sooner he learns this lesson, the better! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 16, 2013, 05:58:39 PM
http://www.sec.gov/Archives/edgar/data/93859/000080724913000358/bh_06.htm

Only a few hundred thousand worth of selling but gabellis first ever selling of Bh since he bought a big chunk at the end of 09.
Title: Re: BH - Biglari Holdings
Post by: ragu on December 17, 2013, 03:50:26 AM
Only a few hundred thousand worth of selling but gabellis first ever selling of Bh since he bought a big chunk at the end of 09.

wescobrk,

You'll find that there is a net addition of 80 shares owned amongst all of the related entities here. The decrease in the % of shares owned is a result of the rights offering.

FWIW, I wish Gabelli didn't own so much of BH.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 17, 2013, 10:14:08 AM
Thanks Ragu, I missed that little minus sign.
I should have said he owns a smaller percentage of the company now. The first time since 09 -even though he picked up another 80 shares.
Title: Re: BH - Biglari Holdings
Post by: dcollon on December 18, 2013, 06:24:04 AM
Cracker Barrel holder Biglari Capital requests company to explore sale process - amended 13D
Wednesday, December 18, 2013 01:08:30 PM (GMT)


Biglari does not believe the company’s board and management are able to maximize the intrinsic business value of the company.
Accordingly, the holder believes that the board should undertake a value maximization process by reviewing all potential extraordinary transactions, including the sale of the company, to create an immediate realization of value for the benefit of all stockholders.
Because of the Biglari’s substantial investment in the company and because it does not hold representation on the board, Biglaris is willing to participate in a process in any capacity that the holder may deem advisable.
In the event that the board does not promptly announce definitive action to engage in a sale process, the holder intends to call a special meeting of the company's shareholders to vote upon a non-binding resolution recommending that the board pursue an extraordinary transaction, e.g., the sale of the company.
Biglari disclosed a 19.9% stake in the company
Title: Re: BH - Biglari Holdings
Post by: redskin on December 18, 2013, 07:22:03 AM
Does Sardar receive a management/incentive fee from BH's investment in the Lion Fund in addition to his compensation package tied to BH book value?
Title: Re: BH - Biglari Holdings
Post by: APG12 on December 18, 2013, 08:16:37 AM
He receives a fee but it is separate from, not in addition to, the fee on book value. He's not being paid twice for the same performance if that's what you're asking.
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on December 18, 2013, 10:16:14 AM
So Saudi Arabia appears to be opening up to more Western brands. I saw last week Cheesecake Factory was opening there, the World Wrestling was putting on 3 shows, and now Steak-n-Shake.

8:04 am Biglari Holdings subsidiary, Steak 'n Shake to open 50 restaurants throughout Saudi Arabia during the coming years (BH) : Steak 'n Shake announces a major international development agreement in the Middle East, which will bring this notable "better burger" chain to Saudi Arabia. Steak 'n Shake has signed an exclusive agreement with AB Holdings to open 50 restaurants throughout Saudi Arabia during the coming years. This agreement represents the ongoing extension of Steak 'n Shake by Biglari outside of the US. Steak 'n Shake expects to open its first location in Riyadh during 1H14.
Title: Re: BH - Biglari Holdings
Post by: redskin on December 18, 2013, 10:27:51 AM
He receives a fee but it is separate from, not in addition to, the fee on book value. He's not being paid twice for the same performance if that's what you're asking.

So any gains from the $400mm+ investment in the Lion Fund will not be included in the book value calculation for his compensation?
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 18, 2013, 10:28:12 AM
Cracker Barrel holder Biglari Capital requests company to explore sale process - amended 13D
Wednesday, December 18, 2013 01:08:30 PM (GMT)


Biglari does not believe the company’s board and management are able to maximize the intrinsic business value of the company.
Accordingly, the holder believes that the board should undertake a value maximization process by reviewing all potential extraordinary transactions, including the sale of the company, to create an immediate realization of value for the benefit of all stockholders.
Because of the Biglari’s substantial investment in the company and because it does not hold representation on the board, Biglaris is willing to participate in a process in any capacity that the holder may deem advisable.
In the event that the board does not promptly announce definitive action to engage in a sale process, the holder intends to call a special meeting of the company's shareholders to vote upon a non-binding resolution recommending that the board pursue an extraordinary transaction, e.g., the sale of the company.
Biglari disclosed a 19.9% stake in the company

I'm personally highly entertained watching him constantly needling the board.
His rope a dope strategy might work at some point.
They have beat him every proxy but he keeps coming back.
Maybe the board will tire at some point.
Title: Re: BH - Biglari Holdings
Post by: APG12 on December 18, 2013, 01:10:50 PM
So any gains from the $400mm+ investment in the Lion Fund will not be included in the book value calculation for his compensation?

"The modification of the Incentive Bonus Agreement between BH and Mr. Biglari to give effect to the transactions, inter alia, by providing that Mr. Biglari’s incentive compensation will thereafter be calculated without reference to any investments by BH and its subsidiaries in investment partnerships (including the Lion Fund and the Lion Fund II), of which Biglari Capital or Mr. Biglari is the general partner."
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on December 23, 2013, 07:52:23 AM
UNAM up 10% this morning--no news that I can find.
Title: Re: BH - Biglari Holdings
Post by: dcollon on December 24, 2013, 05:11:49 AM
BIGLARI CAPITAL CORP.
17802 IH 10 WEST, SUITE 400
SAN ANTONIO, TEXAS 78257
TELEPHONE (210) 344-3400
FAX (210) 344-3411


 
SARDAR BIGLARI, CHAIRMAN
 
December 24, 2013
 


Mr. James W. Bradford
Chairman of the Board
Cracker Barrel Old Country Store, Inc.
305 Hartmann Drive
Lebanon, Tennessee 37087
 
 
Dear Jim:


We have called upon the Board of Directors of Cracker Barrel Old Country Store, Inc. to undertake a value maximization process by reviewing all potential extraordinary transactions, including the sale of the Company. The Board’s primary aim should be to sell to the highest bidder in order to create a realization of Cracker Barrel’s value. As the Company’s lead investor, owning nearly 20% of the outstanding shares, we are willing to lead the process by submitting a bid. But, as you are well aware, Tennessee law currently restricts our ability to engage in such a transaction. Thus, we request that the Board support our efforts to seek an amendment to the state law that would give all shareholders the ability to decide the future of their Company.


The value of the business, or any business, depends on who is in control of the assets. We believe Cracker Barrel’s assets would be far more productive under our leadership than in the hands of present leadership. Thus, we are willing to purchase the business because we perceive a significant upside under our management. But other sophisticated buyers also should have the opportunity to bid for the Company.


We think Cracker Barrel’s earning power is far too low in your hands. Current management appears relatively successful because of the dismal performance under the former CEO. We firmly believe that neither you nor your management has a deep understanding of how substantial value can be created. It takes an entrepreneurial mind. To illustrate, we had to drive the Board and management to license products to third parties. Now that you see the benefits to the business, management claims the idea was part of its plan. But we have no interest in gaining credit; our interest lies in making money. Yet it is obvious you will have difficulty growing earnings through operating performance henceforth.  We are convinced you are leaving a ton of value on the table. In contrast, the sale of the Company will create immediate value for all.


If you are confident in your ability, then, alternatively, you should take on leverage and do a share repurchase. We would consider selling our entire position because we would not want to leave our money in your care. The handling of the Duck Dynasty controversy is another example of poor judgment.
 
Naturally, if our bid is the highest offer, then the Board’s fiduciary duty should dictate a sale to us. We have been working closely with an investment banking firm to arrange the financing required for us to complete the transaction. Consequently, we are prepared to collaborate with the Board in order to amend Tennessee law, thereby placing us in a position to provide the Board with a proposal that would maximize value for all shareholders. All options are on the table.


Should the Board refuse to take meaningful steps to engage in an extraordinary transaction, including the public announcement of its commencement of such a process, we then intend to exercise any and all rights and remedies at our disposal, including a call for a special meeting of shareholders.


We remain resolute in our quest for value maximization.




Sincerely,
 
/s/ Sardar Biglari
 
Sardar Biglari
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 24, 2013, 05:26:13 AM
Thank you, David! :)

Well, I guess this answers pretty well what Mr. Biglari is going to do with the CBRL investment: either he gets to buy the whole company, or he is out. Nothing to say about it: I would be doing exactly the same thing.

Quote
The value of the business, or any business, depends on who is in control of the assets. We believe Cracker Barrel’s assets would be far more productive under our leadership than in the hands of present leadership.

+1

Quote
If you are confident in your ability, then, alternatively, you should take on leverage and do a share repurchase. We would consider selling our entire position because we would not want to leave our money in your care.

+1


Gio
Title: Re: BH - Biglari Holdings
Post by: Redskin212 on December 24, 2013, 07:34:36 PM
http://www.cnbc.com/id/101295433
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on December 24, 2013, 08:17:52 PM

[/quote]

For what it's worth, I attended the annual meeting (been a shareholder since early SNS days), and Biglari said a few interesting things relevant to this conversation:
1) To paraphrase, he would not sell CBRL because it would hurt his credibility in future investments. He wants to make money, and he thinks a controlling stake allows him to do this better than investing and being bought out.

[/quote]

I guess he didn't mean that?
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on December 24, 2013, 10:33:58 PM
Ragnar-

Right on. I honestly don't care though at this point...from my perspective it'd be great to not be stuck with this as a minority holding...control or liquidate!
Title: Re: BH - Biglari Holdings
Post by: Kuhndan on December 27, 2013, 07:18:29 PM
I think Biglari has painted himself into a corner in regards to his Cracker Barrel stake. He has lost three proxy votes with minimal shareholder support outside his own shares. He has no leverage at this point to push for a sale of the company and I doubt management is interested in buying him out at this price. They also probably don't mind seeing Biglari squirm while he gropes for an exit.

If he starts selling in the open market, his volume will most likely drive the stock price down.

While Biglari has suggested that he is pursuing financing for a possible buyout bid, this transaction would be like the minnow swallowing the whale with the resulting enterprise extremely leveraged.......on second thought, think about the potential conflict of interests this option represents.

Let's say Biglari successfully pursues a buy out of Cracker Barrel. While this may not be in the best interests of Biglari Holdings shareholders, it wouldn't be bad a bad outcome for Sardar. The Lion Fund is currently invested in basically only one stock. With minimal exit options and Cracker Barrel fairly valued, with limited upside, Sardar's personal compensation opportunity at the Lion Fund appears to be limited.

Of course he could arrange for Biglari Holdings to acquire Cracker Barrel. This would allow the Lion Fund to exit its position at a premium and Sardar would be able to personally profit from the gain in investments. Biglari Holdings would then be a significantly leveraged company and possibly decline in value for over paying for the buy out. Sardar could use his personal bonus from the Lion fund to buy more stock in BH at a potentially depressed price.

While I doubt he could arrange financing for a buy out, nor do I think he is serious, the potential conflicts of interest are hard to discount.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 27, 2013, 08:54:54 PM
It's been a week and a half and no news release.
The board isn't exactly in a hurry.
Maybe something is going on or they might just ignore him.
Sardar can call the special meeting but I seriously doubt he will be able to obtain many votes.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on December 28, 2013, 02:04:26 AM
I think Biglari has painted himself into a corner in regards to his Cracker Barrel stake. He has lost three proxy votes with minimal shareholder support outside his own shares. He has no leverage at this point to push for a sale of the company and I doubt management is interested in buying him out at this price. They also probably don't mind seeing Biglari squirm while he gropes for an exit.

If he starts selling in the open market, his volume will most likely drive the stock price down.

While Biglari has suggested that he is pursuing financing for a possible buyout bid, this transaction would be like the minnow swallowing the whale with the resulting enterprise extremely leveraged.......on second thought, think about the potential conflict of interests this option represents.

Let's say Biglari successfully pursues a buy out of Cracker Barrel. While this may not be in the best interests of Biglari Holdings shareholders, it wouldn't be bad a bad outcome for Sardar. The Lion Fund is currently invested in basically only one stock. With minimal exit options and Cracker Barrel fairly valued, with limited upside, Sardar's personal compensation opportunity at the Lion Fund appears to be limited.

Of course he could arrange for Biglari Holdings to acquire Cracker Barrel. This would allow the Lion Fund to exit its position at a premium and Sardar would be able to personally profit from the gain in investments. Biglari Holdings would then be a significantly leveraged company and possibly decline in value for over paying for the buy out. Sardar could use his personal bonus from the Lion fund to buy more stock in BH at a potentially depressed price.

While I doubt he could arrange financing for a buy out, nor do I think he is serious, the potential conflicts of interest are hard to discount.

Maybe you are right about “the potential conflicts of interest”… Sincerely, I don’t know… I have a hard time to judge such things… What I do understand and know is that to buy CBRL or to get out makes business sense. And I would be doing the same thing.
Furthermore, I am not so sure management won’t buy BH out at this price… The only reason Mr. Biglari couldn’t get a wider shareholders support is that a rising stock price makes things look too good to complain nowadays… Mr. Biglari is never satisfied, he always wants more… but other shareholders clearly don’t push that hard! They want to relax, enjoy the ride, and minimize frictions as much as possible… until the ride lasts, of course!!
If CBRL’s stock price should decline, and Mr. Biglari still be around, I am sure current management knows they won’t be dealt with such an easy hand this time around! And imo they will act not to find themselves in such a situation. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: Redskin212 on December 28, 2013, 04:39:51 AM
Gio,

Your point about CBRL buying Biglari is very interesting. I would love to see the shoe on the other foot for Sardar.  CBRL certainly has the capacity to lever up,  take out BH and rename it Stake and Shake.  I hope that is why CBRL's management has been so quiet lately.
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on December 28, 2013, 05:06:18 AM
I think Biglari has painted himself into a corner in regards to his Cracker Barrel stake. He has lost three proxy votes with minimal shareholder support outside his own shares. He has no leverage at this point to push for a sale of the company and I doubt management is interested in buying him out at this price. They also probably don't mind seeing Biglari squirm while he gropes for an exit.

If he starts selling in the open market, his volume will most likely drive the stock price down.

While Biglari has suggested that he is pursuing financing for a possible buyout bid, this transaction would be like the minnow swallowing the whale with the resulting enterprise extremely leveraged.......on second thought, think about the potential conflict of interests this option represents.

Let's say Biglari successfully pursues a buy out of Cracker Barrel. While this may not be in the best interests of Biglari Holdings shareholders, it wouldn't be bad a bad outcome for Sardar. The Lion Fund is currently invested in basically only one stock. With minimal exit options and Cracker Barrel fairly valued, with limited upside, Sardar's personal compensation opportunity at the Lion Fund appears to be limited.

Of course he could arrange for Biglari Holdings to acquire Cracker Barrel. This would allow the Lion Fund to exit its position at a premium and Sardar would be able to personally profit from the gain in investments. Biglari Holdings would then be a significantly leveraged company and possibly decline in value for over paying for the buy out. Sardar could use his personal bonus from the Lion fund to buy more stock in BH at a potentially depressed price.

While I doubt he could arrange financing for a buy out, nor do I think he is serious, the potential conflicts of interest are hard to discount.

Maybe you are right about “the potential conflicts of interest”… Sincerely, I don’t know… I have a hard time to judge such things… What I do understand and know is that to buy CBRL or to get out makes business sense. And I would be doing the same thing.
Furthermore, I am not so sure management won’t buy BH out at this price… The only reason Mr. Biglari couldn’t get a wider shareholders support is that a rising stock price makes things look too good to complain nowadays… Mr. Biglari is never satisfied, he always wants more… but other shareholders clearly don’t push that hard! They want to relax, enjoy the ride, and minimize frictions as much as possible… until the ride lasts, of course!!
If CBRL’s stock price should decline, and Mr. Biglari still be around, I am sure current management knows they won’t be dealt with such an easy hand this time around! And imo they will act not to find themselves in such a situation. ;)

Gio

Gio I agree. Here's my read:
1) best outcome: sardar buys company. He believes Cbrl is worth more to him than current management. The large sg$a investments over the past few years for SNS probably scale. So under BH management CBRL benefits from sunk investments into systems to save on sourcing, etc. biglari is behaving as if over them long term the benefits of building scale ind brand name restaurant business are great.
2) middle outcome: BH sells CBRL. Even at a rich price this is less good, as it seems biglari then has to hunt for a new way to scale into the infrastructure. Note he mentioned at the meeting he reads almost every restaurant co. Annual report. This plus past investments suggest that CBRL is the preferred choice today, but not the only alternative.
3) worst outcome: continued minority ownership (if it is a continued distraction for either BH or CBRL management)
Title: Re: BH - Biglari Holdings
Post by: Kuhndan on December 28, 2013, 07:41:40 AM
"Furthermore, I am not so sure management won’t buy BH out at this price… "

Don't forget Biglari Holdings adopted the royalty plan for Sardar earlier this year that makes a buy out of the company largely unattractive. I doubt management would want to go down that path. I don't see an easy way for him to exit his position.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 28, 2013, 07:48:01 AM
Last time cbrl offered to buy him out they required a 3 year standstill agreement.
Do you guys think sardar will agree to such a thing?
I'm sure he would love to buy back in if there is a big drop in the market in the future.
Title: Re: BH - Biglari Holdings
Post by: dcollon on December 30, 2013, 06:02:59 AM
Cracker Barrel Issues Statement in Response to Biglari Demand
Monday, December 30, 2013 02:00:00 PM (GMT)


Cracker Barrel Old Country Store, Inc. ("Cracker Barrel" or the "Company") (Nasdaq:CBRL) said today that its Board of Directors has considered both Sardar Biglari’s recent filing and subsequent letter demanding that the Company commence a sale process, and has determined that the continued execution of the Company’s existing business strategy is currently the proper course of action for the long-term best interests of the Company and its shareholders.

Commenting on the decision, James W. Bradford, Chairman of the Board of Cracker Barrel said: “We are disappointed that Mr. Biglari is seeking to call a special meeting to vote on a proposal requesting that the Company commence a sale process, particularly in light of his defeat by substantial margins in three consecutive proxy contests. Cracker Barrel’s Board of Directors continues to believe that the execution of management’s existing business strategy will create the most value for all shareholders. The Board regularly evaluates all options to serve the best interests of the Company and its shareholders and will continue to do so.”
Title: Re: BH - Biglari Holdings
Post by: wescobrk on December 30, 2013, 06:30:34 AM
Looks like the only option is to sell now unless he wants to go through the formality of a special meeting and not get many votes.
No surprise here. Cbrl has the leverage after 3 straight wins.
I wouldn't be surprised that they raise the dividend after he sells just to try to stick it to him.
Sardar made a quarter of a billion so he certainly didn't lose from his criterion of making money.
Time to move on.
Title: Re: BH - Biglari Holdings
Post by: ragu on January 03, 2014, 04:18:23 AM
Ragu,
My comment wasn't directed at capital allocation decisions where he has complete control.  Rather, I was observing that in matters where he needs the cooperation of others, Sardar should slow down and relax!

onyx1,

Thanks much for the clarification. Sardar has clearly lost a lot of goodwill since the proposal of the incentive compensation at BH. Much of it undeservedly so, IMO.

From a personality perspective, I've always wondered how Berkshire would've panned out if it had someone like Munger at the helm. I suspect I might get my answer as things unfold at BH.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 03, 2014, 05:14:29 AM
From a personality perspective, I've always wondered how Berkshire would've panned out if it had someone like Munger at the helm. I suspect I might get my answer as things unfold at BH.

Best,
Ragu

Though, of course, I cannot know, Mr. Munger has always seemed to me much less ambitious than both Mr. Buffett and Mr. Biglari. I might be wrong, but I don’t see Mr. Biglari, nor Mr. Buffett obviously, be vice-president of anything…

Ragu,
What’s your view on the current situation with CBRL? Do you think BH’s stake will be bought out by CBRL’s management? If no, how do you think Mr. Biglari will move on from here?
Thank you,

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on January 07, 2014, 08:20:34 AM
Though, of course, I cannot know, Mr. Munger has always seemed to me much less ambitious than both Mr. Buffett and Mr. Biglari.

gio,

I agree. Biglari's drive and ambition is definitely way out of the ordinary, much like Buffett.

I was thinking more of the parallels with Munger's personality (lack of any pretense at modesty, unafraid to criticize by name, calling a spade a bloody spade etc.).

Quote from: giofranchi
What’s your view on the current situation with CBRL? Do you think BH’s stake will be bought out by CBRL’s management? If no, how do you think Mr. Biglari will move on from here?

Clearly, the current situation is unsatisfactory from BH's perspective (and those of the other CBRL shareholders even if they aren't bright enough to realize it yet). I don't think BH's entire stake will be bought out by CBRL's management for the reason that Sardar has said that he'll only consider tendering his shares in a repurchase.

As for what happens from here, I think this sentence from the last letter (http://www.sec.gov/Archives/edgar/data/1067294/000092189513002495/dfan14a07428021_12242013.htm) to management pushing for a sale is interesting:

Quote
But other sophisticated buyers also should have the opportunity to bid for the Company.

While it's always possible that this is simply an attempt to forestall any management fear-mongering attempts that he will "steal" the company, I suspect Biglari wouldn't be entirely unhappy with a bidding war for CBRL. And that one might well start with a bid from Biglari and, quite possibly, Jeffries.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 07, 2014, 08:32:27 AM
As for what happens from here, I think this sentence from the last letter (http://www.sec.gov/Archives/edgar/data/1067294/000092189513002495/dfan14a07428021_12242013.htm) to management pushing for a sale is interesting:

Quote
But other sophisticated buyers also should have the opportunity to bid for the Company.

While it's always possible that this is simply an attempt to forestall any management fear-mongering attempts that he will "steal" the company, I suspect Biglari wouldn't be entirely unhappy with a bidding war for CBRL. And that one might well start with a bid from Biglari and, quite possibly, Jeffries.

Best,
Ragu

Interesting. Thank you! :)
We will see.

Best,

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on January 07, 2014, 09:29:23 AM
I don't understand why CBRL doesn't try to gain some leverage by buying up shares of BH. If they bought enough BH, there are several ways they can make money:
a) It would allow them to potentially take over BH (which is essentially a 20% CBRL stock buyback plus the Steak N Shake franchise)
b) Become a big enough nuisance to Biglari that he agrees to some sort of swap of BH's CBRL shares in return for CBRL's BH shares
c) Simply just buy and hold BH stock, and in a base case, they have exposure to their own shares (via BH ownership) at a discount. Best case, each time Biglari tried to call a special meeting or fight a proxy battle, they do the exact same to BH
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 07, 2014, 09:33:08 AM
I don't understand why CBRL doesn't try to gain some leverage by buying up shares of BH. If they bought enough BH, there are several ways they can make money:
a) It would allow them to potentially take over BH (which is essentially a 20% CBRL stock buyback plus the Steak N Shake franchise)
b) Become a big enough nuisance to Biglari that he agrees to some sort of swap of BH's CBRL shares in return for CBRL's BH shares
c) Simply just buy and hold BH stock, and in a base case, they have exposure to their own shares (via BH ownership) at a discount. Best case, each time Biglari tried to call a special meeting or fight a proxy battle, they do the exact same to BH

Very simple: they don’t do what you suggest, because they do not have an entrepreneurial mind… just like Mr. Biglari has always said! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: RichardGibbons on January 07, 2014, 07:34:39 PM
I think the real reason is that Cracker Barrel knows that they won't win that way.  I think it would actually be irresponsible of them to purchase shares of BH. 

They've seen ample evidence that Biglari is willing to harm minority shareholders in order to consolidate control and maximize his personal profits (e.g. his compensation schemes, the whole licensing of his name stuff, the share consolidation to bump out small shareholders).  They definitely shouldn't invest CRBL's resources in a company where there's a reasonable chance that the CEO would deliberately try to screw them.

Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 12, 2014, 02:16:49 AM
I invite anyone who is skeptical about Mr. Biglari’s business acumen to think hard about what he writes in the first 7 lines of the 2013AL:

Quote
In August 2008 we took control of the predecessor company, a money-losing restaurant chain. We turned the business around, and it became the base company, a financial springboard for the enterprise we founded, Biglari Holdings. We assumed management of a company with $1.6 million in cash and investments. Through effective operational and financial management, Biglari Holdings ended fiscal 2013 with $635.4 million in cash and investments. True, $75.6 million of the increase came through a rights offering to existing shareholders. Yet most of the progress occurred by means of value creation.

Imo, it is nothing short of amazing! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: merkhet on January 12, 2014, 06:42:14 AM
I don't think you can just look at $1.6 million --> $635.4 million minus $75.6 million.

If he took control of subsidiaries that deliver free cash flow of $100 million a year, then he has done nothing special.

There should be more to that story.
Title: Re: BH - Biglari Holdings
Post by: Parsad on January 12, 2014, 10:52:08 AM
I don't think you can just look at $1.6 million --> $635.4 million minus $75.6 million.

If he took control of subsidiaries that deliver free cash flow of $100 million a year, then he has done nothing special.

There should be more to that story.

Don't forget the $80M or so, whatever the number was, that they brought up from Steak'n Shake the subsidiary by leveraging it with debt.  Also, $14M in tax reassessments that saved the company, which was the idea of the company's accountant and a former friend of Biglari's.  As well as, the sale and leaseback of many of the underperforming stores which generated tens of millions. 

Nonetheless, he has done very well since taking over and even after all of those things, it is still quite impressive.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 12, 2014, 10:53:13 PM
If he took control of subsidiaries that deliver free cash flow of $100 million a year, then he has done nothing special.

I don’t think this is truly relevant. When I speak of “business acumen”, I mean both on the operations and in finance / investing. They both are important and complement themselves in the process of building wealth. I myself, just like Mr. Biglari, though on a much smaller scale, focus everyday both on improving the quality of operations and on effective capital allocation decisions.

When Mr. Biglari bought SNS for a pittance, it certainly wasn’t the cash machine it is today. In fact, as he pointed out in line number 1 of the 2013AL, it was a “money losing restaurant chain”. What truly matters is the cost he paid to take control over SNS operations, and his ability to turn that business from an unprofitable one into a cash cow.

Anyone can have his/her opinions on Mr. Biglari’s character features and ethics, but no serious entrepreneur should underestimate or fail to recognize the business achievements he has accomplished from late 2008 until today. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: adesigar on January 13, 2014, 01:27:41 AM
If he took control of subsidiaries that deliver free cash flow of $100 million a year, then he has done nothing special.

I don’t think this is truly relevant. When I speak of “business acumen”, I mean both on the operations and in finance / investing. They both are important and complement themselves in the process of building wealth. I myself, just like Mr. Biglari, though on a much smaller scale, focus everyday both on improving the quality of operations and on effective capital allocation decisions.

When Mr. Biglari bought SNS for a pittance, it certainly wasn’t the cash machine it is today. In fact, as he pointed out in line number 1 of the 2013AL, it was a “money losing restaurant chain”. What truly matters is the cost he paid to take control over SNS operations, and his ability to turn that business from an unprofitable one into a cash cow.

Anyone can have his/her opinions on Mr. Biglari’s character features and ethics, but no serious entrepreneur should underestimate or fail to recognize the business achievements he has accomplished from late 2008 until today. :)

Gio

Im no expert on Biglari Holdings so I apologise if im not making much sense. I looked into it a few years back and decided it wasn't my cup of tea.  You mention the business achievements from 2008 (The depths of the financial crisis) until today (all time market highs).  I did a quick check on Yahoo of BH vs Competitors.
                                      2009       2014
BH (Biglari Holdings)         $101       $480   =  480% increase
DIN (DineEquity)               $8.7       $83     =  950% Increase
DENN (Dennys)                 $1.68     $6.93   =  412% Increase
RRGB (Red Robin)              $12.65   $67     =  529% Increase
RT (Ruby Tuesdays)            $1.2      $5.92   =  493% increase

Stockprice of BH seems to have underperformed most of its competitors over the last 5 years. So how much of the improvement of the business is due to improvement in the industry ?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 13, 2014, 01:49:34 AM
Stockprice of BH seems to have underperformed most of its competitors over the last 5 years. So how much of the improvement of the business is due to improvement in the industry ?

Well, of course this I cannot say… But, as I have expressed in the past, good businessmen / investors somehow put themselves in good businesses / industries… Also, I clearly was not talking about BH stock market returns. The fact it underperformed some of its peers on a 5 years horizon doesn’t tell me much: I would be very surprised if on a 10 years horizon (meaning 5 years from now) those companies are still ahead of BH, and on a 15 years horizon I am almost positive they all will lag far behind BH.

Gio
Title: Re: BH - Biglari Holdings
Post by: merkhet on January 13, 2014, 04:56:35 AM
If he took control of subsidiaries that deliver free cash flow of $100 million a year, then he has done nothing special.

I don’t think this is truly relevant. When I speak of “business acumen”, I mean both on the operations and in finance / investing. They both are important and complement themselves in the process of building wealth. I myself, just like Mr. Biglari, though on a much smaller scale, focus everyday both on improving the quality of operations and on effective capital allocation decisions.

When Mr. Biglari bought SNS for a pittance, it certainly wasn’t the cash machine it is today. In fact, as he pointed out in line number 1 of the 2013AL, it was a “money losing restaurant chain”. What truly matters is the cost he paid to take control over SNS operations, and his ability to turn that business from an unprofitable one into a cash cow.

Anyone can have his/her opinions on Mr. Biglari’s character features and ethics, but no serious entrepreneur should underestimate or fail to recognize the business achievements he has accomplished from late 2008 until today. :)

Gio

You've missed my point.

You highlighted that cash went from $1 million to $600 million.  And then you said that it was nothing short of amazing.  Without additional context, that's a pointless number.  There needs to be a "why" did cash go from point A to point B.  Therefore, the cash flow properties of his subsidiaries is incredibly relevant.

For instance, if cash went from $1 million to $600 million, but the underlying subsidiaries generate $3 billion of FCF a year and there's no concomitant buildup of equity value, then he has been wasting a lot of money.

Does that make sense? 

I have no opinion on whether Biglari is a good capital allocator or a good businessman.  However, the evidence that you trotted out to assert that he is a good businessman is lacking.  If you had brought out information about operating margins, incremental return on invested capital, etc.  then it would have been a different story.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 13, 2014, 05:15:41 AM
You've missed my point.

You highlighted that cash went from $1 million to $600 million.  And then you said that it was nothing short of amazing.  Without additional context, that's a pointless number.  There needs to be a "why" did cash go from point A to point B.  Therefore, the cash flow properties of his subsidiaries is incredibly relevant.

For instance, if cash went from $1 million to $600 million, but the underlying subsidiaries generate $3 billion of FCF a year and there's no concomitant buildup of equity value, then he has been wasting a lot of money.

Does that make sense? 

I have no opinion on whether Biglari is a good capital allocator or a good businessman.  However, the evidence that you trotted out to assert that he is a good businessman is lacking.  If you had brought out information about operating margins, incremental return on invested capital, etc.  then it would have been a different story.

I think I have understood your point well... And, if you wish to know, the buildup of capital was due for $269.0 million to Investment Gains and for $194.3 million to Operating Businesses.
Yet, both results were achieved thanks to Mr. Biglari’s “business acumen”: the reason Investment Gains were obtained thanks to his business acumen is obvious enough; and the reason also Operating Businesses gains were obtained thanks to his business acumen is that, when he took control of SNS, his operating business was just a “money losing restaurant chain”.
I still think the first 7 lines of his 2013AL are clear enough. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on January 13, 2014, 02:05:59 PM


Im no expert on Biglari Holdings so I apologise if im not making much sense. I looked into it a few years back and decided it wasn't my cup of tea.  You mention the business achievements from 2008 (The depths of the financial crisis) until today (all time market highs).  I did a quick check on Yahoo of BH vs Competitors.
                                      2009       2014
BH (Biglari Holdings)         $101       $480   =  480% increase
DIN (DineEquity)               $8.7       $83     =  950% Increase
DENN (Dennys)                 $1.68     $6.93   =  412% Increase
RRGB (Red Robin)              $12.65   $67     =  529% Increase
RT (Ruby Tuesdays)            $1.2      $5.92   =  493% increase

Stockprice of BH seems to have underperformed most of its competitors over the last 5 years. So how much of the improvement of the business is due to improvement in the industry ?
[/quote]

No idea if it would  make BH look better or worse, but you can't simply compare the stock price in 2009 versus 2014 for each of these companies. You also would need to take into account if there are more/less shares now vs 2009 and if there is more/less debt since then too
Title: Re: BH - Biglari Holdings
Post by: wescobrk on January 15, 2014, 10:29:32 AM
Gio,
Do you think it's odd he still hasn't sold a share 3 weeks after his intention to do so?
I thought we would have seen a press release with an investment bank he sold his entire stake like ackman did with jcp.
But so far he continues to hold and cbrl continues to slowly decline.
Title: Re: BH - Biglari Holdings
Post by: Rabbitisrich on January 15, 2014, 06:44:54 PM
If he took control of subsidiaries that deliver free cash flow of $100 million a year, then he has done nothing special.

I don’t think this is truly relevant. When I speak of “business acumen”, I mean both on the operations and in finance / investing. They both are important and complement themselves in the process of building wealth. I myself, just like Mr. Biglari, though on a much smaller scale, focus everyday both on improving the quality of operations and on effective capital allocation decisions.

When Mr. Biglari bought SNS for a pittance, it certainly wasn’t the cash machine it is today. In fact, as he pointed out in line number 1 of the 2013AL, it was a “money losing restaurant chain”. What truly matters is the cost he paid to take control over SNS operations, and his ability to turn that business from an unprofitable one into a cash cow.

Anyone can have his/her opinions on Mr. Biglari’s character features and ethics, but no serious entrepreneur should underestimate or fail to recognize the business achievements he has accomplished from late 2008 until today. :)

Gio

Im no expert on Biglari Holdings so I apologise if im not making much sense. I looked into it a few years back and decided it wasn't my cup of tea.  You mention the business achievements from 2008 (The depths of the financial crisis) until today (all time market highs).  I did a quick check on Yahoo of BH vs Competitors.
                                      2009       2014
BH (Biglari Holdings)         $101       $480   =  480% increase
DIN (DineEquity)               $8.7       $83     =  950% Increase
DENN (Dennys)                 $1.68     $6.93   =  412% Increase
RRGB (Red Robin)              $12.65   $67     =  529% Increase
RT (Ruby Tuesdays)            $1.2      $5.92   =  493% increase

Stockprice of BH seems to have underperformed most of its competitors over the last 5 years. So how much of the improvement of the business is due to improvement in the industry ?

DIN was in a pickle after the purchase of Applebee's in 2007.
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on January 16, 2014, 03:38:09 PM
http://www.sec.gov/Archives/edgar/data/1067294/000092189514000056/prec14c07428021_01162014.htm

Mr. Bigs calls for a special meeting, wonder who he would partner with if he submitted a bid for the whole company??
Title: Re: BH - Biglari Holdings
Post by: dcollon on January 21, 2014, 10:45:22 AM
Cracker Barrel Issues Statement on Call for Special Meeting
Tuesday, January 21, 2014


Cracker Barrel Old Country Store, Inc. (“Cracker Barrel” or the “Company”) (Nasdaq:CBRL) today issued the following statement in response to the filing by Sardar Biglari, Biglari Capital Corp. and affiliates seeking to call a special meeting of the Company's shareholders:

Sardar Biglari has run proxy contests to elect himself to Cracker Barrel’s Board of Directors at each of the Company's last three annual meetings. He lost all three, by wide and increasing margins. Shortly before the last annual meeting, Mr. Biglari, having missed the Company's deadline for submitting shareholder proposals, threatened to call a special meeting of shareholders right after the annual meeting to vote on a proposal calling on the Company to pay a $20 per share special dividend. To avoid the cost and distraction of a special meeting right after the annual meeting, the Company voluntarily put Mr. Biglari's proposal on the annual meeting ballot. The proposal also lost by a wide margin.

Apparently not satisfied with these losses, a month after the annual meeting Mr. Biglari announced his intent to call a special meeting to vote on yet another proposal, this time calling on the Company to “pursue all potential extraordinary transactions, including the sale of the Company.” This special meeting would impose the same kind of cost and distraction that the Company sought to avoid when it voluntarily put Mr. Biglari's special dividend proposal on the annual meeting ballot. It is hard to avoid the conclusion that Mr. Biglari is now just engaged in harassment of the Company.

The Company recognizes that Mr. Biglari will likely be able to meet the 20% threshold required to call a special meeting as a result of the fact that he controls the vote of 19.9% of the Company's common stock. Accordingly, Cracker Barrel’s Board has determined to call a special meeting voluntarily to avoid the added cost and distraction of Mr. Biglari's solicitation of the Company’s shareholders for the call of a special meeting. The special meeting will be held on April 23, 2014.
Title: Re: BH - Biglari Holdings
Post by: Spekulatius on January 21, 2014, 09:44:08 PM
http://www.sec.gov/Archives/edgar/data/1067294/000092189514000056/prec14c07428021_01162014.htm

Mr. Bigs calls for a special meeting, wonder who he would partner with if he submitted a bid for the whole company??

CBRL should do a Pac Man defense and submit a bid for BH. They could do stock exchange offer at a decent premium wish a cash component, and still come out ahead. This would unlock more value than Mr. Big pressing for a special dividend at CBRL, imo.
Title: Re: BH - Biglari Holdings
Post by: MCN on January 24, 2014, 04:56:41 AM
Apologies if this has already been discussed on the board but i was wondering what people think about the name licensing deal that Biglari has. At first glance it smacks of greed and a way to hook himself into place but is it perhaps simply to ensure that the company does not continue to use his name if he gets booted out?

Any thoughts?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on January 24, 2014, 05:35:40 AM
Gio,
Do you think it's odd he still hasn't sold a share 3 weeks after his intention to do so?
I thought we would have seen a press release with an investment bank he sold his entire stake like ackman did with jcp.
But so far he continues to hold and cbrl continues to slowly decline.

wescobrk,
sorry I had missed your post until now… Anyway, I cannot really answer to your question… Let’s only say that I am content to let him work. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: wescobrk on January 24, 2014, 05:53:18 AM
No problem.
I saw the special meeting filing and Cbrl response for April 23rd.
Maybe sardar will end up buying it at some point.
Title: Re: BH - Biglari Holdings
Post by: Kuhndan on January 26, 2014, 03:36:23 PM
BH 10k came out on Friday. Biglari was paid $14.7 million plus $830,000 for "shared services" by BH for his work at  Biglari Capital in 2013. He also will get his salary at BH plus incentive. Previously his compensation was capped at $10 million, I forget how much  Biglari paid for  Biglari Capital but it looks like he got a pretty good deal.
Title: Re: BH - Biglari Holdings
Post by: Parsad on January 26, 2014, 06:07:13 PM
BH 10k came out on Friday. Biglari was paid $14.7 million plus $830,000 for "shared services" by BH for his work at  Biglari Capital in 2013. He also will get his salary at BH plus incentive. Previously his compensation was capped at $10 million, I forget how much  Biglari paid for  Biglari Capital but it looks like he got a pretty good deal.

Well, he said he would get around the cap and he did get around the cap...shareholder vote be damned!  Sad example of corporate governance!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on January 26, 2014, 07:06:53 PM
Yep, it was a good year for Biglari, from the 10-K.

"As the general partner of the investment partnerships, Biglari Capital on December 31 of each year will earn an incentive reallocation fee for the Company’s investments equal to 25% of the net profits above an annual hurdle rate of 6%.  Our policy is to accrue an estimated incentive fee throughout the fiscal year.  The total incentive reallocation from Biglari Holdings to Biglari Capital for calendar year 2013 was $14,702, including $3,655 associated with gains on the Company’s common stock, which is eliminated in our financial statements"
Title: Re: BH - Biglari Holdings
Post by: shalab on January 26, 2014, 08:58:27 PM
Yep, it was a good year for Biglari, from the 10-K.

"As the general partner of the investment partnerships, Biglari Capital on December 31 of each year will earn an incentive reallocation fee for the Company’s investments equal to 25% of the net profits above an annual hurdle rate of 6%.  Our policy is to accrue an estimated incentive fee throughout the fiscal year.  The total incentive reallocation from Biglari Holdings to Biglari Capital for calendar year 2013 was $14,702, including $3,655 associated with gains on the Company’s common stock, which is eliminated in our financial statements"


...

BH 10k came out on Friday. Biglari was paid $14.7 million plus $830,000 for "shared services" by BH for his work at  Biglari Capital in 2013. He also will get his salary at BH plus incentive. Previously his compensation was capped at $10 million, I forget how much  Biglari paid for  Biglari Capital but it looks like he got a pretty good deal.

Well, he said he would get around the cap and he did get around the cap...shareholder vote be damned!  Sad example of corporate governance!  Cheers!

Looks like he had $25 M this year - not bad. He is on his way to becoming a billionaire.

It looks like the incentive was calculated without taking into account capital gain liabilities if one were to sell CBRL. This BH case should continue to be interesting this year.
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on January 27, 2014, 08:06:33 AM
I just noticed this in the 10-K(a), I did not realize Duane had left, was this announced before?

Duane Geiger, 51, served as Interim Chief Financial Officer of Biglari Holdings from April 2010 to September 2013 and of the Predecessor from July 2008 to April 2010.  Mr. Geiger has also served as Vice President since 2004, Controller from 2004 until January 2012 and in various other positions with the Company and the Predecessor since 1993.
Title: Re: BH - Biglari Holdings
Post by: ragu on January 28, 2014, 09:23:58 AM
Do you think it's odd he still hasn't sold a share 3 weeks after his intention to do so?

wescobrk,

AFAIK, he has never said he'd sell his stake (aside from tendering in the event of a repurchase). Prior to the CBRL annual meeting, he simply wrote that his pledge to provide a two-week notice to other shareholders before he sold his stake would no longer hold if Cooley and himself were not elected to the board this time.

Quote from: wescobrk
I thought we would have seen a press release with an investment bank he sold his entire stake like ackman did with jcp.

I'd be amazed if he sold his stake in that manner. It would absolutely hurt his credibility in future activist situations and I don't think it's in his nature to take an "out" that isn't offered to all shareholders.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: wescobrk on January 28, 2014, 10:07:39 AM
"I'd be amazed if he sold his stake in that manner. It would absolutely hurt his credibility in future activist situations and I don't think it's in his nature to take an "out" that isn't offered to all shareholders"

Fair enough. Especially now that the stock dropped from 117 to 99.
He is only about 2 years away from getting around the 5 year TN statute from being able to buy more or the whole company.
If he fails at the special meeting (I'm sure he will based on the votes from the past 3 years) then in 2 years he will have more options on the buy side.
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on January 28, 2014, 11:16:06 AM
"I'd be amazed if he sold his stake in that manner. It would absolutely hurt his credibility in future activist situations and I don't think it's in his nature to take an "out" that isn't offered to all shareholders"

Fair enough. Especially now that the stock dropped from 117 to 99.
He is only about 2 years away from getting around the 5 year TN statute from being able to buy more or the whole company.
If he fails at the special meeting (I'm sure he will based on the votes from the past 3 years) then in 2 years he will have more options on the buy side.

Can you explain the TN statute? Thanks!
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on January 28, 2014, 01:04:20 PM
"I'd be amazed if he sold his stake in that manner. It would absolutely hurt his credibility in future activist situations and I don't think it's in his nature to take an "out" that isn't offered to all shareholders"

Fair enough. Especially now that the stock dropped from 117 to 99.
He is only about 2 years away from getting around the 5 year TN statute from being able to buy more or the whole company.
If he fails at the special meeting (I'm sure he will based on the votes from the past 3 years) then in 2 years he will have more options on the buy side.

Can you explain the TN statute? Thanks!

After 5 years from the date Biglari acquired 10% of CBRL (January 2012), he can buy the company if he can get 2/3 of the remaining shares to vote for it. Inside of 5 years, no 10% owner can consummate any business combination with a TN corporation.
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on January 28, 2014, 11:39:52 PM
Helpful...thanks!
Title: Re: BH - Biglari Holdings
Post by: wescobrk on January 29, 2014, 09:40:39 AM
"After 5 years from the date Biglari acquired 10% of CBRL (January 2012), he can buy the company if he can get 2/3 of the remaining shares to vote for it. Inside of 5 years, no 10% owner can consummate any business combination with a TN corporation."

Thanks for the  clarification I thought it was from June 2011 when he filed 13d.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on February 05, 2014, 07:34:38 AM
I have just bought more BH. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on February 05, 2014, 08:11:22 AM
Gio - Curious if you've considered buying some CBRL instead of just increasing the BH position? I'm thinking that CBRL would probably move more if there's a positive development from the special shareholders meeting on April 23, and if it moves down, BH would likely fall too.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on February 05, 2014, 08:21:36 AM
Gio - Curious if you've considered buying some CBRL instead of just increasing the BH position? I'm thinking that CBRL would probably move more if there's a positive development from the special shareholders meeting on April 23, and if it moves down, BH would likely fall too.

Your reasoning is correct. No doubt about that. But I have no interest in CBRL for the long term. And I buy only things that I want to hold for the long term. Instead, should BH share price keep falling, I will keep buying. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on February 05, 2014, 01:29:28 PM
I have just bought more BH. :)

Gio

I too added today at $413. This price makes no sense.
Title: Re: BH - Biglari Holdings
Post by: pantheman on February 28, 2014, 06:11:27 PM
Biglari Buying Maxim Magazine, Terms Not Disclosed

http://online.wsj.com/article/PR-CO-20140227-916724.html
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 01, 2014, 02:13:52 AM
Biglari Buying Maxim Magazine, Terms Not Disclosed

http://online.wsj.com/article/PR-CO-20140227-916724.html

I don’t know Maxim, but I don’t like magazines in general… let’s hope he has paid a very low price… ;)

ragu, any comment?
Thanks,

Gio
Title: Re: BH - Biglari Holdings
Post by: wescobrk on March 01, 2014, 06:54:55 AM
It was supposed to have sold for 28 million but that fell through. Zardari stepped in.
Sardar is likely to have paid a similar amount.
Title: Re: BH - Biglari Holdings
Post by: Morgan on March 01, 2014, 08:52:39 PM
Maxim probably has the highest market share within its niche. I wonder what Sardar has planned for the magazine? Do a major online push? Are there significant revenues, and more importantly, profits online for the magazine?

BH earned $140m GAAP in 2013 and $20-$30m GAAP or so 2010-2012. Lets just say he paid about $30m for the magazine. He also likely (hopefully) paid a small multiple too. So lets say Maxim currently earns $4m/year give or take a million. That seems pretty small in terms of the rest of BH and is also in a dying industry. Getting back to its niche, how likely will it be that he can double the profits from the magazine and in what time frame? Does he know much about the magazine industry? He obviously knows many things I don't. I am very curious to see what he does with this. I hope more information is disclosed.

Anyone have anymore thoughts?
Title: Re: BH - Biglari Holdings
Post by: MYDemaray on March 03, 2014, 03:58:07 AM
alright, let's start the betting on when Sardar changes the name MAXIM to BIGLARI (for a fee, of course)
Title: Re: BH - Biglari Holdings
Post by: rkbabang on March 03, 2014, 07:17:01 AM
alright, let's start the betting on when Sardar changes the name MAXIM to BIGLARI (for a fee, of course)

Yes within the first year. And of course every issue will feature his face on the cover.
Title: Re: BH - Biglari Holdings
Post by: MYDemaray on March 03, 2014, 08:00:49 AM
what I really want to spend my morning doing, is photo-shopping a mag cover for the next issue of BIGLARI with Sardar flanked by two scantily clad women, chowing down on a Steak-N-Shake burger on the front porch of a Cracker Barrel, but alas I have better things to do.....or do I?
Title: Re: BH - Biglari Holdings
Post by: rkbabang on March 03, 2014, 08:11:56 AM
what I really want to spend my morning doing, is photo-shopping a mag cover for the next issue of BIGLARI with Sardar flanked by two scantily clad women, chowing down on a Steak-N-Shake burger on the front porch of a Cracker Barrel, but alas I have better things to do.....or do I?

Make it him standing in the parking lot of a Cracker Barrel, so you can show him standing next to his Lamborghini and the girls laying on top of it.  Also, don't forget that the Biglari Magazine logo is his signature.
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on March 03, 2014, 08:21:35 AM
http://nypost.com/2014/03/01/texas-investor-scoops-up-maxim/

"Alpha Media has finally found a buyer for its beleaguered Maxim magazine — Texas investor Sardar Biglari. Terms were not disclosed but sources said San Antonio-based Biglari Holdings paid between $10 million and $15 million. The laddie magazine lost an estimated $7 million last year on revenue of about $35 million, sources said."
Title: Re: BH - Biglari Holdings
Post by: premfan on March 03, 2014, 08:29:10 AM
Could be an okay deal. Cut expenses and show a profit. Why would biglari waste this time and energy on something that won't move the needle.  Where is the insurance company he promised shareholders. 
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 03, 2014, 09:24:48 AM
Ok. Now, let’s show the entrepreneur in each of us:

If you were in Mr. Biglari’s shoes, what would you do with MAXIM, and how would you use its publishing infrastructure? For $10 to $15 million you got hold of a publishing infastructure already present in 75 countries... now what?

Any ideas?

Gio
Title: Re: BH - Biglari Holdings
Post by: T-bone1 on March 03, 2014, 09:35:31 AM
Ok. Now, let’s show the entrepreneur in each of us:

If you were in Mr. Biglari’s shoes, what would you do with MAXIM, and how would you use its publishing infrastructure? For $10 to $15 million you got hold of a publishing infastructure already present in 75 countries... now what?

Any ideas?

Gio

Given his taste in cars, I assume he bought Maxim for the same reason Donald Trump bought the Miss Universe pageant . . . and I don't think it was for a cash return
Title: Re: BH - Biglari Holdings
Post by: constructive on March 03, 2014, 09:40:52 AM
Ok. Now, let’s show the entrepreneur in each of us:

If you were in Mr. Biglari’s shoes, what would you do with MAXIM, and how would you use its publishing infrastructure? For $10 to $15 million you got hold of a publishing infastructure already present in 75 countries... now what?

Any ideas?

Gio

I'd increase targeted online marketing and marketing on university campuses, and stop doing business in the most unprofitable of those 75 countries.

And try to flip it to Playboy or another strategic buyer as soon as I possibly could.
Title: Re: BH - Biglari Holdings
Post by: premfan on March 03, 2014, 09:45:05 AM
Ok. Now, let’s show the entrepreneur in each of us:

If you were in Mr. Biglari’s shoes, what would you do with MAXIM, and how would you use its publishing infrastructure? For $10 to $15 million you got hold of a publishing infastructure already present in 75 countries... now what?

Any ideas?

Gio

 I would focus my time and energy on moving 585 million of shareholder equity forward. To increase my cult following and leverage that to get more deals. I surely wouldnt waste my time on such a small deal. I would try to keep my promise to shareholders on acquiring a insurance company. I would cut cost to the bare bone and keep whatever profit is left knowing i'm in a dying industry. 
Title: Re: BH - Biglari Holdings
Post by: Morgan on March 03, 2014, 12:26:28 PM
 
Why would biglari waste this time and energy on something that won't move the needle.
That's exactly what I'm wondering. Surely this will take up a decent amount of his time. What are the repuational costs for him if he fails? And the upside if he is succesful... right back to how will this move the needle?


Title: Re: BH - Biglari Holdings
Post by: A_Hamilton on March 03, 2014, 01:15:10 PM
Why would biglari waste this time and energy on something that won't move the needle.
That's exactly what I'm wondering. Surely this will take up a decent amount of his time. What are the repuational costs for him if he fails? And the upside if he is succesful... right back to how will this move the needle?

Maybe take Maxim name and go into hard core porn market? Not kidding.
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on March 03, 2014, 02:57:19 PM
Why would biglari waste this time and energy on something that won't move the needle.
That's exactly what I'm wondering. Surely this will take up a decent amount of his time. What are the repuational costs for him if he fails? And the upside if he is succesful... right back to how will this move the needle?
Since he is keeping the management team I don't think it will take too much of his time. I'd bet he's definitely looking beyond print, and in that sense it could move the needle over time. He clearly likes good brand names and he got a pretty good one for ~$10 million. It could be a steal if he can get the magazine into the black by $5M/year and then leverage the brand and infrastructure into other areas. I would imagine the product licensing opportunities alone cold move the needle 5 years from now. I don't think it's a slam dunk but for $10M there are multiple levers to pull for it to wind up being a real bargain a few years down the road. I like the risk-reward at the bargain price he got it for even if at first glance it appears odd.
Title: Re: BH - Biglari Holdings
Post by: Morgan on March 03, 2014, 07:53:47 PM
Why would biglari waste this time and energy on something that won't move the needle.
That's exactly what I'm wondering. Surely this will take up a decent amount of his time. What are the repuational costs for him if he fails? And the upside if he is succesful... right back to how will this move the needle?
Since he is keeping the management team I don't think it will take too much of his time. I'd bet he's definitely looking beyond print, and in that sense it could move the needle over time. He clearly likes good brand names and he got a pretty good one for ~$10 million. It could be a steal if he can get the magazine into the black by $5M/year and then leverage the brand and infrastructure into other areas. I would imagine the product licensing opportunities alone cold move the needle 5 years from now. I don't think it's a slam dunk but for $10M there are multiple levers to pull for it to wind up being a real bargain a few years down the road. I like the risk-reward at the bargain price he got it for even if at first glance it appears odd.

If he actually got it for ~$10m then yes, that was sounds like quite a good buy. Especially if he can make profitable soonish then leverage the brand some how. I suppose he must have some sort of plan for it. Fun to follow to say the least.  :)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 03, 2014, 10:52:57 PM
It could be a steal if he can get the magazine into the black by $5M/year and then leverage the brand and infrastructure into other areas.

It is precisely those “other areas” I am trying to figure out… what are they? A_Hamilton suggested hard core porn… ;) well, besides that one, which are the plausible “other areas”?

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on March 04, 2014, 12:27:50 AM
ragu, any comment?

gio,

Can't say I saw that one coming! It looks to me like BH weren't involved in the initial bidding.

After the collapse of the Darden Jr. "bid", there was a potential second bid for around $20 million:http://nypost.com/2013/12/20/darden-not-alpha-enough-to-nail-maxim-mag/

I can't find anything on why that might have not gone through. It'll be interesting to hear from Sardar at the AM as to how this came about.

Currently unprofitable business and desperate sellers might have been enough for the purchase price to have been a bargain. I can't see this in the BH umbrella for the long-term though and I suspect a sale might happen a few years down the road.

As for plans, there's potentially this: http://variety.com/2013/tv/news/maxim-magazine-plans-cable-tv-network-report-1200609750/

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: TheValueDude on March 19, 2014, 02:56:30 PM
Looks like Biglari finally bagged an insurance company...

http://www.prnewswire.com/news-releases/biglari-holdings-inc-acquires-first-guard-insurance-company-251047701.html
Title: Re: BH - Biglari Holdings
Post by: MYDemaray on March 19, 2014, 05:37:18 PM
Wait...truckers?...MAXIM?...it all makes sense now!
Title: Re: BH - Biglari Holdings
Post by: Nnejad on March 19, 2014, 05:45:15 PM
Plus, look at the products CCA sells.
http://www.ccaindustries.com/

It's all coming together.
Title: Re: BH - Biglari Holdings
Post by: ragu on March 19, 2014, 08:05:18 PM
http://www.prnewswire.com/news-releases/biglari-holdings-inc-acquires-first-guard-insurance-company-251047701.html

Quote
By writing business directly rather than through agents and brokers, First Guard enjoys one of the lowest cost structures in the insurance industry.

The Geico of truckers insurance.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on March 20, 2014, 12:21:02 AM
http://www.prnewswire.com/news-releases/biglari-holdings-inc-acquires-first-guard-insurance-company-251047701.html

Quote
By writing business directly rather than through agents and brokers, First Guard enjoys one of the lowest cost structures in the insurance industry.

The Geico of truckers insurance.

Best,
Ragu

I like this. It took a while, but in the end Mr. Biglari succeeded in purchasing an insurance company. And one that seems to have a long track-record of underwriting profitably.

I would like to point this out: Mr. Watsa in his latest letter has written:
Quote
Fairfax is very much in the restaurant business in Canada!
Therefore: insurance + fast food franchising.
Now, BH is in the insurance business.
Therefore: fast food franchising + insurance.

 ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: kam2308 on April 21, 2014, 07:29:20 PM
Is anyone planning on going to the annual meeting?
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on April 22, 2014, 12:12:18 PM
Is anyone planning on going to the annual meeting?

I'll be there and will be happy to share some notes.
Title: Re: BH - Biglari Holdings
Post by: kam2308 on April 22, 2014, 03:10:16 PM
Is anyone planning on going to the annual meeting?

I'll be there and will be happy to share some notes.

Cool.  I'd be happy to meet up before the meeting or get drinks afterwards with you or anyone else who is interested. 
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on April 22, 2014, 04:26:27 PM
Is anyone planning on going to the annual meeting?

I'll be there and will be happy to share some notes.

Cool.  I'd be happy to meet up before the meeting or get drinks afterwards with you or anyone else who is interested.

Appreciate the offer, but I'm going to be meeting up with some friends who I haven't seen in a while, since I'll be coming in from out of town for a short trip.
Title: Re: BH - Biglari Holdings
Post by: wescobrk on April 22, 2014, 04:49:28 PM
I'll be there and I'm up for chatting after.
Title: Re: BH - Biglari Holdings
Post by: ragu on April 22, 2014, 08:36:35 PM
I'll be there and will be happy to share some notes.

peridotcapital,

Many thanks in advance!

A request: Could you ask Sardar if he is able to comment on Duane Geiger, the former CFO, leaving the company?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on April 23, 2014, 09:42:23 AM
Not a surprise, Biglari loses again in the CBRL meeting today...maybe it is time to move on
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 23, 2014, 04:14:16 PM
Not a surprise, Biglari loses again in the CBRL meeting today...maybe it is time to move on

He has the longest time horizon and holding period...why move on?  Eventually, after five more years, he would have worn management and shareholders down.   ;D 

At that point, they'll pay a premium to him for his shares...just to leave them alone.  It's called the "Icahn greenmail premium"!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: abitofvalue on April 24, 2014, 07:01:39 AM
To say he lost again is an understatement:

Quote
Preliminary results indicate that approximately 70% of the shares voted - including more than 92% of the shares voted by shareholders other than Biglari Capital - were cast against both proposals.

92% of non-Biglari Capital shareholders voted against him.  That's pretty overwhelming.  Suggests one of two things:
(a) his proposal's aren't very good or
(b) he has managed to piss his partners off so much that they are voting against him despite the fact that its going to cost them money. 

Time for Sardar to acknowledge that maybe he is doing something wrong.  Will his ego allow him to do this? or will he continue to believe that only he knows whats best?
Title: Re: BH - Biglari Holdings
Post by: ragu on April 24, 2014, 07:34:37 AM
92% of non-Biglari Capital shareholders voted against him.  That's pretty overwhelming.  Suggests [...]

Only one thing when it comes to CBRL: Shareholders should think independently and not let proxy advisory firms dictate voting outcomes.

Quote from: abitofvalue
or will he continue to believe that only he knows whats best?

It's not just a question of belief, you know. He is absolutely right based on the facts here.

CBRL management is completely clueless when it comes to capital allocation (and only less so when it comes to operations). Tack on the fact that they have very little integrity and have zero interest in long-term value creation. They care about one thing: keeping their cushy jobs without having to answer to someone as rational as Sardar on the board.

The longer current management and board hang on, the more damage they will do to the long-term value of CBRL. Shareholders are far too blinded by the stock performance of the last few years to see it. As long as Sardar keeps his stake and is unable to get on the board, this remains a real risk for BH.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: abitofvalue on April 24, 2014, 08:19:35 AM

Only one thing when it comes to CBRL: Shareholders should think independently and not let proxy advisory firms dictate voting outcomes.


Oh come-on.  It's a little much to pretend that only shareholders who are with Biglari are truly independent and thinking for themselves while the rest are just sheep listening to proxy advisory firms.   
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 24, 2014, 08:26:28 AM
Oh come-on.  It's a little much to pretend that only shareholders who are with Biglari are truly independent and thinking for themselves while the rest are just sheep listening to proxy advisory firms.

Maybe not… But shareholders lulled into autopilot thinking by a rising stock price are very common… too much so!!

Btw, what flaws do you find in Mr. Biglari’s proposals for CBRL? It basically is the same recipe he used to turn around Steak’n Shake… And it worked quite well! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 24, 2014, 08:31:33 AM
As long as Sardar keeps his stake and is unable to get on the board, this remains a real risk for BH.

+1 (unfortunately)

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on April 24, 2014, 12:39:13 PM
Oh come-on.  It's a little much to pretend that only shareholders who are with Biglari are truly independent and thinking for themselves while the rest are just sheep listening to proxy advisory firms.

There's no need to pretend when the facts are clear.

www.enhancecrackerbarrel.com (http://www.enhancecrackerbarrel.com) is a pretty good start to actually understanding this situation.

HTH,
Ragu
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 24, 2014, 02:23:12 PM
Oh come-on.  It's a little much to pretend that only shareholders who are with Biglari are truly independent and thinking for themselves while the rest are just sheep listening to proxy advisory firms.

There's no need to pretend when the facts are clear.

www.enhancecrackerbarrel.com (http://www.enhancecrackerbarrel.com) is a pretty good start to actually understanding this situation.

HTH,
Ragu

Crackerbarrel and Steak'n Shake are two very different animals.  Crackerbarrel's executives have done a mediocre job.  Steak'n Shake was falling off a cliff and was six months from bankruptcy.  So Sardar's arguments about capital allocation aren't quite on comparable levels here, nor completely accurate.  Frankly, I'm not sure why he didn't pick an easier target than CBRL!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: Kash50 on April 24, 2014, 02:56:14 PM
Did anyone make it to BH's annual meeting ??
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on April 24, 2014, 04:33:26 PM
Yep, I'll put some notes up in a day or two.

Jason
Title: Re: BH - Biglari Holdings
Post by: bookie71 on April 24, 2014, 05:36:19 PM
They also have very different demographics. 
Title: Re: BH - Biglari Holdings
Post by: rkbabang on April 25, 2014, 07:03:23 AM
They also have very different demographics. 

What? You don't think the Cracker Barrel clientele wishes to eat while a creepy picture of Biglari is hanging on the wall staring at them?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 25, 2014, 07:22:54 AM
Crackerbarrel and Steak'n Shake are two very different animals.  Crackerbarrel's executives have done a mediocre job.  Steak'n Shake was falling off a cliff and was six months from bankruptcy.  So Sardar's arguments about capital allocation aren't quite on comparable levels here, nor completely accurate.  Frankly, I'm not sure why he didn't pick an easier target than CBRL!  Cheers!

I agree.
Anyway, 1 year and a half ago CBRL was an undervalued stock, and the healthy rise in price is testimony to that. But today CBRL is no longer undervalued, and from now on to be a good investment it must create value.
To create value, Mr. Biglari proposals make sense; CBRL’s management on the other hand is completely unconvincing…
Now, a shareholder should always think about the future, and not be content with the past, just because the recent past has delivered solid results. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on April 25, 2014, 08:22:06 AM
Has anyone found any blogs or sites with notes from the annual meeting yet? If so, please share
Title: Re: BH - Biglari Holdings
Post by: oddballstocks on April 25, 2014, 08:41:02 AM
They also have very different demographics.

How so?  All of the freeway exits in the Midwest that have a Steak n Shake have a Cracker Barrel as well.  Having grown up in the Midwest and having frequented both places many of times I'd say the only difference is that Cracker Barrel's average patron age is older.

I can even see some of BH's rationale here, you can cut distribution costs in half by sending a truck to both locations along the same routes.
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on April 26, 2014, 05:28:43 PM
Here are some of my notes from the annual meeting. I've condensed them to what I think is most worthwhile, but feel to free to ask anything else if you want and I'll do my best to recall his answers.

First Guard: Blueprint for acquisitions, great manager who will stay on and be highly incentivized to continue strong underwriting results. Minimal float due to fact that property claims are paid out very quickly, but do expect to add casualty companies in the future (nothing in the works right now), where float would be more meaningful. SNS actually has more float than First Guard (gift card sales). Should expect some targeted growth (marketing initiative of $500,000 was one of the first moves) but nothing dramatic in the near to intermediate term.

Cracker Barrel: Lots of negative comments re: CBRL management. Do not get the sense he will be selling. Said he would only do so if the stock got to be "overvalued" and it forced his hand. To me, since it hit $118 and there was no movement there, it seems he will continue to hold, wait for TN law to expire in early 2017. He did say he would like to buy the whole company. As long as total shareholder returns are strong, proxy advisers will be against BH, and he won’t win board seats, but restaurant multiples won't rise forever. He believes he could cut 30-50M from expenses and increase traffic by 5% if he got on the board (conversely traffic has declined by 1% since the current CEO took over, despite 18% increase in marketing spend).

Steak N Shake: Increased G&A spend will start to stabilize after years of increases. Continue to focus on mostly int'l franchise unit growth (pipeline of 220 units), with a few units in the US (west coast is attractive, Santa Monica location will open this year). Focus is on high quality, great service, at lowest possible price. Not focused on margins (I asked about normalized margins for SNS and he sidestepped it) He clearly prefers guest traffic at expense of margin per guest (a la Costco, Walmart). Lots of licensing deals in the works too (SNS chili at select WMT locations and growing…. microwavable shakes in the pipeline). Despite saying he doesn't care about margins (which I don't believe, since he could lower prices further and would still have higher margins than Costco and Walmart), he did say that franchised locations could earn 50% margins (although current investment levels are above 50% of royalties).

Maxim: He had never seen the magazine. Bought a copy, read through it, and decided to buy it. Believes the brand itself is worth more than he paid (did not disclose purchase price). The plan is to upgrade the quality of the magazine later this year (September relaunch), but ultimately breaking or even losing a bit on the magazine is fine, as licensing the brand will be where the major money will be (Playboy business model) and where the transformation will be focused. The losses are ugly today, and will get worse as they spend more money to move into other areas. Expects a 2-4 year window until results start to show traction. No debt maturities to worry about, BH only assumed the assets and the old management team is gone. To me, this will likely be a major drag on BH's results for several years, but as we all know he doesn't care about the short term.

Lion Fund: A couple people gave him a hard time about the incentive fees he will get, price of the BCC sale, etc. He and Phil both dodged the meat of those concerns, but it sounds like most of the public market investments will be through the LPs and whole acquisitions will be through BH, with some minor exceptions (which were not expanded on).

CCA: It has not worked out well thus far, but it’s so small… only a “rounding error.” “I will focus on rounding, you will likely focus on error." BH has had $200 of gains for every $1 of loss so far. Current CCA management is doing the best they can.

Unico American: “No comment.” Interesting, because he commented on every other holding...
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 27, 2014, 01:43:21 AM
Thanks peridotcapital.

+1
Much appreciated! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on April 27, 2014, 11:57:15 AM
It took Ali, 8 rounds to beat Foreman in Zaire. We are only in round 4. A lion doesn't worry about barking chihuahuas.

These were some of the thoughts voiced by Biglari at the meeting. I think Larry from Cracker Barrel was present.
Title: Re: BH - Biglari Holdings
Post by: globalfinancepartners on April 27, 2014, 02:07:43 PM
Also, if he sells CBRL, the book value will get hit because of taxes and impact his compensation. He will never do it.

Why wouldn't book value already reflect deferred taxes as a liability?
Title: Re: BH - Biglari Holdings
Post by: peridotcapital on April 27, 2014, 03:52:29 PM
Quote

Also, note that he is doing double dipping - getting paid at both Lion Fund and BH for book value increases.


Actually, he isn't getting paid twice on the investment profits. The bonus agreement with BH covers only book value increases from operating earnings (the calculation excludes Lion Fund(s) profits to avoid getting paid twice).
Title: Re: BH - Biglari Holdings
Post by: Parsad on April 28, 2014, 12:19:55 AM
It took Ali, 8 rounds to beat Foreman in Zaire. We are only in round 4. A lion doesn't worry about barking chihuahuas.

These were some of the thoughts voiced by Biglari at the meeting. I think Larry from Cracker Barrel was present.

Is Sardar planning on losing Biglari Holdings to a Leon Spink's type of company a few years later?   ;D  Maybe Cracker Barrel should acquire Biglari Holdings.

I love it when people use great historical winning analogies to explain their defeats, rather than saying we've lost the first four rounds, but are persistent and hope to win eventually. 

As if he would prefer to go eight rounds with Cracker Barrel, rather than beat them in the first round!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on April 28, 2014, 08:51:13 AM
Here are my notes from the BH annual meeting April 2014, St Regis NYC

Opening remarks- Biglari showed a slide of the corporate structure and made some remarks about having maximum latitude in capital allocation, looking at cash flow instead of corporate earnings, they are a capital allocation company, no redemption risk which is a big competitive advantage, flexible in their approach, unconventional but logical…and so on

First Guard- Immediately knew it was a special company, looked at financials and 2 days later Sardar and Phil flew to Venice Fl to meet Ed Campbell. Ed Campbell is one of the most detailed people Sardar has ever met. Ed is the key to the business, a very special CEO. Sardar knew all the combined ratios for the past couple of years. 2013 -76.4, 2012-79.7, 2011-90.1, 2010- 80.1, 2009-65.4. This company has vitually no float but it is a great way to enter the insurance business and introduce the industry and regulators to Biglari Holdings. Currently insuring 12700 trucks, BH invested $500,000 in new marketing initiatives and needs a combined ratio in the 80’s at worst to make money.

International Franchising – signed a deal for 20 units Kuwait(they got the money already), 15 in Pakistan, 50 in Saudi Arabia(1st store should open in a couple of months)

Maxim- Feb 14th he was reading about collapsed deal, got financials, then went to Barnes and Noble and bought a copy of Maxim. Made the call and bought the brand. Believes the brand has strong potential and wants to transform the business. This will take at least 2 years and 30 million to make happen. The results will get uglier before they get prettier. Will reposition the magazine by September with better paper quality, uplifting stories, better ethos.  Maxim has a strong brand, in 70 countries, in Russia there is a restaurant and credit card. Sardar stated a prominent group offered to buy a piece of Maxim while he was making the deal and he could have flipped for a quick profit but he declined. 20% of the readers are women, has more subscribers than GQ, Esquire, Rolling Stone but not the ad pages

Lion Fund I and II – 500 million under mgmt, they believe the deal is generous to BH shareholders with a “0” management fee and 25% of profits after a 6% hurdle and high watermark.

Steak and Shake- Sardar has hired people from outside to restaurant industry to help with the next stage. Hired a Federal Express bar code guy, lady from Advance Auto distribution, JC Penney hr guy, and a Toyota university guy. More licensed SNS sku’s coming, they get 8.6 million in float from SNS gift cards

Cracker Barrel- inmates are in charge of the asylum, don’t know why they don’t agree with him, they are like a bunch of Chihuahuas barking, if you are a Lion you don’t bark a lot of arguments, they are spending 5 million to fight him with their cognitive inadequacies and stupidity. This is like the “rumble in the jungle” ’74 Ali-Foreman in Zaire, that went 8 rounds are we are in the 4th round, he would like to make a bid for the whole company but can not. CBRL is an unbelievable brand with outstanding real estate portfolio, it is a Chipotle brand without the Chipotle results. Operationally they are not doing well, COGS is going up, traffic is down. But as long as the stock price goes up, ISS will be on their side. He believes he could reduce their expenses by 30-50 million and increase traffic by 5%. Only way he gets out is if the stock gets way overvalued and forces his hand. Believes CBRl should go international, big potential there.

Licensing agreement- put in place to prevent some schmuk from coming in , bureaucrats create problems and chaos, he is not going anywhere but would get a lot of money if forced out, it goes away in 19 years

Random Notes – Sardar has improved by looking at so many deals. What could have taken him 5 hours to analyze years ago now takes 5 minutes. He recommended “Creativity Inc” as a recent book. Phil likes any of O’Reilly’s books and Sardar gave him Titan to read.  All in all, I thought a very informative meeting. Sardar is amazing in his ability to rattle off numbers. I have no doubt he is going to make a lot of money, the question is how well will the BH shareholders do.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 28, 2014, 08:56:18 AM
Thank you very much, OracleofCarolina! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on April 28, 2014, 09:14:10 AM
OracleofCarolina - was there any indication or hints toward the valuation of First Guard?
Title: Re: BH - Biglari Holdings
Post by: ragu on April 28, 2014, 09:31:17 AM
Here are my notes from the BH annual meeting April 2014, St Regis NYC

Many, many thanks OracleofCarolina!

Quote from: OracleofCarolina
I have no doubt he is going to make a lot of money, the question is how well will the BH shareholders do.

Anywhere between merely very good to phenomenal. My bet is on the latter.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: APG12 on April 28, 2014, 02:04:17 PM
Here are my notes up to the break. Unfortunately, I had a flight to catch...
Title: Re: BH - Biglari Holdings
Post by: Morgan on April 28, 2014, 08:31:40 PM
Here are my notes up to the break. Unfortunately, I had a flight to catch...

Thank you!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 29, 2014, 12:06:12 AM
Quote from: OracleofCarolina
I have no doubt he is going to make a lot of money, the question is how well will the BH shareholders do.

Anywhere between merely very good to phenomenal. My bet is on the latter.

Best,
Ragu

As I have always said, ragu doesn’t lack conviction in his ideas! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 29, 2014, 12:07:20 AM
Here are my notes up to the break. Unfortunately, I had a flight to catch...

Thank you!

+1
Great job! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on April 29, 2014, 01:46:31 AM
Here are my notes up to the break. Unfortunately, I had a flight to catch...

Unfortunate for those of us interested in this. Next time, please consider taking a red-eye out:) (the meeting is unlikely to be shorter)

Seriously fantastic notes! 

One question from the section on Maxim: Did you get the sense that there'd be an eventual sale here? Or, does the 100-150 mn number pertain to possible future revenues?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: APG12 on April 29, 2014, 05:51:38 AM
Here are my notes up to the break. Unfortunately, I had a flight to catch...

Unfortunate for those of us interested in this. Next time, please consider taking a red-eye out:) (the meeting is unlikely to be shorter)

Seriously fantastic notes! 

One question from the section on Maxim: Did you get the sense that there'd be an eventual sale here? Or, does the 100-150 mn number pertain to possible future revenues?

Best,
Ragu

Thanks! I will definitely try next time. It didn't sound to me like his end game was a sale. He said BH was already offered more for it than they paid, but they weren't interested in flipping it. The $100-$150mm numbers were really off the cuff. I think his point was only that there is an opportunity to make many multiples of the initial invested capital and that this is a different kind of investment than First Guard.
Title: Re: BH - Biglari Holdings
Post by: dcollon on April 30, 2014, 06:00:51 AM
Cracker Barrel guides Q3 EPS $1.18-$1.23 vs prior $1.20-$1.30 and FactSet $1.26, raises quarterly dividend
Wednesday, April 30, 2014

In conjunction with the 1-May Analyst and Institutional Investor Meeting, the company also reported today its comparable store sales through 28-Apr-14 for the 13-week Q3 ending 2-May-14. ◦April MTD comparable restaurant sales +2.2% with Q3 QTD (0.7%)

April MTD comparable retail sales +11.5% with Q3 QTD +0.7%

The company believes a continued challenging consumer environment, an increasingly promotional competitive landscape, particularly within the dinner daypart, and an overall reduction in vehicle travel – due both to weather and shortened vacation periods – impacted comparable store traffic, restaurant sales and retail sales during the quarter to date.

The company has raised its quarterly dividend to $1.00 from $0.75, payable on 5-Aug-14 to shareholders of record as of 18-Jul-14.
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on April 30, 2014, 08:55:31 AM
Biglari mentioned at the meeting that if he was in charge at CBRL, he thought he could easily cut expenses 30-50 million.

And today....CBRL announces a "cost-cutting plan" to reduce expenses by at least 50 million by 2017!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on April 30, 2014, 08:59:54 AM
Biglari mentioned at the meeting that if he was in charge at CBRL, he thought he could easily cut expenses 30-50 million.

And today....CBRL announces a "cost-cutting plan" to reduce expenses by at least 50 million by 2017!

CBRL’s management will go on copying Mr. Biglari’s ideas… And taking all the merits… Fortunately, we are not here for the glory, but for the money! ;)

Gio

PS
Bought more BH today :)
Title: Re: BH - Biglari Holdings
Post by: petey2720 on May 01, 2014, 12:26:35 PM
In case Sardar reads this site, the attached article reflects the next restaurant chain he should buy.  Privately held Portillo's.  Cash Cow.  Only 38 locations.  If managed properly.....could be huge.
Title: Re: BH - Biglari Holdings
Post by: saltybit on May 01, 2014, 12:57:09 PM
In case Sardar reads this site, the attached article reflects the next restaurant chain he should buy.  Privately held Portillo's.  Cash Cow.  Only 38 locations.  If managed properly.....could be huge.

Wow, can't believe he is selling.... this place is a chicago institution. (makes great italian beef sandwiches)
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on May 01, 2014, 02:19:54 PM
In Cracker Barrel news...what do you folks think of the 1 plate cost cutting idea?


Genius! Haha
Title: Re: BH - Biglari Holdings
Post by: gg on May 01, 2014, 03:22:49 PM
In case Sardar reads this site, the attached article reflects the next restaurant chain he should buy.  Privately held Portillo's.  Cash Cow.  Only 38 locations.  If managed properly.....could be huge.

Agreed that it's a great brand, and for the right price, could be a great fit in the BH portfolio.

Not sure if there is much they could do to improve operations though. I used to live and work near the River North location in the city, and I can't imagine it being managed any better. Definitely one of the most impressive retail establishments I ever frequented. The location is at a real busy intersection, and they probably have 100+ drive throughs during rush hour each day and have several employees standing outside in the car lines to take the orders as soon as cars pulled up to maximize the speed. Inside, it also seems to be an incredibly well-oiled machine--always so many people yet the lines are super quick and the food is pretty solid
Title: Re: BH - Biglari Holdings
Post by: petey2720 on May 01, 2014, 09:48:43 PM
When I said managed properly, I meant:

1). Don't change any of the existing operations.

2).  Manage their growth into new markets responsibly. 
Title: Re: BH - Biglari Holdings
Post by: bargainman on May 01, 2014, 10:48:02 PM
When I said managed properly, I meant:

1). Don't change any of the existing operations.

2).  Manage their growth into new markets responsibly.

I think it would be a much better fit for Markel ventures or Fairfax.
Title: Re: BH - Biglari Holdings
Post by: Parsad on May 02, 2014, 12:04:14 AM
When I said managed properly, I meant:

1). Don't change any of the existing operations.

2).  Manage their growth into new markets responsibly.

I think it would be a much better fit for Markel ventures or Fairfax.

+1!!!  Can you imagine...Portillo's by Biglari!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 02, 2014, 12:33:34 AM
I think it would be a much better fit for Markel ventures or Fairfax.

Though I would love to see FFH purchase such an outstanding business, why do you say “a much better fit”?

Gio
Title: Re: BH - Biglari Holdings
Post by: Williams406 on May 02, 2014, 03:09:40 AM
I'd be tempted to bid for Portillo's just to defray my family's dining costs. Every week I play the same game in drive-through line: Burger or Italian Beef with sweet peppers? Why choose? So I order both. Traffic to the restaurants I live by are unreal. Gotta be a great business.
Title: Re: BH - Biglari Holdings
Post by: biaggio on May 02, 2014, 05:41:41 AM
When I said managed properly, I meant:

1). Don't change any of the existing operations.

2).  Manage their growth into new markets responsibly.

I think it would be a much better fit for Markel ventures or Fairfax.

+1!!!  Can you imagine...Portillo's by Biglari!  Cheers!


How about Portillo by sanjeev.

Maybe corner capital should look at this
Title: Re: BH - Biglari Holdings
Post by: Scudbucket on May 02, 2014, 04:14:01 PM
Whenever I go back home to Chicago I always go to Portillo's.  The one in Niles, IL is always busy, it's unreal.  I'm willing to wait, though.  And so are about 20 other people behind me.  It's a great business and really does have an amazing following.  I would love to see MKL buy this, for a fair price, though.
Title: Re: BH - Biglari Holdings
Post by: Parsad on May 02, 2014, 04:33:25 PM
When I said managed properly, I meant:

1). Don't change any of the existing operations.

2).  Manage their growth into new markets responsibly.

I think it would be a much better fit for Markel ventures or Fairfax.

+1!!!  Can you imagine...Portillo's by Biglari!  Cheers!


How about Portillo by sanjeev.

Maybe corner capital should look at this

Could have been one day!   ;D  But we are far too small today to even take a nibble. 

Would be ideal for Fairfax, Markel or even Dhandho Holdings!  Mohnish knows the brand well as a native Chicagoan, but I would think this is going to sell on the high end and might be a bit too big for Dhandho at the moment as well.

Perfect size and quality for Fairfax and Markel with lots of room for growth...they would both start to get a lot more calls from quality private business owners if they got this one!  And they would maintain the culture of the company and owner.  Cheers!   
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 13, 2014, 02:32:37 AM
Biglari Holdings: Sum Of The Parts Indicates Strong Upside


Gio
Title: Re: BH - Biglari Holdings
Post by: APG12 on May 13, 2014, 06:19:48 AM
Quote
One of the things that his plan does not contain is a catch-up provision. Most hedge funds contain such a condition where the manager only gets paid on the percentage above the hurdle rate. For instance, if the manager has a hurdle rate 6% and earns 12%, they would only get their performance fee on the incremental 6%. In Biglari's case, if he earns anything in excess of 6%, he earns the entire gain. In the example above, he would get the 25% incentive fee on the full 12%.

 ???

The formula from the holding co. incentive agreement: .25 * (New Book Value - High Water Mark * 1.06)

And for the Lion Fund: "The incentive reallocation to Biglari Capital is equal to 25% of the net profits allocated to the limited partners in excess of their applicable hurdle rate."
Title: Re: BH - Biglari Holdings
Post by: ragu on May 14, 2014, 09:55:18 AM
The formula from the holding co. incentive agreement: .25 * (New Book Value - High Water Mark * 1.06)

And for the Lion Fund: "The incentive reallocation to Biglari Capital is equal to 25% of the net profits allocated to the limited partners in excess of their applicable hurdle rate."

Indeed. That was just plain silly. Although the conclusion is right, the write-up sorely lacks qualitative and quantitative rigour (sorry, Gio!).

The unfortunate reality for BH shareholders is that for the right thing to happen at CBRL (Sardar on the board at the very least), BH's book value needs to likely take a hit from a declining market value for CBRL as management presides over operational and capital-allocation idiocy.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 14, 2014, 11:08:01 PM
Indeed. That was just plain silly. Although the conclusion is right, the write-up sorely lacks qualitative and quantitative rigour (sorry, Gio!).

The unfortunate reality for BH shareholders is that for the right thing to happen at CBRL (Sardar on the board at the very least), BH's book value needs to likely take a hit from a declining market value for CBRL as management presides over operational and capital-allocation idiocy.

Best,
Ragu

Hey! I am not the author of that piece… I just found interesting a sum of the parts analysis that got to a fair value of $675! ;)

Why “unfortunate reality”?! The way I see it, this could become a great buying opportunity: a hit to BH’s BV, caused by nothing more than a decline in CBRL stock price, would certainly make BH’s stock price fall, but for no real nor worrisome reason… On the contrary, if such an event actually happens, with Mr. Biglari finally on the board, CBRL imo will be a stronger, not weaker, organization than before… So, what do we have here? A lower share price… for a stronger business?! Just great!!

On the other hand, what might happen instead is that CBRL’s management goes on ignoring Mr. Biglari, while copying his strategies and implementing his business optimization advices. If this is the case, CBRL will create shareholders value and we will benefit from it.

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 15, 2014, 07:21:37 AM
Just bought more today. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on May 15, 2014, 07:55:56 AM
Hey! I am not the author of that piece… 

Gio,

I know that you didn't write it. However, your posting of it w/o comment suggested an implicit endorsement.

I should've stopped reading when Sardar was compared to Gordon Gekko (suggesting a lack of understanding of Milken, Icahn and Sardar all in one go).

Quote from: giofranchi
I just found interesting a sum of the parts analysis that got to a fair value of $675! ;)

Heh. An 18x multiple on earnings (however loosely based on "comps") is hardly justifiable. Ignore deferred taxes on the CBRL investment, and voila, you have your $675/share number.

Quote from: giofranchi
Why “unfortunate reality”?! The way I see it, this could become a great buying opportunity

Oh, I agree. Some of us may have as much as we can afford to right now:-).

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 16, 2014, 12:22:17 AM
ragu,
actually I endorsed the sum of the parts analysis… that’s it! I was not really interested in any other part of the article… surely couldn’t care less about the comparison to Gordon Gekko!! ;)

On the other hand, if you think the sum of the parts analysis is flawed, then I agree: the article has close to no merit… But I wouldn’t be so sure… Given its size, growth prospects, Mr. Sardar’s entrepreneurial abilities and young age, BH’s fair value imo is close to 2xBV… which is not far from the figure presented in the article.

Cheers,

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on May 16, 2014, 05:49:02 AM
[..]BH’s fair value imo is close to 2xBV… which is not far from the figure presented in the article.

With so much of BH's value tied to Sardar's ability, I doubt we are going to see a market price of 2xBV anytime soon. Not until someone has special insight into Sardar's longevity and figures that BV/share is going to compound at at least 15%/annum for the foreseeable future:-).

As for the article, the writer has done some homework. The factual inaccuracies (SEC forced Sardar to revise hurdle rate on the original incentive agreement?!), the unreasonable multiple on restaurant earnings, the ignoring of deferred taxes on the CBRL position all undermine that homework though.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 16, 2014, 06:23:29 AM
With so much of BH's value tied to Sardar's ability, I doubt we are going to see a market price of 2xBV anytime soon. Not until someone has special insight into Sardar's longevity and figures that BV/share is going to compound at at least 15%/annum for the foreseeable future:-).

By a very simple discounted value of equity calculation (with a 9% discount rate) it takes only 13 years of compounding BV at 15% annual, to get to a present value of equity of 2xBV0 (BV0 = BV today). After that BH could close doors… Not very likely, right? Most of all because by then Mr. Biglari will be only 50! :)

15% compounded annual, with the mix of very safe operating earnings and very good investing capabilities he has engineered, is imo decidedly achievable. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on May 16, 2014, 06:38:18 AM
15% compounded annual, with the mix of very safe operating earnings and very good investing capabilities he has engineered, is imo decidedly achievable. ;)

Agreed. However, I'd be (very) disappointed if that's all Sardar managed over that time-frame.

If Rafa Benitez (former Liverpool manager) were talking about Sardar, I'd suspect he'd say: The possibilities, they are intriguing, no?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: giofranchi on May 16, 2014, 06:41:39 AM
If Rafa Benitez (former Liverpool manager) were talking about Sardar, I'd suspect he'd say: The possibilities, they are intriguing, no?

+1! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on May 16, 2014, 01:56:55 PM
http://finance.yahoo.com/news/biglari-holdings-inc-news-release-200900561.html?.tsrc=applewf

Results are out..
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on June 10, 2014, 07:12:41 PM
http://instagram.com/p/pFgyXcoNZ9/

It will be fun to watch what Biglari does with the Maxim brand.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 11, 2014, 12:28:21 AM
Ragu/Gio, where do you put the valuation of BH?

Quote
The Company’s proportionate share of Company stock held by investment partnerships at cost is $64,803 and $54,613 at April 9, 2014 and September 25, 2013, respectively, and is recorded as treasury stock.
--page 8

Therefore, true BV should be: $64.8 + $543.8 = $608.6 million.
I don’t want to put a precise number on fv, but let’s just say I won’t be worried about valuation until BH sells for 2xBV: 2 x $608.6 = $1,217.2 million.
As of yesterday BH market cap was $765.57 million.

Ragu?

Gio
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on June 11, 2014, 05:42:56 AM
Ragu/Gio, where do you put the valuation of BH?

Quote
The Company’s proportionate share of Company stock held by investment partnerships at cost is $64,803 and $54,613 at April 9, 2014 and September 25, 2013, respectively, and is recorded as treasury stock.
--page 8

Therefore, true BV should be: $64.8 + $543.8 = $608.6 million.
I don’t want to put a precise number on fv, but let’s just say I won’t be worried about valuation until BH sells for 2xBV: 2 x $608.6 = $1,217.2 million.
As of yesterday BH market cap was $765.57 million.

Ragu?

Gio

Can you explain why you use 2xBV here while BRK buys back stock below 1.2xBV?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 11, 2014, 06:07:11 AM
Can you explain why you use 2xBV here while BRK buys back stock below 1.2xBV?

Well, that’s just math… Compound BV at 20% annual for just 8 years, and you get to 4.3 times initial BV. Then use a discount rate of 10%, and you get to a present value of equity that is 2x today’s BV. By this calculation BH could close doors 9 years from now, and still be worth 2x BV.

But I know no one here likes math… and for good reasons… it is very easy to deceive ourselves using math…

Accordingly, I would say this: I sell a great business, only if it gets extremely overvalued. I don’t really think BH will ever trade at 2x BV, therefore this is basically a journey I am willing to make alongside Mr. Biglari… Wrong partner? Lots of people would say absolutely yes! I, on the contrary, have great respect for what he has achieved till now.

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on June 11, 2014, 07:55:25 AM
Ragu?

With BH over the next decade, the bulk of the value is going to accrue from growth in book value on a per share basis rather than on an expansion in the price/book multiple. So, I find it easier to think in terms of the possibilities in growth in book value on a per share basis.

IMO, assuming Sardar stays in control, CAGR in BVPS over the next decade:

15%: Very highly likely

20%: Probable

30%: Unlikely? Perhaps, but it's a non-trivial chance nonetheless.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on June 11, 2014, 01:02:34 PM
I suppose there is synergy between Steak N Shake and Maxim

http://www.maxim.com/gallery/maxim-parties/106961

How can I get into the next Maxim event...sheesh!
Title: Re: BH - Biglari Holdings
Post by: Spekulatius on June 11, 2014, 07:58:01 PM
I suppose there is synergy between Steak N Shake and Maxim

http://www.maxim.com/gallery/maxim-parties/106961

How can I get into the next Maxim event...sheesh!

Looks good to me too. If they provide tickets to shareholders, I will buy a few shares too. Where is Mr. Big?
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on June 14, 2014, 06:09:28 PM
http://www.ibj.com/property-lines-2014-06-12-biglari-name-becomes-part-of-downtown-landscape/PARAMS/post/48088#.U5zjx4m9LCS

Cheers!
Title: Re: BH - Biglari Holdings
Post by: Parsad on June 14, 2014, 08:36:33 PM
Fu*k me!  Sorry, that's the only thing that could come out of my mouth after reading and seeing that. ;D

For you board members who think this has something to do with my past history, please read the comments that people left after that article and come to your own conclusion.  If you think that it's still me, you are delusional! 

Insane!  Owns less than 10% of the company and names a landmark, historic building after himself!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: Parsad on June 15, 2014, 01:22:41 AM
Biglari is building a global brand so that it becomes easy to recognize him just like Watsa, Pabrai etc. He is going a step beyond Watsa though in that he has made his name synonymous with the brand.

In the short term, it will be used to justify paying him the money for branding but in the long term it is going to be quite interesting. Remains to be seen if his remaining partners will be helped or harmed by this...

Actual brands are built on the backs of a product, generally created, developed, distributed and then consumed in daily life...be it technology, industrial equipment, food and beverage, vice or anything else.  Biglari has created nothing!  He's taken the wheel and called it his own...he's not a shameless cloner as Mohnish would put it, but someone who clones something, or acquires it, and says he created it.  This whole "brand" thing is solely to entrench control.  Cheers! 
 
Title: Re: BH - Biglari Holdings
Post by: gg on June 15, 2014, 07:02:48 AM
The issue at this point (which is what sardar wanted) is that any branding by the parent co (Biglari holdings), will further entrench sardar due to the fact that he shares a name with the company. So as pessimists, we'd say he's making it seem like it's Steak n shake by sardar biglari, and optimists would say Steak n shake by biglari (holdings) 
Title: Re: BH - Biglari Holdings
Post by: globalfinancepartners on June 15, 2014, 07:44:09 AM

He seems to be doing fine on the acquisition front so far. If the trend holds, soon we should be seeing Maxim by Biglari!


(http://cdn2.maxim.com/maxim/sites/default/files/hot100party_2014_maxim_sl.jpg)
Title: Re: BH - Biglari Holdings
Post by: shalab on June 15, 2014, 07:48:30 AM
GlobalFInancePartners - awesome picture!
Title: Re: BH - Biglari Holdings
Post by: ukvalueinvestment on June 15, 2014, 12:18:46 PM
In the comments section of that newspaper article link, it says that Biglari charged the company for the use of his name.  If true, that is a very dodgy related party transaction.  I don't like this guy at all.  He appears to be trying to enrich himself through means other than just compounding the book value of his company.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 16, 2014, 12:44:06 AM
In the comments section of that newspaper article link, it says that Biglari charged the company for the use of his name.  If true, that is a very dodgy related party transaction.  I don't like this guy at all.  He appears to be trying to enrich himself through means other than just compounding the book value of his company.

Quote
Yet there were many leading Romans of the elder generation who could not forget that this seemingly admirable reconstitution of the State had only been made possible by the military defeat, secret murder or public execution of almost every person who had defied the power of this energetic pair.
--Robert Graves “I, Claudius”, describing Emperor Augustus and his wife Livia, after the Civil Wars

WOW… after all, it seems there had been in history at least one very successful person, who was a bigger rogue than Mr. Biglari!! ;D ;D ;D

No, seriously: I understand all the skepticism about Mr. Biglari… but, as I have always said, I will take the evidence as it comes. If and when his behavioral eccentricities start getting in the way of his business judgment and acumen, I will reconsider my view about BH. Now I still think it is one of the best platform for doing business I know of.

Gio

PS
Whoever has not read “I, Claudius” yet, please do so! Very highly recommended!! :)
Title: Re: BH - Biglari Holdings
Post by: ragu on June 16, 2014, 03:51:41 AM
In the comments section of that newspaper article link, it says that Biglari charged the company for the use of his name. 

Ah, the comments section of a newspaper article link. It's where every serious investor goes for his due diligence.

It might be useful to go read the actual filing to understand the licensing agreement before sounding off, you know.

Quote
I don't like know this guy at all, but I thought I'd sound cool sitting on top of my moral high horse.
(edited for accuracy)

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: redskin on June 16, 2014, 12:07:01 PM
In the comments section of that newspaper article link, it says that Biglari charged the company for the use of his name. 

Ah, the comments section of a newspaper article link. It's where every serious investor goes for his due diligence.

It might be useful to go read the actual filing to understand the licensing agreement before sounding off, you know.

Quote
I don't like know this guy at all, but I thought I'd sound cool sitting on top of my moral high horse.
(edited for accuracy)

http://www.4-traders.com/BIGLARI-HOLDINGS-INC-6118554/news/Biglari-Holdings-Inc--Licensing-deal-stirs-up-Sardar-Biglaris-critics-17880580/ (http://www.4-traders.com/BIGLARI-HOLDINGS-INC-6118554/news/Biglari-Holdings-Inc--Licensing-deal-stirs-up-Sardar-Biglaris-critics-17880580/)
Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: ukvalueinvestment on June 16, 2014, 03:21:57 PM
 Hey dude.  I'm not investing in his vehicle so no due diligence required.

  I caveated it by saying "if true".

Do you rush off to read filings every time you scan some article of middling interest?

Moral high horse?  Not really.  In general, am I a fan of related party transactions and vanity?  Not really.

Have a nice day.  Enjoy your filings.




Title: Re: BH - Biglari Holdings
Post by: Myth465 on June 16, 2014, 06:03:22 PM
Hey dude.  I'm not investing in his vehicle so no due diligence required.

I caveated it by saying "if true".
Do you rush off to read filings every time you scan some article of middling interest?
Moral high horse?  Not really.  In general, am I a fan of related party transactions and vanity?  Not really.
Have a nice day.  Enjoy your filings.

We have some die hard Biglari fans.
Dont take it personal, no criticism of Biglari, will be allowed on their watch.
Title: Re: BH - Biglari Holdings
Post by: ragu on June 16, 2014, 08:22:57 PM
Dont take it personal, no criticism of Biglari, will be allowed on their watch.

Heh. And here I was thinking that it might have something to do with the fact that said criticism was flippant,careless and completely at odds with the facts at hand.

Congratulations on living up to that handle of yours, btw.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: adesigar on June 16, 2014, 11:06:10 PM
In the comments section of that newspaper article link, it says that Biglari charged the company for the use of his name. 

Ah, the comments section of a newspaper article link. It's where every serious investor goes for his due diligence.

It might be useful to go read the actual filing to understand the licensing agreement before sounding off, you know.

Quote
I don't like know this guy at all, but I thought I'd sound cool sitting on top of my moral high horse.
(edited for accuracy)

Best,
Ragu

Here is the actual filing

http://www.sec.gov/Archives/edgar/data/93859/000092189513000091/form8k07428_01112013.htm

http://www.sec.gov/Archives/edgar/data/93859/000092189513000091/ex101to8k07428_01112013.htm

Lets hear Ragu's and Gio's spin on what the reason is for this "Trademark License Agreement ". 

Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 16, 2014, 11:45:57 PM
Lets hear Ragu's and Gio's spin on what the reason is for this "Trademark License Agreement ".

Well, of course I give the same interpretation Sanjeev gives about this trademark license agreement: it probably is all about control.
But I don’t understand who really cares… I want him to feel comfortably in charge and to have full control… That way it will be easier for him to think and to plan for the long run, won’t it?
One thing I know for sure: if I hadn’t full control over my company, I wouldn’t be able to do half the things I am doing… which might be a very good outcome, after all!! But that’s another story!! ;D ;D ;D

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 17, 2014, 12:00:24 AM
We have some die hard Biglari fans.
Dont take it personal, no criticism of Biglari, will be allowed on their watch.

When it comes to business, I don’t think I am a fan of anything. As I have often repeated: “just show me something better, and I am gone in a second!” ;)
The fact, when it comes to BH, is that all the criticism I hear and read about always concern Mr. Biglari’s character peculiarities… I know them by now… and sincerely, I don’t care… at least until there is some evidence those peculiarities start hindering his business acumen.
If you think they already do, then I would really like to know why and how: until now the arguments I have heard against BH business model are very weak indeed (actually, I would say they are non-existent!).

Gio
Title: Re: BH - Biglari Holdings
Post by: ukvalueinvestment on June 17, 2014, 12:33:43 AM
Dont take it personal, no criticism of Biglari, will be allowed on their watch.

Heh. And here I was thinking that it might have something to do with the fact that said criticism was flippant,careless and completely at odds with the facts at hand.

Congratulations on living up to that handle of yours, btw.

Best,
Ragu

Flippant and careless?  Perhaps. 

Completely at odds with the facts?  Having read those links, I don't think so.

Good luck living up to that handle?  Er, well I am British and am an investor and do so based on value .... So not much luck required!
Title: Re: BH - Biglari Holdings
Post by: APG12 on June 17, 2014, 05:36:35 AM
Enjoy your filings.

The CoBF way of saying, F off!  ;D
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on June 17, 2014, 10:58:11 AM
We have some die hard Biglari fans.
Dont take it personal, no criticism of Biglari, will be allowed on their watch.

When it comes to business, I don’t think I am a fan of anything. As I have often repeated: “just show me something better, and I am gone in a second!” ;)
The fact, when it comes to BH, is that all the criticism I hear and read about always concern Mr. Biglari’s character peculiarities… I know them by now… and sincerely, I don’t care… at least until there is some evidence those peculiarities start hindering his business acumen.
If you think they already do, then I would really like to know why and how: until now the arguments I have heard against BH business model are very weak indeed (actually, I would say they are non-existent!).

Gio

Don't you think this the typical guy that will enrich himself (further) over the backs of his shareholders?

You always talk about people you like to do business with. Do you think this guy's trustworthy? (and why?)
Title: Re: BH - Biglari Holdings
Post by: Parsad on June 17, 2014, 11:04:10 AM
Lets hear Ragu's and Gio's spin on what the reason is for this "Trademark License Agreement ".

Well, of course I give the same interpretation Sanjeev gives about this trademark license agreement: it probably is all about control.
But I don’t understand who really cares… I want him to feel comfortably in charge and to have full control… That way it will be easier for him to think and to plan for the long run, won’t it?
One thing I know for sure: if I hadn’t full control over my company, I wouldn’t be able to do half the things I am doing… which might be a very good outcome, after all!! But that’s another story!! ;D ;D ;D

Gio

The question is, how did you come to control your company Gio?  I'm guessing you either built the stake or bought it, correct?  You didn't entrench yourself into a company with 2% personal ownership and then start changing names, compensation, licensing, share class structure, building names, etc.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 18, 2014, 12:00:57 AM
Don't you think this the typical guy that will enrich himself (further) over the backs of his shareholders?

You always talk about people you like to do business with. Do you think this guy's trustworthy? (and why?)

But I always just stick to business… I try to listen to what they say about their business strategy and about the process they employ to create value… I try to decide if I like what I hear, or if I don’t… Then I invest if I like it, I look somewhere else if I don’t like it… That’s all!
I try to judge people on how clearly and effectively they think and communicate their business goals, and the means to achieve them.

I know very well that “being full of oneself” is a warning sign… But why? Because it might cause someone to lose clearness of vision and to start making bad business decisions! Yet, until there is the evidence someone full of himself like Mr. Biglari truly is beginning to misjudge business opportunities, it is just extremely difficult and uncertain to predict it will happen. That’s why I said that I will take the evidence as it comes: until now I like what I see (from a business point of view) very much! When and if my business point of view changes, I will revaluate BH.

I think of it this way:

The evidence: Mr. Biglari has built a platform for doing business following the example of BRK, while also trying to follow in Mr. Icahn's footsteps as an activist investor, putting together the best of both worlds.
The speculation: it is going to end badly, because Mr. Biglari is an arrogant fellow.

The evidence: since the inception of his Lion Fund, Mr. Biglari’s shareholders have made tons of money.
The speculation: he will enrich himself over the backs of his shareholders, because Mr. Biglari is an arrogant fellow.

Well, I just stick with the evidence… And…
Quote
When the facts change, I change my mind

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 18, 2014, 12:26:58 AM
The question is, how did you come to control your company Gio?  I'm guessing you either built the stake or bought it, correct?  You didn't entrench yourself into a company with 2% personal ownership and then start changing names, compensation, licensing, share class structure, building names, etc.  Cheers!

Yeah! Sanjeev, of course you are right! But I think we are missing something very important here… SIZE!!

Mr. Biglari is my age and already runs a company that is orders of magnitude larger than my own… I think it is simply impossible for him to get control over it by the means you have suggested: by building it, or by purchasing it. No way someone as young as him (without a spectacular inheritance from his family…!!) could have gotten control over such a large company simply buying a majority stake! Also building it is out of the question: those are stories that might happen in the high-tech realm… not in fast food franchising!

Therefore, here we have a dilemma: either manage the company without true control over it (which I think is dangerous, because shareholders interests might sometimes be very short term…), or get control over the company in some non-traditional ways (which has its own dangers, because shareholders, who instead are long-term oriented, might not like it at all…).

It is not an easy choice… but I guess by now it is clear what I prefer! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on June 18, 2014, 02:12:42 AM
Don't you think this the typical guy that will enrich himself (further) over the backs of his shareholders?

You always talk about people you like to do business with. Do you think this guy's trustworthy? (and why?)

But I always just stick to business… I try to listen to what they say about their business strategy and about the process they employ to create value… I try to decide if I like what I hear, or if I don’t… Then I invest if I like it, I look somewhere else if I don’t like it… That’s all!
I try to judge people on how clearly and effectively they think and communicate their business goals, and the means to achieve them.

I know very well that “being full of oneself” is a warning sign… But why? Because it might cause someone to lose clearness of vision and to start making bad business decisions! Yet, until there is the evidence someone full of himself like Mr. Biglari truly is beginning to misjudge business opportunities, it is just extremely difficult and uncertain to predict it will happen. That’s why I said that I will take the evidence as it comes: until now I like what I see (from a business point of view) very much! When and if my business point of view changes, I will revaluate BH.

I think of it this way:

The evidence: Mr. Biglari has built a platform for doing business following the example of BRK, while also trying to follow in Mr. Icahn's footsteps as an activist investor, putting together the best of both worlds.
The speculation: it is going to end badly, because Mr. Biglari is an arrogant fellow.

The evidence: since the inception of his Lion Fund, Mr. Biglari’s shareholders have made tons of money.
The speculation: he will enrich himself over the backs of his shareholders, because Mr. Biglari is an arrogant fellow.

Well, I just stick with the evidence… And…
Quote
When the facts change, I change my mind

Gio

Gio,

You're completely right that it doesn't matter he's arrogant. In fact, I'm more inclined to go with people the world perceives as arrogant (remember: arrogance is an unjustifiably high believe in your own abilities. If that belief is high but justifiable it's not arrogance but excellence). For some reason I get a bad feeling when someone is trying to entrench himself with techniques anyone could employ (put your name on everything) and seems to not respect his shareholders (some of the notes of the meeting I saw). All of that give me the feeling (yes this is coming from a beta guy) he's going to fuck me over and I should not trust him. I could be completely wrong and I probably have to dig further (one oft he reasons I'm asking) but that is what it is.

You are always talking about a business partnership. As a rule I try to avoid doing business with people I don't trust (hence my post).

I'm curious how this will play out.
Title: Re: BH - Biglari Holdings
Post by: skanjete on June 18, 2014, 02:39:02 AM
The question is, how did you come to control your company Gio?  I'm guessing you either built the stake or bought it, correct?  You didn't entrench yourself into a company with 2% personal ownership and then start changing names, compensation, licensing, share class structure, building names, etc.  Cheers!

Yeah! Sanjeev, of course you are right! But I think we are missing something very important here… SIZE!!

Mr. Biglari is my age and already runs a company that is orders of magnitude larger than my own… I think it is simply impossible for him to get control over it by the means you have suggested: by building it, or by purchasing it. No way someone as young as him (without a spectacular inheritance from his family…!!) could have gotten control over such a large company simply buying a majority stake! Also building it is out of the question: those are stories that might happen in the high-tech realm… not in fast food franchising!

Therefore, here we have a dilemma: either manage the company without true control over it (which I think is dangerous, because shareholders interests might sometimes be very short term…), or get control over the company in some non-traditional ways (which has its own dangers, because shareholders, who instead are long-term oriented, might not like it at all…).

It is not an easy choice… but I guess by now it is clear what I prefer! ;)

Gio

Gio, maybe an example to the contrary : FNG group, listed on the free market.

The company was started by 3 engineers (a couple and a friend). They are now 39 years old.

They bought a small retailer of child clothing in 2004 for 100.000€.
The acquisition was a disaster and they had to start all over again. But they were quick learners and applied some engineering concepts to the retailing sector which provided them a competitive advantage.

From 2008 on things started to get better and there was no risk of going out of business anymore.
Now, after some acquisitions, they employ 900 people, have revenue of 135m€ with an EBITDA margin of 17% (nothing like Inditex yet, but growing) and the latest equity issue was based on an equity value of 125m€.
They still own 60% of the company.

I agree, Biglari has still greater size, but their equity investment is a lot bigger than his.
Besides, they get richer mainly by growing the value of the company, not by siphoning off chunks of value.

I would rather bet on such a story than on a type as Biglari. (Actually, I haven't bet on neither one of them.)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 18, 2014, 03:08:20 AM
Gio, maybe an example to the contrary : FNG group, listed on the free market.

The company was started by 3 engineers (a couple and a friend). They are now 39 years old.

They bought a small retailer of child clothing in 2004 for 100.000€.
The acquisition was a disaster and they had to start all over again. But they were quick learners and applied some engineering concepts to the retailing sector which provided them a competitive advantage.

From 2008 on things started to get better and there was no risk of going out of business anymore.
Now, after some acquisitions, they employ 900 people, have revenue of 135m€ with an EBITDA margin of 17% (nothing like Inditex yet, but growing) and the latest equity issue was based on an equity value of 125m€.
They still own 60% of the company.

I agree, Biglari has still greater size, but their equity investment is a lot bigger than his.
Besides, they get richer mainly by growing the value of the company, not by siphoning off chunks of value.

I would rather bet on such a story than on a type as Biglari. (Actually, I haven't bet on neither one of them.)

Good example, indeed! ;)
The fact is what I said in my previous post: I think I understand how Mr. Biglari is going to create value and what’s his strategy to achieve worthy business goals.
Instead, I don’t know anything about those very talented engineers at FNG Group…
Whenever I read stories like the one of FNG Group, 100k that have turned into 100 million in a few years, without clearly understanding how the stars behind those great stories think about and do business... well, they just could be lottery tickets to me…

Gio
Title: Re: BH - Biglari Holdings
Post by: skanjete on June 18, 2014, 03:15:21 AM
Gio, maybe an example to the contrary : FNG group, listed on the free market.

The company was started by 3 engineers (a couple and a friend). They are now 39 years old.

They bought a small retailer of child clothing in 2004 for 100.000€.
The acquisition was a disaster and they had to start all over again. But they were quick learners and applied some engineering concepts to the retailing sector which provided them a competitive advantage.

From 2008 on things started to get better and there was no risk of going out of business anymore.
Now, after some acquisitions, they employ 900 people, have revenue of 135m€ with an EBITDA margin of 17% (nothing like Inditex yet, but growing) and the latest equity issue was based on an equity value of 125m€.
They still own 60% of the company.

I agree, Biglari has still greater size, but their equity investment is a lot bigger than his.
Besides, they get richer mainly by growing the value of the company, not by siphoning off chunks of value.

I would rather bet on such a story than on a type as Biglari. (Actually, I haven't bet on neither one of them.)

Good example, indeed! ;)
The fact is what I said in my previous post: I think I understand how Mr. Biglari is going to create value and what’s his strategy to achieve worthy business goals.
Instead, I don’t know anything about those very talented engineers at FNG Group…
Whenever I read stories like the one of FNG Group, 100k that have turned into 100 million in a few years, without clearly understanding how the stars behind those great stories think about and do business... well, they just could be lottery tickets to me…

Gio

Of course you're right about the lottery tickets.

I was just suggesting an example of how some people succeed in a) building a company from scratch, b) in a mundane sector and c) while maintaining control.
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on June 23, 2014, 02:46:26 PM
Grand opening this week in Ibiza
Title: Re: BH - Biglari Holdings
Post by: peter1234 on June 24, 2014, 12:13:52 AM
Now he has a reason to go visit Ibiza regularly.
 ;D
Title: Re: BH - Biglari Holdings
Post by: Vish_ram on June 24, 2014, 08:04:17 AM
I've a great idea for Biglari to further entrench himself. Like the girl in Wendy's logo, he should put his picture on top of his name. Now he can charge his companies for using his likeness.
Title: Re: BH - Biglari Holdings
Post by: Parsad on June 24, 2014, 10:43:17 AM
I've a great idea for Biglari to further entrench himself. Like the girl in Wendy's logo, he should put his picture on top of his name. Now he can charge his companies for using his likeness.

I don't think we are far off from that.  Think in terms of Remington, Dave from Wendy's, Bijan (for those that remember the early 80's), Martha Stewart, etc.  He's literally tying himself into the brand and will eventually pitch them, if not already.  Except, all those people really controlled their companies in ownership stakes.  Cheers!
Title: Re: BH - Biglari Holdings
Post by: Zorrofan on June 25, 2014, 12:03:30 PM
Don't you think this the typical guy that will enrich himself (further) over the backs of his shareholders?

You always talk about people you like to do business with. Do you think this guy's trustworthy? (and why?)

But I always just stick to business… I try to listen to what they say about their business strategy and about the process they employ to create value… I try to decide if I like what I hear, or if I don’t… Then I invest if I like it, I look somewhere else if I don’t like it… That’s all!
I try to judge people on how clearly and effectively they think and communicate their business goals, and the means to achieve them.

I know very well that “being full of oneself” is a warning sign… But why? Because it might cause someone to lose clearness of vision and to start making bad business decisions! Yet, until there is the evidence someone full of himself like Mr. Biglari truly is beginning to misjudge business opportunities, it is just extremely difficult and uncertain to predict it will happen. That’s why I said that I will take the evidence as it comes: until now I like what I see (from a business point of view) very much! When and if my business point of view changes, I will revaluate BH.

I think of it this way:

The evidence: Mr. Biglari has built a platform for doing business following the example of BRK, while also trying to follow in Mr. Icahn's footsteps as an activist investor, putting together the best of both worlds.
The speculation: it is going to end badly, because Mr. Biglari is an arrogant fellow.

The evidence: since the inception of his Lion Fund, Mr. Biglari’s shareholders have made tons of money.
The speculation: he will enrich himself over the backs of his shareholders, because Mr. Biglari is an arrogant fellow.

Well, I just stick with the evidence… And…
Quote
When the facts change, I change my mind

Gio

Gio,

Your posts are always most interesting. And you seem to be able to separate emotion from your decision making process - not always easy!!   So I am truly confused by your stance with this company.  i ask this to provoke discussion not discord - how do you reconcile your stance on creating shareholder value with the egregious compensation paid to management of this company?

cheers
Zorro

Title: Re: BH - Biglari Holdings
Post by: gg on June 25, 2014, 01:21:28 PM
Gio,

Your posts are always most interesting. And you seem to be able to separate emotion from your decision making process - not always easy!!   So I am truly confused by your stance with this company.  i ask this to provoke discussion not discord - how do you reconcile your stance on creating shareholder value with the egregious compensation paid to management of this company?

cheers
Zorro

Zorro,
Let me ask you this -- for the following rates of BH's growth in book value, which lead to scenarios in which you think that Sardar Biglari's compensation is "egregious" ?

(a) -2%
(b) 2%
(c) 6%
(d) 10%
(e) 15%
(f) 20%
Title: Re: BH - Biglari Holdings
Post by: Zorrofan on June 25, 2014, 01:42:43 PM
http://www.biglariholdings.com/IncentiveAgreement.pdf#zoom=100

Company shall pay to Executive, determined as of the last day of
each fiscal year of Company (including any fiscal year in which any of the events set forth in
Section 4(a) occur) (“Incentive Compensation Calculation Date”), incentive compensation
equal to the Incentive Compensation Amount (as defined below) as of such Incentive
Compensation Calculation Date; provided, however, that no duplicate Incentive Compensation
Amount shall be paid to Executive in any fiscal year. The Incentive Compensation Amount shall
be paid to Executive as promptly as practicable after each Incentive Compensation Calculation
Date, and in no event later than 75 days thereafter (the “Payment Date”), subject to Section 6(c).
The “Incentive Compensation Amount” means the amount computed (subject to proration with
respect to any fiscal year during the term of this Agreement in which any of the events set forth in
Section 4(a) occurs, determined based on the date of such event) using the following formula
where “x” equals 1.06 (subject to proration for the 2010 fiscal year and any short fiscal year
during the term of this Agreement) with respect to which the Incentive Compensation Amount is
determined, provided that in no event shall the Incentive Compensation Amount payable to the
Executive with respect to any fiscal year exceed $10 million:
(0.25)(New Book Value - ((High Water Mark)(x)))


Now, I am old but I don't think I'm senile just yet...Biglari is taking 25% of all growth over 6%. That strikes me as rather excessive. You may be okay with that, but I'm not.  If the benchmark was higher, maybe, but 6% is setting the bar pretty low.  Coke executives gave themselves a huge slice of Coke's future earnings, i wasn't okay with that either. Executive  pay in this country is getting excessive, and as a shareholder that's my money they are taking.

cheers
Zorro
Title: Re: BH - Biglari Holdings
Post by: OracleofCarolina on June 25, 2014, 01:55:20 PM
Yes, but that piece is capped at 10 million(for now :)

and Biglari also gets 25% after 6% hurdle rate in the lion funds, which is where most of the CBRL stock resides, last year that was another 14 million

So 24 million + 900k salary(i think that's it..for now :)
Title: Re: BH - Biglari Holdings
Post by: gg on June 25, 2014, 01:59:46 PM
I'm by no means suggesting that there is any scenario here where sardar ends up not being handsomely paid, but it's mostly performance based, which is better than you could say for the majority of other comparably sized public organizations. Of course we'd love to see him work for $1 per year, but that's simply not going to happen. So what is the market rate for allocators with his track record, investing hundreds of millions of dollars? Probably more than what we're paying him. ...
Title: Re: BH - Biglari Holdings
Post by: Myth465 on June 25, 2014, 05:10:53 PM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....
Title: Re: BH - Biglari Holdings
Post by: Dustin T on June 25, 2014, 06:47:40 PM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....

LOL watching with popcorn, that's my position as well. I think Biglari is an interesting capital allocator and think he might produce above average returns, but I'd like to see what Berkshire Hathaway "A" shares would be priced at right now if they had since inception been saddled with a Sardar Biglari style "rake"
Title: Re: BH - Biglari Holdings
Post by: peter1234 on June 26, 2014, 01:55:46 AM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....

LOL watching with popcorn, that's my position as well. I think Biglari is an interesting capital allocator and think he might produce above average returns, but I'd like to see what Berkshire Hathaway "A" shares would be priced at right now if they had since inception been saddled with a Sardar Biglari style "rake"

Rough estimate: if you take Berkshire's 19.7% cagr over last 48 years and take 25% above hurdle of 6%, you would take mgmt fees of 25%*(19.7%-6%) = 3.4% per year.

Compounded over 48 years (1.034)^48 gives you about 5.

So Shares would be worth about 1/5.

(Of course assuming that Biglari's 10M cap would keep moving upwards and never actually capping performance fees.)
 ;)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 26, 2014, 04:55:37 AM
Gio,

Your posts are always most interesting. And you seem to be able to separate emotion from your decision making process - not always easy!!   So I am truly confused by your stance with this company.  i ask this to provoke discussion not discord - how do you reconcile your stance on creating shareholder value with the egregious compensation paid to management of this company?

cheers
Zorro

Hi Zorro,
let me just ask: how do you look at Mr. Biglari’s compensation?
a) A cost that unfortunately is not cut to the bone
b) Some sort of ominous sign Mr. Biglari is not a great entrepreneur and therefore is going to make big business mistakes in the not too distant future
If the answer is a), I agree with you. And what can I say? As long as BVPS keeps growing handsomely, I will just pretend I don’t know it could grow even faster! ;)
If the answer is b), what can I tell you? As I have already said, I will deal with the evidence as it comes. My crystal ball is definitely broken! ;)

I am reading and interesting book: Compelling People, The Hidden Qualities That Make Us Influential
The authors suggest the two most important things we communicate to other people, and that they use to judge us, are: STRENGTH and WARMTH. Really compelling people are those who know how to convey both an impression of being strong and an impression of being warm.
Other two findings imo are interesting:
1) Strength and warmth tend to be mutually exclusive… even from a biological point of view: strength is associated with testosterone, warmth with oxytocin: high levels of testosterone and high levels of oxytocin in our bodies are mutually exclusive
2) The Halo Effect: people tend to think that those who are very strong should also be very warm, and vice versa.
Of course, 1) is nature, 2) is only a bias.
I have found many people on this thread believe 2) in reverse: because Mr. Biglari is so poor at conveying warmth, he should also lack strength… well, imo also 2) in reverse is nothing but a bias. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 26, 2014, 05:09:04 AM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....

I really don’t understand why some people like to make fun of other people’s point of view… I guess it is because it makes them feel right and/or important…

I am not here to feel right and/or important… instead, I am here to know and understand other people’s point of view…

Let me tell you it is so much easier to know and understand your point of you, if you don’t make fun of mine.

Gio
Title: Re: BH - Biglari Holdings
Post by: Myth465 on June 26, 2014, 06:17:52 AM
Im actually defending your point.
You have very articulately outlined why you are comfortable with this position at least 5 times, and a few other members.
You consistently have the same questions raised again. You guys appear to know the comp plan inside and out, so its not like you are uninformed.

I wouldnt put chips here, but find your reasons valid and informed.
I am asking everyone else why they keep asking you how you have gained comfort when you have a very deep grasp of the situation here.
People thought my Sandridge position was nuts, and the fact is they were right. At some point they left it and just watched the outcome. I dont think owning BH is nuts, but constantly asking how you can hold despite the potential comp issues, is betting a dead horse.

There was no sarcasm in my point.
I am fine to watch this play out and see how your thesis works, and also looking forward to hearing you all discuss future updates on BH.
Now I did mock ragu, but thats another subject.....
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 26, 2014, 06:33:31 AM
There was no sarcasm in my point.

Ok. Then, I have misunderstood… I beg your pardon! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: gg on June 26, 2014, 08:01:11 AM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....

LOL watching with popcorn, that's my position as well. I think Biglari is an interesting capital allocator and think he might produce above average returns, but I'd like to see what Berkshire Hathaway "A" shares would be priced at right now if they had since inception been saddled with a Sardar Biglari style "rake"

Rough estimate: if you take Berkshire's 19.7% cagr over last 48 years and take 25% above hurdle of 6%, you would take mgmt fees of 25%*(19.7%-6%) = 3.4% per year.

Compounded over 48 years (1.034)^48 gives you about 5.

So Shares would be worth about 1/5.

(Of course assuming that Biglari's 10M cap would keep moving upwards and never actually capping performance fees.)
 ;)


QUESTION: Where do you think Biglari came up with this idea of taking 25% of the performance above a 6% hurdle rate?
HINT 1: It is the same source from which Mohnish Pabrai modeled his fund's fees, which are....25% of performance above a 6% hurdle.
HINT 2: Asking, like in the comment above, what that Berkshire Hathaway guy's track record would be like if he charged those type of fees to his investors, means that you'll probably get his wrong
ANSWER: The Oracle himself....(but he didn't cap his fee at 10 million)
Title: Re: BH - Biglari Holdings
Post by: Parsad on June 26, 2014, 08:45:44 AM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....

LOL watching with popcorn, that's my position as well. I think Biglari is an interesting capital allocator and think he might produce above average returns, but I'd like to see what Berkshire Hathaway "A" shares would be priced at right now if they had since inception been saddled with a Sardar Biglari style "rake"

Rough estimate: if you take Berkshire's 19.7% cagr over last 48 years and take 25% above hurdle of 6%, you would take mgmt fees of 25%*(19.7%-6%) = 3.4% per year.

Compounded over 48 years (1.034)^48 gives you about 5.

So Shares would be worth about 1/5.

(Of course assuming that Biglari's 10M cap would keep moving upwards and never actually capping performance fees.)
 ;)


QUESTION: Where do you think Biglari came up with this idea of taking 25% of the performance above a 6% hurdle rate?
HINT 1: It is the same source from which Mohnish Pabrai modeled his fund's fees, which are....25% of performance above a 6% hurdle.
HINT 2: Asking, like in the comment above, what that Berkshire Hathaway guy's track record would be like if he charged those type of fees to his investors, means that you'll probably get his wrong
ANSWER: The Oracle himself....(but he didn't cap his fee at 10 million)

Buffett didn't charge 25% above a 6% hurdle at Berkshire...he took a very modest $100K salary...that's it!  Mohnish is also doing the same at Dhando...a modest salary and incentive fee.  There is an enormous difference using such a fee structure at a hedge fund where you can have redemptions and a public company where you are dealing with captive capital...the biggest risk to the manager no longer exists at the public company...that your partners will redeem all of their capital. 

Biglari found a nice little way around that by becoming the hedge fund manager to Biglari Holdings...in essence he charges his fee structure on captive capital, as Biglari Holdings will never pull that money.  He couldn't get shareholder approval the other way, so he found a nice simple way around the shareholders.  Cheers! 
Title: Re: BH - Biglari Holdings
Post by: AtlCDore on June 26, 2014, 08:51:38 AM
Excuse me for jumping in on the conversation.  I don't really know a whole lot about BH as I have not really spent much time on the company.  I do know that Biglari, the person, seems to generate a lot of feelings in people both positively and negatively. 

Is it possible that Biglari is like a Ronald Perelman type of character and thus people stay away from the stock because of the feelings he generates?  Perelman seemed to be quite the unsavory type of character and therefore his company (MacAndrews and Forbes comes to mind) always seemed to trade at a discount to NAV.  There was a perception that investors were always going to get screwed by Perelman.   Ultimately, the discount did close and investors did make money. 

So is it possible that Biglari may actually be a good investor/operator but because of how he is perceived that his company trades at a discount but it ultimately turns out to be a good long-term investment?
Title: Re: BH - Biglari Holdings
Post by: gg on June 26, 2014, 08:56:20 AM
Excuse me for jumping in on the conversation.  I don't really know a whole lot about BH as I have not really spent much time on the company.  I do know that Biglari, the person, seems to generate a lot of feelings in people both positively and negatively. 

Is it possible that Biglari is like a Ronald Perelman type of character and thus people stay away from the stock because of the feelings he generates?  Perelman seemed to be quite the unsavory type of character and therefore his company (MacAndrews and Forbes comes to mind) always seemed to trade at a discount to NAV.  There was a perception that investors were always going to get screwed by Perelman.   Ultimately, the discount did close and investors did make money. 

So is it possible that Biglari may actually be a good investor/operator but because of how he is perceived that his company trades at a discount but it ultimately turns out to be a good long-term investment?

This is pretty much EXACTLY how I see it
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 26, 2014, 08:59:26 AM
So is it possible that Biglari may actually be a good investor/operator but because of how he is perceived that his company trades at a discount but it ultimately turns out to be a good long-term investment?

If Mr. Biglari’s business judgment and choices in the future are of the same very high quality as the ones he has made in the past until now, the answer is yes! Of course!

Those who don’t like Mr. Biglari think sooner or later he will make poor business choices. Because, of course, that is the only true reason why you would not want to invest in BH today.

Gio
Title: Re: BH - Biglari Holdings
Post by: rkbabang on June 26, 2014, 09:07:11 AM
So is it possible that Biglari may actually be a good investor/operator but because of how he is perceived that his company trades at a discount but it ultimately turns out to be a good long-term investment?

If Mr. Biglari’s business judgment and choices in the future are of the same very high quality as the ones he has made in the past until now, the answer is yes! Of course!

Those who don’t like Mr. Biglari think sooner or later he will make poor business choices. Because, of course, that is the only true reason why you would not want to invest in BH today.


The other reason is the reason I choose not to invest in BH today.  I think sooner or later Biglari will choose to screw over his shareholders somehow to greatly enrich himself at their expense. Leaving him very rich and his shareholders ... not so much.  I don't trust him.  I could be wrong and this could be exactly what AltCDore is talking about, but I am not willing to take that risk.

Title: Re: BH - Biglari Holdings
Post by: Partner24 on June 26, 2014, 09:24:49 AM
Three characteristics of a great manager:

- Honest and shareholders oriented (and I mean all shareholders as a whole...)
- Energic
- Competent

If there is one that I feel that's missing (IMO), I keep my popcorn in my hands!  ;)

Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 26, 2014, 09:34:36 AM
I don't think it works that way.
In business, when something is doing great, the last thing you want is "to rock the boat"... Instead, you just want to keep the status quo and to keep operations undisturbed as long as possible.
In other words to screw his shareholders would be "a very poor business choice".
And usually it is only the last one of a long list of poor business choices!

Gio
Title: Re: BH - Biglari Holdings
Post by: Dustin T on June 26, 2014, 05:21:45 PM
Guys these guys have consistently said they dont really care what Biglari takes, as long as they make money.

What's the issue with this, if they want to place their chips here, then whats the problem. They have a better understanding of the situation then all of us and are 100% comfortable with it. I wish them luck, and will watch with popcorn....

LOL watching with popcorn, that's my position as well. I think Biglari is an interesting capital allocator and think he might produce above average returns, but I'd like to see what Berkshire Hathaway "A" shares would be priced at right now if they had since inception been saddled with a Sardar Biglari style "rake"

Rough estimate: if you take Berkshire's 19.7% cagr over last 48 years and take 25% above hurdle of 6%, you would take mgmt fees of 25%*(19.7%-6%) = 3.4% per year.

Compounded over 48 years (1.034)^48 gives you about 5.

So Shares would be worth about 1/5.

(Of course assuming that Biglari's 10M cap would keep moving upwards and never actually capping performance fees.)
 ;)


QUESTION: Where do you think Biglari came up with this idea of taking 25% of the performance above a 6% hurdle rate?
HINT 1: It is the same source from which Mohnish Pabrai modeled his fund's fees, which are....25% of performance above a 6% hurdle.
HINT 2: Asking, like in the comment above, what that Berkshire Hathaway guy's track record would be like if he charged those type of fees to his investors, means that you'll probably get his wrong
ANSWER: The Oracle himself....(but he didn't cap his fee at 10 million)

I'm well aware that Warren had a different structure in his original partnership. I didn't mention his partnership only the 40 years WB has been the CEO of a publicly traded company. I'm sure you have an appreciation for the difference. I was mainly pointing out that there is a much higher frictional cost to his pay structure, and it does have consequences for you the investor. We do not know how the incentive structure will change over time but I expect the 10 million cap will increase as well.

His pay structure is the biggest reason I'm not invested in BH. I totally understand why some of you are, and I hope you all do quite well. I don't think BH will skyrocket and become outrageously priced. I think it will hover between 1 and 2x book. I haven't written BH off totally, I just haven't seen enough to justify his high pay and the nagging feeling he views the shareholders as leverage and not as a partner.

I appreciate Gio's comments on BH most of all. I'm glad there is a bright and capable well reasoned voice pointing out that this might be a heck of an investment. I occasionally come close to diving in myself, but I'm enjoying sitting on the sidelines and eating popcorn for now.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 27, 2014, 12:48:38 AM
His pay structure is the biggest reason I'm not invested in BH. I totally understand why some of you are, and I hope you all do quite well. I don't think BH will skyrocket and become outrageously priced. I think it will hover between 1 and 2x book. I haven't written BH off totally, I just haven't seen enough to justify his high pay and the nagging feeling he views the shareholders as leverage and not as a partner.

I appreciate Gio's comments on BH most of all. I'm glad there is a bright and capable well reasoned voice pointing out that this might be a heck of an investment. I occasionally come close to diving in myself, but I'm enjoying sitting on the sidelines and eating popcorn for now.

Well, thank you very much Dustin!
I think we also should never forget that Mr. Biglari is required to invest at least 30% of the incentive he receives in BH stocks, and to hold those stocks for at least 3 years.
If more qualitative reasons still leave you skeptical, this at least is something objective that should go a long way in aligning his interests with shareholders’.

Another qualitative thing I like is that I find Mr. Biglari to be extremely well read, at least when it comes to investing. As a general rule, I would postulate the following theorem: the larger someone’s library is, the lower the probabilities that person is going to mistreat his/her shareholders are. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: Zorrofan on June 27, 2014, 06:15:07 AM
Gio,

Your posts are always most interesting. And you seem to be able to separate emotion from your decision making process - not always easy!!   So I am truly confused by your stance with this company.  i ask this to provoke discussion not discord - how do you reconcile your stance on creating shareholder value with the egregious compensation paid to management of this company?

cheers
Zorro

Hi Zorro,
let me just ask: how do you look at Mr. Biglari’s compensation?
a) A cost that unfortunately is not cut to the bone
b) Some sort of ominous sign Mr. Biglari is not a great entrepreneur and therefore is going to make big business mistakes in the not too distant future
If the answer is a), I agree with you. And what can I say? As long as BVPS keeps growing handsomely, I will just pretend I don’t know it could grow even faster! ;)
If the answer is b), what can I tell you? As I have already said, I will deal with the evidence as it comes. My crystal ball is definitely broken! ;)

I am reading and interesting book: Compelling People, The Hidden Qualities That Make Us Influential
The authors suggest the two most important things we communicate to other people, and that they use to judge us, are: STRENGTH and WARMTH. Really compelling people are those who know how to convey both an impression of being strong and an impression of being warm.
Other two findings imo are interesting:
1) Strength and warmth tend to be mutually exclusive… even from a biological point of view: strength is associated with testosterone, warmth with oxytocin: high levels of testosterone and high levels of oxytocin in our bodies are mutually exclusive
2) The Halo Effect: people tend to think that those who are very strong should also be very warm, and vice versa.
Of course, 1) is nature, 2) is only a bias.
I have found many people on this thread believe 2) in reverse: because Mr. Biglari is so poor at conveying warmth, he should also lack strength… well, imo also 2) in reverse is nothing but a bias. ;)

Gio

Gio,

Many thanks for your reply and your patience!!  I do not dispute Biglari's ability to invest but I am in the "A" camp.  I would rather he grew rich with me, rather than through the compensation structure he has put in place.  I recall many years ago WEB told a story in one of his shareholder letter about dealing with (IIRC) Rose Blumkin.  If I can recall the story correctly, she survived the Nazi occupation and when she came to America her standard of choosing who to conduct business with was based on "would they have hidden me from the Nazis?" The moral being choose to conduct business with people of high character.  I am very undecided so I will likely watch and wish you well with this one....

 ;D

cheers
Zorro
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 27, 2014, 07:14:36 AM
When looking at Biglari, I am reminded of this WEB quote.

“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.” –Warren Buffett

I think there is a misconception about what I try to do while investing my firm’s capital.
I look for great entrepreneurs, not great managers.
When I hire someone, I look for a great manager; when I invest, I look for a great entrepreneur.
I think the difference is huge.

Gio
Title: Re: BH - Biglari Holdings
Post by: zarley on June 27, 2014, 10:35:18 AM
When looking at Biglari, I am reminded of this WEB quote.

“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.” –Warren Buffett

I think there is a misconception about what I try to do while investing my firm’s capital.
I look for great entrepreneurs, not great managers.
When I hire someone, I look for a great manager; when I invest, I look for a great entrepreneur.
I think the difference is huge.

Gio

What a curious non sequitur.  The issue isn't a balancing of his entrepreneurial ability vs. his management ability, it's a question of trust and integrity.  People view him as lacking personal integrity and see the name thing and the compensation issue as examples of why they don't trust him.  From that view, it's a question of why do you choose to do business with someone you don't trust. 

It seems that you either believe that people have misunderstood Biglari's motivations and actions, and that he's done nothing to make you feel you can't trust him, or you feel like even though he has questionable character, his other skills will make BH, as an investment vehicle, so profitable that it won't matter if he's skimming a little extra for himself off the top in the process.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on June 28, 2014, 12:45:41 AM
What a curious non sequitur.  The issue isn't a balancing of his entrepreneurial ability vs. his management ability, it's a question of trust and integrity.  People view him as lacking personal integrity and see the name thing and the compensation issue as examples of why they don't trust him.  From that view, it's a question of why do you choose to do business with someone you don't trust. 

It seems that you either believe that people have misunderstood Biglari's motivations and actions, and that he's done nothing to make you feel you can't trust him, or you feel like even though he has questionable character, his other skills will make BH, as an investment vehicle, so profitable that it won't matter if he's skimming a little extra for himself off the top in the process.

Ok, so let me try to explain what I mean a little more clearly:

I think what Mr. Buffett means is this: do they understand they are stewards of other people’s capital? Do they accept this responsibility seriously?

I know a lot of CEOs and a lot of entrepreneurs: practically without any exception entrepreneurs’ chief interest is capital allocation, while CEOs’ chief interest is… something else!

Most CEOs have not started their career as capital allocators, otherwise they all would be entrepreneurs!, instead they were technicians, designers, sales and marketing representatives, PR representatives, etc.. They were extremely good at what they did, and sometimes go on thinking that, once they have become CEOs, the success of the business they run still solely depends on their abilities as technicians, designers, sales and marketing, or PR representatives, etc.. This ego-centric view of the business they run has two fundamental flaws:
1) It is incompatible with the idea they view themselves as stewards of other people’s capital
2) It is false

Just yesterday, for instance, I met with the CEO of a large engineering firm based in Milan. We talked for an hour, and she was all about this project over here, that project over there, a lot of technicalities, all very interesting things… but the subject of capital allocation she simply never brought up, not even once. Well, you know what? I wouldn’t be interested to invest in her company.

When you deal with entrepreneurs, instead, everything changes. They know their most important activity is capital allocation. Therefore:
a) In a private company they view themselves as stewards of their own capital
b) In a public company they view themselves as stewards of other people’s capital
Of course, depending on past results, some ask to be paid less, others to be paid more… But there can be no misunderstanding about what their first and most important responsibility is.

What are then the risks with entrepreneurs? I see two basically:
First: they start underperforming: look at Mr. Dell, for instance, and the outcome for shareholders was not a favorable one... But at the beginning of this discussion I have said:
If Mr. Biglari's business judgment and choices in the future are of the same very high quality as the ones he has made in the past until now
Second: some entrepreneurs might be truly dishonest people. Of course, I don’t think Mr. Biglari is dishonest. Full of himself and arrogant? Maybe yes. Dishonest? Absolutely not! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on June 30, 2014, 05:26:13 AM
Do you think this guy's trustworthy? (and why?)

watchwoord,

Couple of questions (that I have asked earlier on this board):

a. Which set of people have invested with Sardar the longest?

b. What have the overwhelming majority in that set done with respect to their investment with Sardar since the compensation plan was announced?

The implications of the answers to these 2 questions should help those that are on the fence re. Sardar.


Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: ragnarisapirate on June 30, 2014, 08:25:19 AM
Do you think this guy's trustworthy? (and why?)

watchwoord,

Couple of questions (that I have asked earlier on this board):

a. Which set of people have invested with Sardar the longest?

b. What have the overwhelming majority in that set done with respect to their investment with Sardar since the compensation plan was announced?

The implications of the answers to these 2 questions should help those that are on the fence re. Sardar.


Best,
Ragu

I assume that you are referring to the lion fund partners, no?

Something to consider- they are likely paying his compensation 2x for the shares of BH that they own via the lion fund, once for the hedge fund style agreement at BH, then again when they pay his management fee at the lion fund.

Of course, there could be some agreement that isn't public that remedies this- after all, hedge funds are generally more secretive than a public company. For example, he doesn't charge the LF partners a fee or anything for the portion of the LF that is invested in BH. That would actually seem pretty fair to them.


If this is not the case, I would begin to question if they are getting that great of a deal many think. That said, Sardar is generally excellent in what he does. No one here can say that he is a bad investor.

If there are any current Lion Fund partners out there, I would love to talk with you about this.
Title: Re: BH - Biglari Holdings
Post by: Saidal on June 30, 2014, 07:05:37 PM
I'd be interested in seeing the Lion Fund LP letters as well. Does anyone have PDFs of previous year letters?
Title: Re: BH - Biglari Holdings
Post by: ragu on July 03, 2014, 06:31:39 AM
I assume that you are referring to the lion fund partners, no?

Jeff,

I am.


Quote from: ragnarisapirate
Something to consider- they are likely paying his compensation 2x for the shares of BH that they own via the lion fund, once for the hedge fund style agreement at BH, then again when they pay his management fee at the lion fund.

That's right. And yet, oddly enough, they stuck with him.

Quote from: ragnarisapirate
Of course, there could be some agreement that isn't public that remedies this

There wasn't. Sardar confirmed at the AM a couple of years back that the LF partners were effectively being charged twice.

What do Sardar's longest standing partners know about his integrity that cause them to take a stand different from the public shareholders that were disillusioned by the incentive agreement?

Best,
Ragu

Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 15, 2014, 11:32:16 PM
I have bought more yesterday at $409.

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 16, 2014, 06:01:11 AM
This is heretical but I'll say it anyways.

shalab, if applied to Mr. Biglari, that is not heretical… it is just unrealistic. And to be realistic is all that truly matters in investing… Mr. Biglari somehow arises strong feelings… whenever Mr. Biglari is concerned, most people fail to be realistic…

That’s why my agenda is to take the evidence as it comes: when results (measured in BVPS growth) deteriorate, I will start questioning Mr. Biglari’s conduct and business acumen… until then I will let the numbers speak for themselves.

Gio
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on July 16, 2014, 06:16:59 AM
https://www.sec.gov/Archives/edgar/data/93859/000092189514001546/s307428035_07142014.htm
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 16, 2014, 06:52:39 AM
I was just responding to Ragu on why investors are not leaving Lion Fund even though they are charged twice.

I know... but I don't think it is the right answer... I think investors in the Lion Fund since inception have made a lot of money... despite Mr. Biglari's peculiarities... that's why imo they are not leaving even though they are charged twice...

Of course, I might be wrong. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 16, 2014, 06:55:17 AM
https://www.sec.gov/Archives/edgar/data/93859/000092189514001546/s307428035_07142014.htm

Does anyone know when it will be completed?

Thanks,

Gio
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on July 16, 2014, 08:45:37 AM
Geo no news yet on that.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 16, 2014, 08:49:45 AM
Geo no news yet on that.

Ok, thank you!
I have made money before with this kind of offering... and I look foreward to making money again! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on July 16, 2014, 08:55:50 AM
Geo no news yet on that.

Ok, thank you!
I have made money before with this kind of offering... and I look foreward to making money again! ;)

Gio

Looking back at the prior rights offering:
-The first S-3 was published on 2/5/13
-there were five total amendments published, with the final one being on 8/20/13
-Amendment three released (7/19/13) released the size of the offering in $$$ but not the max unit price
-Amendment 4 (8/16) increased the offering amount slightly (~$5M) and disclosed the offering price of $265/share and set the cutoff for holders of record at 8/27/13
-The transaction occurred in September 2013
-Following this timeline suggests an early 2015 timing, with the date

I'll compare the final 2013 prospectus with this latest version to see what variances exist. Geo--PM me your email address pls.
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on July 16, 2014, 11:08:13 AM
Geo--PM me your email address pls.

Ahahahahahah!!!!... As if my e-mail were top-secret...  ;D ;D

g.franchi
AT
agenziamilanostrutture
DOT
it

Cheers,

Gio

No but this page is freely accessible so posting it here like this will result in you getting more spam. I suggest you make it less readable or remove it ;)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 17, 2014, 12:40:17 AM
No but this page is freely accessible so posting it here like this will result in you getting more spam. I suggest you make it less readable or remove it ;)

Well, I guess you are right! And I am removing it... ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 17, 2014, 07:41:16 AM
Gio  - while you may certainly be rational in your evaluation of BH, (wo)man is not a rational animal. In my mental model, two forces are at play here - a great story and inertia.

Biglari was a great story and still is to a great extent. Kudos to Biglari to build it up and play it that way.

Hi Shalab!
I have not said I am rational… Instead, I have just said I will take the evidence as it comes… To be rational, and to take the evidence as it comes, are very different things: the former requires much self-control and clearness of thought… The latter requires only the ability to read numbers…
So, where is the catch? Well usually, if you wait for performance to be evident, you might run the risk of losing money (if and when that performance disappoints). But here is where valuation comes into play: today BH’s market capitalization is a low enough multiple of BV that, even if Mr. Biglari starts making unsound business decisions, I don’t believe it will contract much further… Therefore, BH’s stock price actually gives us the luxury to wait for that evidence… In other words, expectations already are that Mr. Biglari is going to make mistakes in the future.

BTW - I am looking forward to "Gio Holdings" to be listed  ;D.

Ahahahahah!!! Thank you! But I am not that ambitious… I love what I do… Wouldn’t do anything else… I am lucky enough to be financially independent… I have compounded my firm’s capital at 20% annual for the last 3 years, and this year I am up 10%... Despite my "ex" very large investment in LRE, that has cost me money this year… I know I probably won’t succeed in keeping up such a good performance for long… But I also believe I can do sufficiently well, even without other people’s money… My shareholders are my family… Why should I welcome the headache to accept others?

Cheers,

Gio
Title: Re: BH - Biglari Holdings
Post by: peter1234 on July 19, 2014, 10:01:03 PM
I learn a lot from Gio and everyone's thoughtful comments on this board. If Gio was running money, we might never have heard of him.

 ;D
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 20, 2014, 01:18:51 AM
Thank you Peter! Too kind of you! But I understand what shalab means.
Yet, once again, let’s try to be rational:
First: as an entrepreneur I run businesses which require very little or no capital at all… therefore, if I were to receive more capital trough an IPO of my company, I sincerely wouldn’t know how to use it…
Second: as an investor I simply don’t think my track record is good enough to manage other people’s money…
So basically, besides the fact I don’t welcome the headache a public company would bring, which is true, I also don’t think the business proposition I could offer is interesting enough. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: cobafdek on July 20, 2014, 07:18:57 AM

So basically, besides the fact I don’t welcome the headache a public company would bring, which is true, I also don’t think the business proposition I could offer is interesting enough. ;)

Gio


I would pay to get regular Gio-style commentary in partnership or shareholder letters, written in that authentic inimitable Gio prose.  That would be a refreshing change from the fake wannabe-Buffett-knockoff BH letters.  For now, I am grateful to get Gio commentary for free here, even if there were no emoticons!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 20, 2014, 07:27:30 AM
I would pay to get regular Gio-style commentary in partnership or shareholder letters, written in that authentic inimitable Gio prose. 

Ahahahah!!! Hey, it is really too flattering! And I don’t deserve that! Anyway, thank you so much! :)

Cheers,

Gio
Title: Re: BH - Biglari Holdings
Post by: bargainman on July 20, 2014, 04:44:18 PM
just  for kicks, here is my future prediction for an acquisition by Bigs ;0)

http://us.bulgari.com
Title: Re: BH - Biglari Holdings
Post by: rkbabang on July 21, 2014, 07:00:34 AM
just  for kicks, here is my future prediction for an acquisition by Bigs ;0)

http://us.bulgari.com

Accompanied by a slight name change, of course, for which he will charge a substantial fee.
Title: Re: BH - Biglari Holdings
Post by: ragu on July 21, 2014, 09:40:35 AM
The answer can be found in oddball's quote:

No, it can't. If that were true and given Sardar's track record, the AUM at the Lion Fund would be many, many multiples of what it actually is.

The reality is that Sardar simply can't sell his story. See the failures to raise capital at Western even when he was offering capital back on the first 30% of on any losses and not being able to meet a relatively "conservative" (Sardar's words) goal of increasing AUM by $10 million via fresh capital for the Lion Fund when the incentive agreement was proposed.

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth." - Sherlock Holmes

As per Cooley, the vast majority of the money in the Lion Fund comes locally from San Antonio. These are folks that have known Sardar for a very long time.

It's no surprise to me that they stick with him. It's also no surprise why: Their assessment is that he is trustworthy. I agree.

Best,
Ragu


Title: Re: BH - Biglari Holdings
Post by: RichardGibbons on July 21, 2014, 08:12:22 PM
It's no surprise to me that they stick with him. It's also no surprise why: Their assessment is that he is trustworthy. I agree.

Funny, I can't think of that many people in the investing space who have done more to prove themselves untrustworthy.  This is my opinion from a while back, and he's really done nothing to change it.

http://www.fool.com/investing/value/2010/05/11/biglari-proves-buffett-right.aspx
Title: Re: BH - Biglari Holdings
Post by: peter1234 on July 21, 2014, 08:27:05 PM
It's no surprise to me that they stick with him. It's also no surprise why: Their assessment is that he is trustworthy. I agree.

Funny, I can't think of that many people in the investing space who have done more to prove themselves untrustworthy.  This is my opinion from a while back, and he's really done nothing to change it.

http://www.fool.com/investing/value/2010/05/11/biglari-proves-buffett-right.aspx

Thanks for linking your older post.

This man certainly polarizes.

I guess we will see what his returns will be medium to long term.
 ;)
Title: Re: BH - Biglari Holdings
Post by: ragu on July 21, 2014, 09:09:13 PM
Funny, I can't think of that many people in the investing space who have done more to prove themselves untrustworthy. 

The opportunity cost of being wrong about Sardar's integrity will likely be too high. Even for above-average value investors.

The biggest flaw in your article is the assumption that this compensation plan is forever. It's not.

And, book value on a per-share basis will grow at a decent clip even for the time that the plan is in place.

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: racemize on July 21, 2014, 10:20:42 PM
The biggest flaw in your article is the assumption that this compensation plan is forever. It's not.

Perhaps you mean, you believe it is not?  It seems very, very hard to state that as a fact.  Is there any evidence other than your belief that that is true?
Title: Re: BH - Biglari Holdings
Post by: ERICOPOLY on July 21, 2014, 10:51:29 PM
The biggest flaw in your article is the assumption that this compensation plan is forever. It's not.

Perhaps you mean, you believe it is not?  It seems very, very hard to state that as a fact.  Is there any evidence other than your belief that that is true?

Yes, there is evidence that the current compensation plan is only temporary.  Just look at history... you just wait a period of time, and then Sardar hikes his compensation.  So you see, the current compensation plan will only be temporary.  His past history has shown it to be the case.
Title: Re: BH - Biglari Holdings
Post by: racemize on July 21, 2014, 11:12:37 PM
Ok, I'm going to try to model this out based on Ragu's previous posts as to why he will stop the compensation package (Ragu, please correct anything that you disagree with):

Let's make up something with easy numbers.  Let's say I invest in a company and own 10% of that company, and it is worth $1 million dollars,  and is selling at book value (I will assume it sells at book value from here out) so:

day 1: market cap $1 million, and I own $100,000 of it.

Ok, I use a 5% hurdle and 25% of book value growth, and I grow at 25% per annum, every year, like clock work.  The payout to me is 25%-5%*25% = 5% of book value, and the company grows value by 20%.  So:

year 1: proforma book value is $1.25 million, except that I take $50,000 as compensation, and repurchase the shares at book, resulting in:

$1.2 million value, and I own $100,000*1.2+5%*$1,200,000 = $170,000

This continues for a while until "control day":

year 2: $1,440,000.00   $264,000   18.33%
year 3: $1,728,000.00   $388,800   22.50%
year 4: $2,073,600.00   $552,960   26.67%
year 5: $2,488,320.00   $767,232   30.83%
year 6: $2,985,984.00   $1,045,094   35.00%
year 7: $3,583,180.80   $1,403,412   39.17%
year 8: $4,299,816.96   $1,863,254   43.33%
year 9: $5,159,780.35   $2,450,896   47.50%
year 10: $6,191,736.42   $3,199,064   51.67%

Ok, we've now gotten to the point where I own more than half the shares, and I have control of the company.  Now, I must choose between keeping the compensation arrangement, or losing it.

If I keep the arrangement, then my $3,199,064 grows by 20% and I get 5% of the $6,191,736, which is:
$7,430,083.71   $4,148,463   55.83%

If I do not, then my portion ($3,199,064) grows by 25%, but presumably I get no further compensation?  This result is, for me:
$3,199,064 * 1.25 = $3,998,830

Thus, if I look out for my own interest, why do I choose not to continue the arrangement?  I believe this has been your argument, but I am perhaps not understanding it. 

The bottom line here, is that 5% of book value is always greater than the additional 5% I would have gotten from my own portion of the company's growth, unless the price to book exceeds some threshold value, depending on time horizon.

Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 21, 2014, 11:29:28 PM
Funny, I can't think of that many people in the investing space who have done more to prove themselves untrustworthy.  This is my opinion from a while back, and he's really done nothing to change it.

http://www.fool.com/investing/value/2010/05/11/biglari-proves-buffett-right.aspx

Richard,
Thank you for posting your article, I hadn’t read it before.

My answer is simply that I am not concerned at all about the compensation plan: since 2010 BH’s BVPS has grown at a CAGR of circa 21% (from $200 per share at 2010 year end, to $355 per share at 2013 year end), after all incentives were paid. And he has achieved such a result concentrating on his 2 or 3 best ideas… do you still think he should be indexing?! ???

I also invest in GLRE and TPRE, which have compensation plans much similar to BH. Instead, I don’t own neither LUK, nor BAM, nor SHLD, which you suggested. Evidently enough, I think there are many aspects of a business much more important than a compensation plan… And I have no problem at all to pay up for performance.

Once again, I am not saying I think I am more rational than other people about BH… I am just saying I will take the evidence as it comes: during the time since you wrote your article the evidence has been overwhelmingly in favor of Mr. Biglari. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: racemize on July 21, 2014, 11:37:26 PM
Ok, I did some more calculations, messing with the P/B, and assuming all of the compensation is used to buy back stock at the given P/B. 

At 1 P/B, it never makes sense, until it is equal at 100% of ownership.
At 1.1 P/B, 97% ownership is the breakeven
At 1.2 P/B, 89%
At 1.3 P/B, 80%
At 1.4 P/B, 75%
At 1.5 P/B, 70%
At 1.6 P/B, 67%
At 1.7 P/B, 61%
At 1.8 P/B, 59%
At 1.9 P/B, 56%
At 2 P/B, 54%

Of note, all of these take 20+ years to hit, pretty much.  In fact, it is almost always between 21 and 22 years.

Note that it is getting late, so there is some chance I didn't do these formula right.



Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 22, 2014, 12:12:30 AM
Ok, I use a 5% hurdle

Joel,
why have you used a 5% hurdle, when in fact it is 6%?

Anyway, I don’t understand what’s the point in making this kind of calculation… You know what’s my greatest hope? That I continue paying a lot of money to Mr. Biglari, Mr. Einhorn, and Mr. Loeb for the next 3 or 4 decades!! ;)

Cheers,

Gio
Title: Re: BH - Biglari Holdings
Post by: racemize on July 22, 2014, 07:08:51 AM
Ok, I use a 5% hurdle

Joel,
why have you used a 5% hurdle, when in fact it is 6%?

Anyway, I don’t understand what’s the point in making this kind of calculation… You know what’s my greatest hope? That I continue paying a lot of money to Mr. Biglari, Mr. Einhorn, and Mr. Loeb for the next 3 or 4 decades!! ;)

Cheers,

Gio

I used 5% to make the numbers round, it should be the same result effectively. 

The point is that Ragu has repeatedly stated that it is rational for BH to remove the incentive, but never spelled it out.  I was attempting to use his implied logic to show whether or not it was in his interest.  See:

The biggest flaw in your article is the assumption that this compensation plan is forever. It's not.

Perhaps you mean, you believe it is not?  It seems very, very hard to state that as a fact.  Is there any evidence other than your belief that that is true?



Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 22, 2014, 07:36:00 AM
The point is that Ragu has repeatedly stated that it is rational for BH to remove the incentive, but never spelled it out.  I was attempting to use his implied logic to show whether or not it was in his interest. 

Mmm… I think the logic is different… As you get richer, you start feeling things more under your control, and you grow older… even an aggressive character like Mr. Biglari’s inevitably changes and begins to recognize the importance of the intangible advantages a more relaxed and easy going reputation might bring. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: racemize on July 22, 2014, 07:43:05 AM
The point is that Ragu has repeatedly stated that it is rational for BH to remove the incentive, but never spelled it out.  I was attempting to use his implied logic to show whether or not it was in his interest. 

Mmm… I think the logic is different… As you get richer, you start feeling things more under your control, and you grow older… even an aggressive character like Mr. Biglari’s inevitably changes and begins to recognize the importance of the intangible advantages a more relaxed and easy going reputation might bring. :)

Gio

Ragu has previously stated that it is the rational thing to do, and has to with cash flows, so I'm trying to figure it out.  With regard to your explanation, while possible, I don't think it would be possible to make the direct statement of fact that the compensation scheme will end in such a case--it would require to know the state of Mr. Biglari's mind in the future, a feat that I'm fairly sure no one can perform, with certainty, even Biglari himself.
Title: Re: BH - Biglari Holdings
Post by: dcollon on July 22, 2014, 01:21:45 PM
BIGLARI HOLDINGS
 
NEWS RELEASE

 
 
SAN ANTONIO, TX, July 21, 2014 — Biglari Holdings Inc. (NYSE: BH) (“Biglari Holdings” or the “Company”) today announced the terms of a new offering of transferable subscription rights (the “Rights Offering”). Pursuant to the Rights Offering, the Company will distribute one transferable subscription right (“Right”) for each share of its common stock to shareholders of record at the close of business on August 19, 2014.
 
Every five (5) Rights will entitle a shareholder to subscribe for one share of common stock at a price of $250.00 in cash per share. The Rights (excluding oversubscription privileges) will be transferable and are expected to be admitted for trading on the New York Stock Exchange (the “NYSE”) (NYSE: BH RT) during the course of the Rights Offering. The subscription period will commence on August 19, 2014 (the record date) and terminate on September 12, 2014 (the expiration date), unless the Rights Offering is extended.
 
Shareholders on the record date who fully exercise the Rights distributed to them will also be entitled to subscribe for and purchase additional shares of common stock not purchased by other Rights holders through their basic subscription privileges. The maximum number of shares that a shareholder may purchase under this oversubscription privilege is equal to the number of shares such shareholder purchased under its basic subscription privilege, subject to pro-rata allotment. A shareholder will be entitled to exercise the oversubscription privilege only if he or she is a shareholder on the record date and exercises the basic subscription privilege in full.
 
Only Rights aggregated to purchase whole shares of common stock are exercisable.  Fractional shares will not be issued and exercises of Rights will be rounded down.  Shareholders must aggregate Rights in multiples of five (5) Rights to purchase shares of common stock they desire and are entitled to purchase in the Rights Offering.  The Company will not issue fractional Rights or cash in lieu of fractional shares underlying Rights.
 
The Rights are expected to trade “when issued” on the NYSE beginning on August 14, 2014, and shares of common stock of the Company are expected to trade “ex-Rights” on August 15, 2014. The Rights are expected to begin trading for normal settlement on the NYSE on or about August 21, 2014 and continue through the opening of trading on the expiration date.
 
The Company expects to mail subscription certificates evidencing the Rights and a copy of the prospectus for the Rights Offering to record date shareholders beginning on or about August 20, 2014.
 
This announcement does not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any offer or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The Rights Offering will be made only by means of a prospectus. A copy of the prospectus, when available, may be obtained from the information agent, Alliance Advisors LLC, at (855) 976-3332.
Title: Re: BH - Biglari Holdings
Post by: RichardGibbons on July 22, 2014, 07:08:31 PM
The opportunity cost of being wrong about Sardar's integrity will likely be too high. Even for above-average value investors.

That could end up being true.  That said, I'll never have any regrets in not investing on someone whose integrity seems questionable.

The biggest flaw in your article is the assumption that this compensation plan is forever. It's not.
I haven't seen any evidence of this.  I suspect this is a faith thing with you.

And, book value on a per-share basis will grow at a decent clip even for the time that the plan is in place.

Maybe.  And if it only grows at a mediocre rate, you can take solace in the fact that Biglari is at least getting rich.

All that said, you likely know more about the company than me.  To me, it's uninvestable, so I haven't spent much time on it since he lied to shareholders, started taking the company from them, and entrenched himself using the whole name-licensing thing.  So I could easily be missing something.
Title: Re: BH - Biglari Holdings
Post by: RichardGibbons on July 22, 2014, 07:24:15 PM
My answer is simply that I am not concerned at all about the compensation plan: since 2010 BH’s BVPS has grown at a CAGR of circa 21% (from $200 per share at 2010 year end, to $355 per share at 2013 year end), after all incentives were paid. And he has achieved such a result concentrating on his 2 or 3 best ideas… do you still think he should be indexing?! ???

The indexing thing was kind of tongue in cheek.  If I were him, I wouldn't be indexing, because a) it would be boring and b) high variance is great for him since he has a "heads I win, tails shareholders lose" compensation plan.

For me, the growth in Book Value argument isn't that interesting, because anything multiplied by zero is zero.  So, if I don't believe I can trust the manager to operate in a largely ethical way, then I'd rather not take the chance of having a great 20 year run, followed by a zero.

The evidence isn't overwhelmingly in Sardar's favor since 2010.  For instance, the share price has grossly under performed the S&P 500.  The corporations he is trying to acquire are recognizing that he's trying to screw them, and are fighting back, etc.  I think he's made his job harder by being a jerk.  I think the evidence is at best neutral.  But as I said above, I don't follow the company closely, so probably I'm missing something.

The thing I find interesting is that you like investing in jockeys (a strategy I like a lot), but you don't seem to give the integrity of the jockey that much weight.  I'm curious if it affects your outcomes significantly.  I'm not sure if it will, or not.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 22, 2014, 11:35:19 PM
b) high variance is great for him since he has a "heads I win, tails shareholders lose" compensation plan.

Richard,
I truly think this is not rational… the faster BVPS grows, the more money Mr. Biglari will make… He might be extremely conscious about his business acumen, and sometimes arrogant, and he might charge his shareholders a lot for his services as a manager and capital allocator… but that doesn’t mean his own interests aren’t aligned with shareholders’… It is evident they are!

So, if I don't believe I can trust the manager to operate in a largely ethical way, then I'd rather not take the chance of having a great 20 year run, followed by a zero.

With this I am not sure I understand what's exactly that you mean…

The evidence isn't overwhelmingly in Sardar's favor since 2010.  For instance, the share price has grossly under performed the S&P 500. 

As for the stock price… well, we are value investors, aren’t we? We want to look at and pay attention to business results, not stock price fluctuations, right?… At least that’s what we like to say! ;)

The corporations he is trying to acquire are recognizing that he's trying to screw them, and are fighting back, etc. 

This again is not rational… the evidence until now is that every company Mr. Biglari put his hands on became much more profitable than it was before. Of course, it might change in the future, and, as I have often repeated, I will take the evidence as it comes.

The thing I find interesting is that you like investing in jockeys (a strategy I like a lot), but you don't seem to give the integrity of the jockey that much weight.  I'm curious if it affects your outcomes significantly.  I'm not sure if it will, or not.

I look for outstanding entrepreneurs, when I invest… I am not looking for “someone to hire”… They are two totally different things. Entrepreneurs and managers: they are two totally different breeds. And looking for outstanding entrepreneurs, I want to see a great track record, I want to understand what they are going to do, and I want them to explain it clearly to shareholders, I want to understand why their great track records might be sustained in the future for many years to come, and I want them to be at the helm of a business which generates steady and predictable cash flow. And, of course, I want them to be large owners of the companies they have built (Mr. Biglari through the LF is a large owner of BH, and he invests at least 30% of his incentive in BH).

Character traits, instead, are treacherous… I cannot base an investment on character traits… Think of it this way: lots of men discover only after many years of marriage they actually didn’t know their spouses possessed some truly unbearable “character traits”! And vice versa, of course!
You think you can assess Mr. Biglari’s integrity, calling him a liar and a thief, because he achieves hedge-fund results (I mean, the top 0.1% of hedge funds!), and asks to be paid like a hedge fund manager?!… Well, I don’t think you can.

Gio


Title: Re: BH - Biglari Holdings
Post by: rayfinkle on July 23, 2014, 09:00:55 AM
Quote
The corporations he is trying to acquire are recognizing that he's trying to screw them, and are fighting back, etc. 

To be more precise here: the managers (and members of the boards) of the corporations he is trying to acquire are recognizing that their lives will get harder under Biglari. This is a case where it seems likely that the interests of the managers (less work, more comp.) of target companies are not aligned with the interests of the shareholders (generating more quality cash flow from the same asset base--and/or great incremental returns on new capital). It could be the case that managers are acting out of self-preservation and not shareholder interest.

After meeting Biglari and following the company closely (very word of every SEC doc & other publication) here's where I've come out:
1) Biglari is a talented investor;
2) Biglari understands the levers that unlock value in certain industries (most proven in restaurants) and knows how to pull them;
3) Biglari is extremely arrogant / cocky; this seems to hinder his ability to execute on some of his acquisition/investment strategy;
4) Biglari cares a lot about getting extremely rich;
5) Biglari cares a lot about getting control (board is full of cronies, comp. plan promotes his increased ownership of the company)

...and here are my (current, subject to change) conclusions based on the above observations. Note, they rely on the premise that Biglari can be all of the things described above at once...and that doesn't necessarily suggest bad investing outcomes.
1) In most scenarios Biglari will get richer than me (a shareholder).
2) Given that the businesses he runs improve (either one-time due to right-sizing operations or ongoing), and that will help both him and investors (him more)
3) He already has control of the company, even if he personally doesn't own 51%.
4) I am not capable of making character judgments based on reading SEC docs. His letters say the right things, he unleashes operating cash, and he rewards himself nicely for that.

Finally--and oh man did this go longer than I had intended--being an asshole and elbowing out certain shareholders seems to have gotten other managers rich. John Malone is one example (and no, I'm not intending to compare the two). Cable Cowboy covers story after story about how Malone wrestled control through opaque corporate structuring maneuvers that strategically siphoned the best assets into subsidiaries that he had a higher probability of understanding/controlling than the predecessor structures. Here's the quote (emphasis added).

Quote
Oddly, it was Ted Turner who forced Malone to sit up and take notice that he was lagging behind his peers in personal wealth. One day, ribbing his friend, Turner told Malone, "Gee, John, I'm getting rich and Bob's getting rich. And the only one that's not getting rich is you." " Turner's words stung more than Malone cared to admit. Though he made a decent salary, Malone had no big stock options or equity in TCI-less than 1 percent as late as 1990-and he had never asked for any. As he looked around in the cable industry, a lot of his contemporaries were accumulating vast wealth and he wasn't. And in his mind, he was working harder, contributing more. And if Ted and the rest of the group had made this their benchmark of success, then Malone would show how quickly he could set new records, much as he had done with the discus back at Hopkins.

"Up until then I had been more focused on TCI. I was going to have the biggest and best company," Malone said later. "And it was making Bob very rich. And Bob wasn't reciprocating. And that was just Bob. He would never do anything unless you pushed him into a decision. That's what created Liberty. It was a little schemey. Very tax-efficient. And it worked."

The terms, largely structured by Malone himself, defied understanding by mere mortals. Indeed, the structure of the deal-outlined in a 345-page prospectus-was so Byzantine, it seemed almost designed to obfuscate. Through something called an exchange offer, TCI shareholders would get a special rights offering-one right to buy one Liberty share for every 200 shares of TCI they owned. It was a privilege, not an obligation, and each of these rights, in turn, allowed an investor to swap in 16 shares of TCI stock for a single share of Liberty Media. It seemed like such a lopsided offer: 16 shares of TCI for just 1 share of Liberty? That valued Liberty at about $300 a share, for a total market value of more than $600 million by Malone's reckoning. How could that be, analysts asked, given that Liberty posted a loss on revenue of a mere $52 million for the pro forma nine months? No one on Wall Street expected the stock to trade up to $300 anytime soon. Liberty issued $625 million in preferred stock to parent TCI; the preferred represented more than half of the capitalization of Liberty. "If you're a TCI shareholder, pass on the swap," advised a columnist in Forbes. "If you're considering buying Liberty now that it is trading on a when-issued basis o-t-c [over the counter], don't chase it." 's Doubters found the whole idea of Liberty a dubious proposition: TCI's shareholders were being asked to pay up to acquire ownership of a company whose sole assets they already owned, before TCI spun the properties into Liberty. Moreover, it wasn't as if Liberty was an operating company with a strong stream of revenue; its portfolio consisted mostly of passive minority stakes in cable channels controlled by other companies. At first, not even Magness wanted to participate. "First, it's cats and dogs, and they'll never understand or value it," he told Malone one day.19 "So much the better for shareholders who do understand it," Malone replied, "because the assets are undervalued at the moment." He told Magness he should invest as much as possible in the Liberty offering. "You ought to do it because it's a life raft," he told Magness. When Magness questioned why it would be spun out, Malone told him, "You don't lash the life raft to the deck of the ship to try and float the ship. The whole idea of a life raft is you set it afloat, and at least you've got something if you hit an iceberg." z" Moreover, Liberty did not have a high-risk profile, whereas if TCI hit the iceberg, it could be a serious collapse, given its high debt leverage. Malone transferred to Liberty roughly 15 percent of TCI's market value in assets he considered speculative. TCI hung on to Turner Broadcasting System and Discovery Communications. After its spin-off from TCI, which had $3.8 billion in sales in 1991, Liberty would have interests in a sliver of TCI cable systems representing about 650,000 subscribers and would own stakes in 26 other entities, including TCI's 50 percent of American Movie Classics, 17 percent of BET, 30 percent of QVC, 16 percent of the Family Channel, and interests in 14 regional sports networks. Malone, president of TCI, would become chairman of Liberty. Though Magness eventually bought in, he never believed that Liberty would amount to much. He was wrong: Liberty would build more wealth for both men, and build it far more rapidly than TCI had ever managed to deliver. Most TCI shareholders refused to participate; for them, the deal seemed a little lopsided, and the explanation for it was all too complicated. It was safer to just sit this one out. Their timidity was key to Malone's effort to build a much bigger Liberty stake for himself, for under the terms he devised, the fewer shareholders who participated in the Liberty deal, the more equity each of them would hold in the new company. While fewer than half of TCI's shareholders took part in the Liberty spin-off, Malone bet as heavily as he possibly could and commanded a disproportionately larger share of the equity being handed out: 20 percent of all Liberty shares and 40 percent voting control. Yet to get it, he would reduce his TCI holdings by more than one-third. Malone got 8.7 percent of Liberty shares in return, three times more than he would have been able to claim had all shareholders participated. Malone paid $25.6 million to exercise the options he was given in lieu of salary, but to the chagrin of critics, he had put up only $100,000 in cash, which he got by selling 6,250 QVC shares back to Liberty. Malone gave the company a $25.5 million note for the rest of the stock. He later paid off part of the debt to Liberty in TCI stock. By the end of the maneuvers, Malone owned 20 percent of Liberty's class B supervoting stock, giving him roughly 40 percent of the shareholder votes at Liberty. Over the next two years he did more financial engineering, splitting Liberty's stock multiple times-first, 20 for 1, then 4 for 1, and then 2 for 1. His aim: to increase the number of shares available for use as currency in acquisitions and to lower the stock price he had initially, intentionally kept high so more individual investors could afford to buy in. During the preceding 15 years, Malone had enjoyed a reputation of being one of the lowest-paid, best-performing chief executives in corporate America. No one would ever again consider him underpaid. In 1991, TCI paid him just $300,000; Liberty, nothing. Estimated value of Malone's compensation in stock options that year: $26 million. In crafting the Liberty spin-off, Malone had kicked on the financial machinery inside his razor-focused mind, and structured a highly complex, all but incomprehensible deal aimed at meeting his main goals: to mollify regulators, to ensure TCI's continued growth, and to feather his own nest.


Title: Re: BH - Biglari Holdings
Post by: rayfinkle on July 23, 2014, 09:03:58 AM
Sorry--that quote was from "Cable Cowboy" chapter 6
Title: Re: BH - Biglari Holdings
Post by: RichardGibbons on July 23, 2014, 07:11:28 PM
b) high variance is great for him since he has a "heads I win, tails shareholders lose" compensation plan.
I truly think this is not rational… the faster BVPS grows, the more money Mr. Biglari will make… He might be extremely conscious about his business acumen, and sometimes arrogant, and he might charge his shareholders a lot for his services as a manager and capital allocator… but that doesn’t mean his own interests aren’t aligned with shareholders’… It is evident they are!

Yeah, you're right, he does have a high water mark.

[Actually, to edit, the case where he isn't aligned with you is the Fairfax hedging scenario.  Watsa believed that hedging was the right strategy, and did it.  Biglari is incented not to do such a strategy -- even if he believes that it's the best strategy for shareholders -- because it impacts his income.  Incentives are tricky, which is why there is value in working with someone who you can trust to act in shareholders' best interests, not their own.]

That said, your last sentence is wrong.  I was trying to avoid a long discussion about this.  But to summarize:

1. He bought a small fraction of a company, then began taking over your company using money that is rightfully the shareholders'.  This isn't in the shareholders' best interests.
2. He renamed the company and added a licensing fee if he's ever terminated, so as to solidify his control and get paid for failure.  This is not in the shareholders' best interests.
3. He did this while lying to shareholders about what he was planning to do.  He could have simply stayed silent.  Instead, he decided that acting deceitfully was the best way to manipulate shareholders to doing what he wanted.  This is not in shareholders' best interests.
4. He is issuing rights, which will both cost you money in issuance costs, and accelerate the time it takes for the company to get big enough that its returns fall.  This is not in shareholders' best interests (though it makes Biglari's paydays bigger.  Coincidence, I guess.)

So, if I don't believe I can trust the manager to operate in a largely ethical way, then I'd rather not take the chance of having a great 20 year run, followed by a zero.

With this I am not sure I understand what's exactly that you mean…

Anything multiplied by zero is zero.  So, if he makes you 25% this year, 25% next year, 25% for the next ten years, then you lose -100% because he does some unethical thing that costs shareholders, then your outcome is zero, despite the good years.

As for the stock price… well, we are value investors, aren’t we? We want to look at and pay attention to business results, not stock price fluctuations, right?… At least that’s what we like to say! ;)

Fair point, on the other hand, he's also running a holding company during a huge bull market.  And your statement was that the evidence was overwhelmingly in his favour.  Many investors consider share price the most important piece of evidence about performance.  So, it seemed a bit much to say "overwhelmingly" when I would bet that the average investor would say that is overwhelming evidence of the opposite. (That said, you and I are perhaps not average investors. :) )

The corporations he is trying to acquire are recognizing that he's trying to screw them, and are fighting back, etc. 

This again is not rational… the evidence until now is that every company Mr. Biglari put his hands on became much more profitable than it was before. Of course, it might change in the future, and, as I have often repeated, I will take the evidence as it comes.

I haven't spent a lot of time looking at it, and don't want to.  That said pretty well every company coming out of the great recession is more profitable than it was before.  Welcome to low interest rates, rising employment, and an improving economy.

I look for outstanding entrepreneurs, when I invest… I am not looking for “someone to hire”… They are two totally different things. Entrepreneurs and managers: they are two totally different breeds. And looking for outstanding entrepreneurs, I want to see a great track record, I want to understand what they are going to do, and I want them to explain it clearly to shareholders, I want to understand why their great track records might be sustained in the future for many years to come, and I want them to be at the helm of a business which generates steady and predictable cash flow. And, of course, I want them to be large owners of the companies they have built (Mr. Biglari through the LF is a large owner of BH, and he invests at least 30% of his incentive in BH).

Character traits, instead, are treacherous… I cannot base an investment on character traits… Think of it this way: lots of men discover only after many years of marriage they actually didn’t know their spouses possessed some truly unbearable “character traits”! And vice versa, of course!

Yeah, this is interesting to me, because I wouldn't invest in a Kozlowsli or Jeff Skilling company, despite the fact that they had great records.  Maybe that isn't rational, though I think there's something to be said for the argument.  I would guess that there's a correlation between people taking advantage of shareholders in small ways, and taking advantage of them in large ways.  Also, I think there's other options, like Watsa and Buffett that I'd prefer.

You think you can assess Mr. Biglari’s integrity, calling him a liar and a thief, because he achieves hedge-fund results (I mean, the top 0.1% of hedge funds!), and asks to be paid like a hedge fund manager?!… Well, I don’t think you can.

Yeah, I don't think you can either.  Luckily I didn't say that.  I believe hedge fund managers wanting to be paid like hedge fund managers does not imply that they lack integrity, are liars, thieves, kick small animals, eat orphans for breakfast, like Justin Bieber etc.

Title: Re: BH - Biglari Holdings
Post by: ItsAValueTrap on July 23, 2014, 07:35:36 PM
Finally--and oh man did this go longer than I had intended--being an asshole and elbowing out certain shareholders seems to have gotten other managers rich. John Malone is one example (and no, I'm not intending to compare the two). Cable Cowboy covers story after story about how Malone wrestled control through opaque corporate structuring maneuvers that strategically siphoned the best assets into subsidiaries that he had a higher probability of understanding/controlling than the predecessor structures. Here's the quote (emphasis added).

In Malone's case, investors were presented a choice.  Unfortunately for them, they were defaulted into the bad choice and nudged in that direction.  But... at least they had a choice.  With Biglari, shareholders aren't getting a say in these special deals, the corporate aircraft (including a G650 which is the hottest corporate jet you can get), etc. etc.

Sometimes things don't end so well with that type of management.  They might go on to do something really screwed up.  If you own a basket of these things, perhaps shareholder return will be mediocre once you factor in all of the blow ups.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 23, 2014, 11:38:03 PM
[Actually, to edit, the case where he isn't aligned with you is the Fairfax hedging scenario.  Watsa believed that hedging was the right strategy, and did it.  Biglari is incented not to do such a strategy -- even if he believes that it's the best strategy for shareholders -- because it impacts his income.  Incentives are tricky, which is why there is value in working with someone who you can trust to act in shareholders' best interests, not their own.]

So, now Mr. Biglari is also accused to be short term oriented, and not to think for the long term good of BH… Because, if he believed hedging were a good strategy to maximize BVPS over the long term, and if he were long term oriented, why shouldn’t he be hedging?! The higher BVPS over the long term, the richer he’ll be! No... he doesn’t hedge, because BH’s operating businesses are the best hedges anyone can find: probably, fast-food franchising does better in a recession than during economic prosperity.

1. He bought a small fraction of a company, then began taking over your company using money that is rightfully the shareholders'.  This isn't in the shareholders' best interests.
2. He renamed the company and added a licensing fee if he's ever terminated, so as to solidify his control and get paid for failure.  This is not in the shareholders' best interests.
3. He did this while lying to shareholders about what he was planning to do.  He could have simply stayed silent.  Instead, he decided that acting deceitfully was the best way to manipulate shareholders to doing what he wanted.  This is not in shareholders' best interests.
4. He is issuing rights, which will both cost you money in issuance costs, and accelerate the time it takes for the company to get big enough that its returns fall.  This is not in shareholders' best interests (though it makes Biglari's paydays bigger.  Coincidence, I guess.)

1. What do you mean “using money that is rightfully the shareholders’”?… Money he made the shareholders pay him for his services, and that you don’t think he deserved?… Clearly, I don’t understand this compensation problem…
2. Yeah… Control is a problem… But the fact is I want him to have full control over BH as soon as possible! I know what it is like to run a company without full control, I know what is like to run a company with full control: if you want great results, go for the latter all the times! Another way to get full control, for instance, is to introduce a second class of super voting shares… and that is also a much criticized practice by detractors… who evidently have never run a business in their whole life!
3. Lying… I guess because in the beginning he said he would not be paid for his services… right? Is that what you mean? Well, those shareholders he “lied” to went on to make a lot of money! Then they could have cashed in anytime they wanted and said goodbye! If those are the consequences of “lying”, well then lie to me all the time, please! Anyway, I might agree with you: that was a mistake… made by a very young entrepreneur, who had never run a public company in his life before, and who found himself all of a sudden with lots of responsibilities… Let me ask you: do you still remember what you were doing, and which kind of responsibilities fell upon you, when little over 30 years old? Are you sure, if you had been in Mr. Biglari’s shoes, you would have made no mistakes?
4. I made money the first time he issued rights, I am quite convinced I will make money this time again.

Anything multiplied by zero is zero.  So, if he makes you 25% this year, 25% next year, 25% for the next ten years, then you lose -100% because he does some unethical thing that costs shareholders, then your outcome is zero, despite the good years.

Then, I had understood well… But I don’t see why in year 21, after 20 years of great performance, of building a very successful company, all of a sudden he should dream of making “some unethical thing” that wholly destroys the work of a lifetime… Maybe I simply don’t get it, but do you think it would be rational? ???

I haven't spent a lot of time looking at it, and don't want to.  That said pretty well every company coming out of the great recession is more profitable than it was before.  Welcome to low interest rates, rising employment, and an improving economy.

I really don’t see what low interests, rising employment, and an improving economy (doubtful!!) might have anything to do with improving same stores traffic, or with getting new and very profitable franchising agreements… Richard, do you run a company? Has the “improving economy” done anything for you the last three years? Not for me!! ;)

Yeah, this is interesting to me, because I wouldn't invest in a Kozlowsli or Jeff Skilling company, despite the fact that they had great records.  Maybe that isn't rational, though I think there's something to be said for the argument.  I would guess that there's a correlation between people taking advantage of shareholders in small ways, and taking advantage of them in large ways.  Also, I think there's other options, like Watsa and Buffett that I'd prefer.

I think you didn’t invested with Mr. Kozlowsli nor Mr. Skilling because you didn’t understand what they were doing… you couldn’t answer these questions:
a) How much of their success was luck?
b) What things have they done to achieve success?
c) Can they replicate those things going forward?
d) Which are the possible obstacles that might arise going forward?
e) Are they aware of those potential problems?
f) How could they deal with those problems?
g) Etc.
I would say the inability to answer those questions in Mr. Kozlowsli’s and Mr. Skilling’s cases is the true reason why you and I didn’t invest in their businesses. At least, I am sure that is the reason as far as I am concerned! Can I answer those questions in BH’s case? I think I can. :)

Gio
Title: Re: BH - Biglari Holdings
Post by: Parsad on July 23, 2014, 11:58:30 PM
Gio,

Respectfully, I believe you and others will do nothing but find excuse after excuse for Sardar's behavior.  I don't even bother with these debates anymore, because there will always be a subset of people who say I harbor past grudges, just as there will always be people who will justify any conduct if it makes them a buck!

I've been involved with a company recently, where the CEO has been a disgrace in terms of self-entitlement and he constantly blames others for his failures, both in terms of the company's operations and his own compensation.  The only reason people ignore Sardar's failures in corporate governance, compensation and ethics is because he has been successful on the company operational side. 

That success gives him the opportunity to write his own check, while shareholder's gleefully ignore other troubling symptoms.  But that's ok if you guys want to ignore those symptoms or lapses...just let go of the charade of excusing his behavior and simply embrace the fact that you want to make a buck regardless of the CEO's ethics.  There's no shame in that...but forget about trying to explain to us over and over how his conduct is misunderstood. 

I invested in SED International...I knew Sham had not properly disclosed certain charges against him, but I still bought shares because I thought they were cheap...but I'm not going to sit and argue on the SED thread on how great his ethical conduct is.  If you think Biglari Holdings is a good investment or is cheap...great!  But stop the BS...and please stop calling him Mr. Biglari...it's driving me nuts!   ;D 

He's not Buffett, he's not Watsa, he's not even Mohnish Pabrai!  You can take what those three say to the bank.  You can't bank on what Biglari says!  Cheers! 
Title: Re: BH - Biglari Holdings
Post by: Parsad on July 24, 2014, 12:10:45 AM
Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 24, 2014, 12:26:16 AM
Gio,

Respectfully, I believe you and others will do nothing but find excuse after excuse for Sardar's behavior.  I don't even bother with these debates anymore, because there will always be a subset of people who say I harbor past grudges, just as there will always be people who will justify any conduct if it makes them a buck!

I've been involved with a company recently, where the CEO has been a disgrace in terms of self-entitlement and he constantly blames others for his failures, both in terms of the company's operations and his own compensation.  The only reason people ignore Sardar's failures in corporate governance, compensation and ethics is because he has been successful on the company operational side. 

That success gives him the opportunity to write his own check, while shareholder's gleefully ignore other troubling symptoms.  But that's ok if you guys want to ignore those symptoms or lapses...just let go of the charade of excusing his behavior and simply embrace the fact that you want to make a buck regardless of the CEO's ethics.  There's no shame in that...but forget about trying to explain to us over and over how his conduct is misunderstood. 

I invested in SED International...I knew Sham had not properly disclosed certain charges against him, but I still bought shares because I thought they were cheap...but I'm not going to sit and argue on the SED thread on how great his ethical conduct is.  If you think Biglari Holdings is a good investment or is cheap...great!  But stop the BS...and please stop calling him Mr. Biglari...it's driving me nuts!   ;D 

He's not Buffett, he's not Watsa, he's not even Mohnish Pabrai!  You can take what those three say to the bank.  You can't bank on what Biglari says!  Cheers!

 ;D ;D ;D

Sanjeev,
I call everyone Mr./Mrs. + his/her surname… Ahahahah!!!!

Ok, then, I will stop it here…

Just want to point out that my idea is more general. It goes beyond the discussion about BH. And it is simply this: try to base an investment on whose “words could be taken to the bank”, and whose words instead cannot, and you won’t be right much more often than if you flip a coin. Try, instead, to base an investment answering those questions from a) to f) in my last post, and you might end up doing a bit better than if you flip a coin. ;)

When you try to judge people’s character, simply too many subjective things get in the way… And it is extremely difficult to think and judge rationally. Instead, when you try to judge the quality of a business, the actions and the decisions taken by management (instead of their character), things stay on a much more impersonal level. And that imo leads to better choices.

Cheers,

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 24, 2014, 12:32:38 AM
the corporate aircraft (including a G650 which is the hottest corporate jet you can get)

Well, I know Mr. Biglari Sardar  ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment… We will see! My hope is he doesn’t use the jet for personal reasons… That would truly be an unjustified waste of shareholders’ money! (As if I didn’t know lots of CEOs who use the corporate jet for personal reasons… ::) )

In Malone's case, investors were presented a choice.  Unfortunately for them, they were defaulted into the bad choice and nudged in that direction.  But... at least they had a choice.  With Biglari, shareholders aren't getting a say in these special deals

I don't think this is true: shareholders always have options. They simply can cash in, selling the rights they receive and using the proceeds elsewhere.

Gio
Title: Re: BH - Biglari Holdings
Post by: Parsad on July 24, 2014, 01:05:58 AM
the corporate aircraft (including a G650 which is the hottest corporate jet you can get)

Well, I know Mr. Biglari Sardar  ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment…

Much better!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: tombgrt on July 24, 2014, 02:27:03 AM
the corporate aircraft (including a G650 which is the hottest corporate jet you can get)

Well, I know Mr. Biglari Sardar  ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment…

Oh yes, a $65M jet is a great way to spend money to expand a business with a $700M market cap...
Title: Re: BH - Biglari Holdings
Post by: writser on July 24, 2014, 02:39:24 AM
Does he actually own a G650? I don't see that in the FAA registry - looks like he 'only' timeshares three older Gulfstream models and a Cessna.

Maybe he's planning to buy one, that would explain the rights offering ;) .
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 24, 2014, 03:34:42 AM
Oh yes, a $65M jet is a great way to spend money to expand a business with a $700M market cap...

Well, you are right… It doesn’t certainly seem to be a sound investment. ;)
Once again, I try not to judge every single investment decision… Some will be good, others will be poor… Overall I think results will be satisfactory.

Instead, as I have already said, I would be quite disappointed if that corporate jet were used for personal reasons.

Gio
Title: Re: BH - Biglari Holdings
Post by: rkbabang on July 24, 2014, 06:11:09 AM
3. Lying… I guess because in the beginning he said he would not be paid for his services… right? Is that what you mean? Well, those shareholders he “lied” to went on to make a lot of money! Then they could have cashed in anytime they wanted and said goodbye!

That is exactly what I did.  I'll give Sadar credit for what he did right. I made a lot of money on my Western Sizzlin, Friendlies, and especially SNS shares.  But when I realized that I couldn't trust what he said I cashed out and left.  Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 24, 2014, 06:28:42 AM
Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;)
Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :)

Gio
Title: Re: BH - Biglari Holdings
Post by: cobafdek on July 24, 2014, 08:08:47 AM
Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1

Any bets Mr. Biglari's Sardar's next shareholder letter will print it like we bought a corporate jet?

If he does, Sanjeev win the debate.  If he does not, Gio wins.
Title: Re: BH - Biglari Holdings
Post by: globalfinancepartners on July 24, 2014, 08:23:49 AM
For what it's worth, all of the aircraft on the linked FAA registry are NetJets aircraft.  All tail numbers ending with QS are NetJets.

Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1

Any bets Mr. Biglari's Sardar's next shareholder letter will print it like we bought a corporate jet?

If he does, Sanjeev win the debate.  If he does not, Gio wins.
Title: Re: BH - Biglari Holdings
Post by: Greg on July 24, 2014, 08:42:09 AM
If Biglari Holdings has interests in 4 jets and there is only one Sardar who has been flying around in the other 3 jets?
Title: Re: BH - Biglari Holdings
Post by: gg on July 24, 2014, 09:19:25 AM
I am almost positive that they do not OWN the jets outright. They most likely have a Netjets membership. Practically speaking, this means that they agree to purchase a package of a certain number of flying hours on the jets. Legally, I think when you do this, Netjets actually makes you a fractional shareholder in the jets. (There are several reasons that you become a fractional shareholder in the jets, and one of them is that I believe you can benefit from the rapid depreciation schedule of the planes.)

Do I wish that there was not any expense from BH spent on private aircraft? Yes.

If they didn't have a Netjets membership, would they be one of the only $700 million market cap companies without it? Probably

Bottom line - some of you are misreading the FAA data as if they've spent 65 million on a jet, which is simply not true.
Title: Re: BH - Biglari Holdings
Post by: topofeaturellc on July 24, 2014, 09:47:29 AM
If you click on the N-Number you can see that the planes are all controlled by NetJets. You can also see who else holds interests so you can sort of guess how big a share they own in the plane.

Not to defend this guy or anything.  I've just been through this exercise with others.
Title: Re: BH - Biglari Holdings
Post by: rkbabang on July 24, 2014, 10:01:22 AM
Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;)
Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :)

I have nothing against activist investors, this was something I initially liked about Biglari.  But when he is perceived as dishonest and greedy, the target companies (both management and shareholders) will fight him at any cost.  If he were perceived as honest and shareholder friendly he might more easily gain the support of the target company's shareholders, which would make acquiring companies infinitely easier.   If he had the reputation he has now he never would have been able to take over SNS.  He won't be able to pull off something like that again.  Regardless of how bad a company's management is, the shareholders are not going to want to trade it for a liar.

Title: Re: BH - Biglari Holdings
Post by: ItsAValueTrap on July 24, 2014, 12:12:49 PM
For what it's worth, all of the aircraft on the linked FAA registry are NetJets aircraft.  All tail numbers ending with QS are NetJets.

Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1

Any bets Mr. Biglari's Sardar's next shareholder letter will print it like we bought a corporate jet?

If he does, Sanjeev win the debate.  If he does not, Gio wins.

My mistake, they do not have a G650.  And thank you for pointing out that they are all Netjets fractional ownerships.
Title: Re: BH - Biglari Holdings
Post by: rayfinkle on July 24, 2014, 12:58:33 PM
Finally--and oh man did this go longer than I had intended--being an asshole and elbowing out certain shareholders seems to have gotten other managers rich. John Malone is one example (and no, I'm not intending to compare the two). Cable Cowboy covers story after story about how Malone wrestled control through opaque corporate structuring maneuvers that strategically siphoned the best assets into subsidiaries that he had a higher probability of understanding/controlling than the predecessor structures. Here's the quote (emphasis added).

In Malone's case, investors were presented a choice.  Unfortunately for them, they were defaulted into the bad choice and nudged in that direction.  But... at least they had a choice.  With Biglari, shareholders aren't getting a say in these special deals, the corporate aircraft (including a G650 which is the hottest corporate jet you can get), etc. etc.

Sometimes things don't end so well with that type of management.  They might go on to do something really screwed up.  If you own a basket of these things, perhaps shareholder return will be mediocre once you factor in all of the blow ups.

Can you elaborate here on Malone? Don't BH shareholders have a choice to (subscribe or dilute)?
Title: Re: BH - Biglari Holdings
Post by: dcollon on July 24, 2014, 02:01:40 PM
Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;)
Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :)

I have nothing against activist investors, this was something I initially liked about Biglari.  But when he is perceived as dishonest and greedy, the target companies (both management and shareholders) will fight him at any cost.  If he were perceived as honest and shareholder friendly he might more easily gain the support of the target company's shareholders, which would make acquiring companies infinitely easier.   If he had the reputation he has now he never would have been able to take over SNS.  He won't be able to pull off something like that again.  Regardless of how bad a company's management is, the shareholders are not going to want to trade it for a liar.



It might be interesting to ask the management at First Guard Insurance why they were willing to sell their company to Biglari Holdings earlier this year.  It might provide another view point on Sardar's ability to do deals in the future. 
Title: Re: BH - Biglari Holdings-How quickly many forget Sardar's words
Post by: Greg on July 24, 2014, 09:14:19 PM
SARDAR BIGLARI ISSUES LETTER TO SHAREHOLDERS OF
 
THE STEAK N SHAKE COMPANY
 
SAN ANTONIO, TX – February 21, 2008 – Sardar Biglari, Chairman and Chief Executive Officer of Western Sizzlin Corporation (OTC Bulletin Board: WSZL) and The Lion Fund, LP, issued the following letter today to the shareholders of The Steak n Shake Company (NYSE: SNS):
 
Dear Fellow Shareholders:

(Below is heavily excerpted. The complete text is at http://www.sec.gov/Archives/edgar/containers/fix071/93859/000092189508000589/dfan14a06824004_02212008.htm).

...we will remain a significant minority shareholder working for the benefit of all shareholders. ...Most importantly, we would not obtain a return on investment different from that of any other shareholder. We seek to make money with you, not off you.
 
Title: Re: BH - Biglari Holdings
Post by: RichardGibbons on July 24, 2014, 10:49:10 PM
Respectfully, I believe you and others will do nothing but find excuse after excuse for Sardar's behavior.  I don't even bother with these debates anymore, because there will always be a subset of people who say I harbor past grudges, just as there will always be people who will justify any conduct if it makes them a buck!

Yeah, this is right, Sanjeev.  My main concern is that for a while, this board was getting so pro-Biglari than people might  think that it was a reasonable investment akin to Fairfax and Berkshire, rather than something with a lot of hair.

Gio, my interpretation of you right now is that you're really emotional about the topic, and  resolve cognitive dissonance, you've decided to adopt the position that you can't judge the integrity of the people by their actions.  I think this is very likely to be harmful to you.  So, I think I'll leave this discussion alone for a while.

Good luck, I hope you make a bundle!
Title: Re: BH - Biglari Holdings-How quickly many forget Sardar's words
Post by: Parsad on July 24, 2014, 11:26:17 PM
SARDAR BIGLARI ISSUES LETTER TO SHAREHOLDERS OF
 
THE STEAK N SHAKE COMPANY
 
SAN ANTONIO, TX – February 21, 2008 – Sardar Biglari, Chairman and Chief Executive Officer of Western Sizzlin Corporation (OTC Bulletin Board: WSZL) and The Lion Fund, LP, issued the following letter today to the shareholders of The Steak n Shake Company (NYSE: SNS):
 
Dear Fellow Shareholders:

(Below is heavily excerpted. The complete text is at http://www.sec.gov/Archives/edgar/containers/fix071/93859/000092189508000589/dfan14a06824004_02212008.htm).

...we will remain a significant minority shareholder working for the benefit of all shareholders. ...Most importantly, we would not obtain a return on investment different from that of any other shareholder. We seek to make money with you, not off you.

The full paragraph is much clearer in hindsight on how disingenuous the intentions were:

In addition, the board’s letter reiterates the falsity that we are seeking to control the company for our own personal benefit and therefore should pay a control premium. Nothing could be further from the truth. This is another erroneous argument designed, in my view, to distract you from the serious problems confronting Steak n Shake. The truth is that Steak n Shake will stay in the hands of its shareholders, and we will remain a significant minority shareholder working for the benefit of all shareholders.

Compensation change...name change...name licensing termination fee...dual voting share structure...Lion Fund holding SNS shares...Lion Fund sold back to Biglari because compensation agreement doesn't pass...Lion Fund invests BH shares to reap hedge fund fees...control BH with less than 4% personal ownership.  Finally, Steak'n Shake by Biglari!  i didn't even know he invented steakburgers!  Cheers!
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 25, 2014, 01:07:06 AM
Gio, my interpretation of you right now is that you're really emotional about the topic, and  resolve cognitive dissonance, you've decided to adopt the position that you can't judge the integrity of the people by their actions.  I think this is very likely to be harmful to you.  So, I think I'll leave this discussion alone for a while.

Richard,
I think this is not exactly right: I cannot judge Biglari’s integrity based on the fact he changed the Stake ‘N Shake name into Biglari Holdings, based on the compensation plan he devised for himself, and based on the mistake he made of promising to work for free… Call me “emotional”, if that makes you feel good, but I am pretty sure you cannot judge Biglari’s integrity based on those facts as well. Because no one can!
Yet, those are the same things I keep hearing again and again… Nothing else!

I will take the evidence as it comes: when Biglari’s “unethical behavior” starts causing him to make serious business mistakes, BH’s BVPS will inevitably stop growing at the fast rate it has grown for the last 3 years. That will definitely make me revaluate my thesis about BH.
With all due respect, that evidence will be much more convincing than your arguments, Parsad’s, or those of any other detractor on the board.

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 25, 2014, 01:17:20 AM
It might be interesting to ask the management at First Guard Insurance why they were willing to sell their company to Biglari Holdings earlier this year.  It might provide another view point on Sardar's ability to do deals in the future.

+1 ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: ragu on July 25, 2014, 09:34:55 AM
[...]based on the mistake he made of promising to work for free…  [...]

Folks keep using this as an example of Sardar "lying". However, it's the first time I've seen you say this, Gio.

It is inaccurate, even if it won't stop people from using it as a stick to beat Sardar with.

Do you (or any of those that accuse Sardar of lying) actually know the context of Sardar's statement?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: rkbabang on July 25, 2014, 10:02:24 AM
[...]based on the mistake he made of promising to work for free…  [...]

Folks keep using this as an example of Sardar "lying". However, it's the first time I've seen you say this, Gio.

It is inaccurate, even if it won't stop people from using it as a stick to beat Sardar with.

Do you (or any of those that accuse Sardar of lying) actually know the context of Sardar's statement?

Best,
Ragu

Yes I remember it well it was in response to this letter:

http://www.sec.gov/Archives/edgar/data/93859/000009385908000016/exhibit99_1.htm (http://www.sec.gov/Archives/edgar/data/93859/000009385908000016/exhibit99_1.htm)

"You are threatening to replace a majority of the Board with as yet unidentified candidates of your own choosing by calling a special meeting immediately after the annual meeting.  The Board’s ability to hire a permanent Chief Executive Officer and take other steps necessary for the Company’s future will be suspended and associate morale will be impaired as uncertainty continues over the composition of the Board.  Moreover, any minority shareholder who could change the Board’s composition would effectively obtain control of the Company without the payment of any control premium to shareholders."

Instead of saying (a complete lie) "Nothing could be further from the truth. This is another erroneous argument designed, in my view, to distract you from the serious problems confronting Steak n Shake. The truth is that Steak n Shake will stay in the hands of its shareholders, and we will remain a significant minority shareholder working for the benefit of all shareholders."

He could have been honest and said something such as:  Yes I intend to gain control of the company, change its name and charge the company for using it, implement a compensation scheme which benefits me at the great expense of its shareholders which will eventually enable me to use the outrageous amounts of money the company pays me to buy the company out from under its shareholders, but despite all I plan to do I still think they will be better off with me in control than its current management. 

He didn't say those things though, instead he lied.
Title: Re: BH - Biglari Holdings
Post by: ragu on July 25, 2014, 10:41:01 AM

[snipped in its entirety]

All fine and dandy, but what does that have to do with the question posed?

I'll ask again: What was the context in which Sardar said that he would "refuse extra remuneration" and how have subsequent events shown him to be lying?

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: rkbabang on July 25, 2014, 11:02:41 AM
You are being vague and cryptic here. I'm not sure what you are getting at.

The context was a proxy fight with SNS management. He was trying to get board seats.  The quote from Biglari above was written by him in direct response to the quote from SNS management above.  Unless you have a different definition of the word "context" than I do, I have answered your question.  "Context" you keep saying that, I don't think it means what you think it does.
Title: Re: BH - Biglari Holdings
Post by: CorpRaider on July 25, 2014, 04:27:50 PM
http://spinoffmonitor.com/biglari-holdings-bh-announces-rights-offering/
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 26, 2014, 01:01:11 AM
Do you (or any of those that accuse Sardar of lying) actually know the context of Sardar's statement?

No, I don’t. And I don’t care either. This whole thing about compensation cannot be really serious… I thought my tone had always been sarcastic enough! ;)

What’s serious, instead, is the opportunity we have in BH today. Its shares are constantly put under pressure for a reason that’s very clear to me: BH is stuck with the CBRL investment today. That is exactly the kind of reason for undervaluation I like: because I can be sure it is only temporary.

How many times do you find something that not only looks undervalued, but that you also know why it is undervalued, and you have great confidence it is only for a temporary reason too? Not very often, right?! And, when you do, you immediately recognize it as one of the best investment opportunity you have come across in a while.

That’s what BH around $400 is today!

Gio
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on July 26, 2014, 03:29:16 AM
Do you (or any of those that accuse Sardar of lying) actually know the context of Sardar's statement?

No, I don’t. And I don’t care either. This whole thing about compensation cannot be really serious… I thought my tone had always been sarcastic enough! ;)

What’s serious, instead, is the opportunity we have in BH today. Its shares are constantly put under pressure for a reason that’s very clear to me: BH is stuck with the CBRL investment today. That is exactly the kind of reason for undervaluation I like: because I can be sure it is only temporary.

How many times do you find something that not only looks undervalued, but that you also know why it is undervalued, and you have great confidence it is only for a temporary reason too? Not very often, right?! And, when you do, you immediately recognize it as one of the best investment opportunity you have come across in a while.

That’s what BH around $400 is today!

Gio

Don't you think it's undervalued because the CEO is considered by the general population to be untrustworthy? If so, I imagine that will stay the same (not important if you don't intent to sell, it only limits your liquidity).
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 26, 2014, 03:38:26 AM
Don't you think it's undervalued because the CEO is considered by the general population to be untrustworthy?

No.
At the end of 2013 BH stock price reached $520.
Do you think the market changed opinion about Biglari in 6 months? ???

Gio
Title: Re: BH - Biglari Holdings
Post by: Mikenhe on July 26, 2014, 03:58:43 AM
I'm an ex owner of steak and shake, currently sitting on the sidelines. My biggest concern is that SB is going to try and run everything. I prefer the Watsa method of buying businesses that run themselves.

As it happens I'm off to a wood fired grill they own tonight - thought there were a few more of them but it'll be interesting to see the concept first hand.
Title: Re: BH - Biglari Holdings
Post by: Sportgamma on July 26, 2014, 06:26:23 AM
Don't you think it's undervalued because the CEO is considered by the general population to be untrustworthy?

No.
At the end of 2013 BH stock price reached $520.
Do you think the market changed opinion about Biglari in 6 months? ???

Gio

Previous price is not a reason for something to be undervalued. Right?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 26, 2014, 06:37:00 AM
Previous price is not a reason for something to be undervalued. Right?

What I meant is this: until CBRL stock price began to slightly decline (or at least stopped appreciating fast), and until it became obvious that Biglari is facing a long battle with CBRL’s management, the P/B ratio the market was willing to accord to BH was in line with the one of other companies which are expected to grow BVPS at a handsome CAGR for many years to come.

Gio
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on July 26, 2014, 09:40:22 AM
Don't you think it's undervalued because the CEO is considered by the general population to be untrustworthy?

No.
At the end of 2013 BH stock price reached $520.
Do you think the market changed opinion about Biglari in 6 months? ???

Gio

Well aren't the clear ego-centrical changes (e.g. everything with his name on it) very recent?

For the record I'm not trying to be annoying, I'm just enjoying the discussion as I would not feel comfortable investing with this CEO and I'm curious whether I'm wrong about that :)
Title: Re: BH - Biglari Holdings
Post by: link01 on July 26, 2014, 12:55:30 PM
Previous price is not a reason for something to be undervalued. Right?

What I meant is this: until CBRL stock price began to slightly decline (or at least stopped appreciating fast), and until it became obvious that Biglari is facing a long battle with CBRL’s management, the P/B ratio the market was willing to accord to BH was in line with the one of other companies which are expected to grow BVPS at a handsome CAGR for many years to come.

Gio
gio, I think that's only part of it. besides the cbrl concerns you mention there's also sns: operating earnings declined from 19m to 12m 2012 to 2013, $ ebit from 46.5m to 28.4m.

tho biglari states that he believe sns never the less increased its intrinsic value I don't think there are a lot of investors disposed to take him at his word or give him the benefit of a doubt. however, on this point I do. when he says "We willingly traded near-term profits for higher long-term cash flows. In fact, we could have had record earnings in fiscal 2013. Instead, we chose to reinvest rather achieve a low cost structure, and to grow through franchising. We will continue to allocate capital on the basis of creating significantly greater dollar value per dollar spent." I believe him. he may be in a hurry to get rich but he has strongly held value investing principles & business operating beliefs that I don't think he will compromise, even if it hampers short term performance. "We are subscribing to Sam Walton’s philosophy in which he stated, “By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price.”

here's how he traded higher costs now for a stronger franchise & profits down then road:

" Restaurant operating costs increased because of, inter alia, increased staffing in our stores of $4.3 million, higher supply costs of $2.3 million, and higher insurance costs of $1.6 million. Increased training in 2013 resulted in a $2.7 million higher expense, largely tied to franchise openings. In addition, our efforts to franchise the Steak n Shake concept domestically and internationally has steadily increased General and administrative expenses. In fiscal 2013, direct franchising costs represent 24.8% of Steak n Shake’s general and administrative expenses, up from 14.8% in fiscal 2012."

and I estimate direct franchise costs were 9.5m in 201 & 19m in 2013. adding the increase in all these investment related costs up YOY is real money at +20.4m. that more than offsets the -17.2 decrease in YOY ebit mentioned above. BH does indeed look undervalued, tho whether its enough to compensate for the mistrust biglari has engendered will help determine how much more undervalued it can get before the scales are finally tipped the other way.

edit: oh, & if biglari continues with these rights offerings below book value its going to take some adjustments to calc bh's real growth in bvps when attempting to plot his scorecard on that metric. I thought it was interesting that he said he'll continue to make use of rights offerings at least until he's able to push thru a shareholder vote for a dual class of stock, tho I don't remember where I read that at this time







Title: Re: BH - Biglari Holdings
Post by: bargainman on July 26, 2014, 02:57:16 PM
You are being vague and cryptic here. I'm not sure what you are getting at.

This is not unusual.  I don't think I have seen a single message from Ragu that is not vague and cryptic.
Title: Re: BH - Biglari Holdings
Post by: bargainman on July 26, 2014, 03:03:01 PM
Previous price is not a reason for something to be undervalued. Right?

What I meant is this: until CBRL stock price began to slightly decline (or at least stopped appreciating fast), and until it became obvious that Biglari is facing a long battle with CBRL’s management, the P/B ratio the market was willing to accord to BH was in line with the one of other companies which are expected to grow BVPS at a handsome CAGR for many years to come.

Gio

I think that the issue here is what will big man be able to do in the future?  Given his less than sterling reputation and the ability of Target companies to put up a reasonable fight as demonstrated by Cracker Barrel, Will Bigs be able to police sorts of returns in the future?  He definitely deserves some credit in the cracker case in that he has pushed management to make or at least pretend to make changes that have increased the stock-price and presumably the value of cracker.  So perhaps it is not important that in the future he will be able to get a board seat or take control as long as he's able to move management to make changes.

I am curious if anybody is first in the history of raiders and "jerk activist investors out to make themselves rich" like perhaps Icahn would care to comment on how big Larry compares?
Title: Re: BH - Biglari Holdings
Post by: bargainman on July 26, 2014, 03:17:32 PM
"When you have eliminated the impossible, whatever remains, however improbable, must be the truth." - Sherlock Holmes

As per Cooley, the vast majority of the money in the Lion Fund comes locally from San Antonio. These are folks that have known Sardar for a very long time.

It's no surprise to me that they stick with him. It's also no surprise why: Their assessment is that he is trustworthy. I agree.

Best,
Ragu

This statement is incredibly flawed.  Think about it at the extreme. The people who know you the longest are your parents. Your parents stick with you and trust you. Therefore everybody else should stick with you and trust you.

The people who have been with you the most are most likely to stick with you for many reasons other than you being trustworthy.  Just watch a few episodes of that addict rehab show "Intervention" and this will be absolutely clear.

I really hope that you are not making your investment decisions based on big Larry's initial investors sticking with him.
Title: Re: BH - Biglari Holdings
Post by: bargainman on July 26, 2014, 03:23:42 PM
One question about the rights offering. I'm pretty sure this has been discussed in the past but I can't remember the Outcome. Why is he offering shares at a price so far below the current market shareprice?

I think in the past the conclusion was that, given the over subscription clause, this will allow him to pick up shares quite cheaply and increase his control of the company (assuming some number of shareholders did not fully subscribe).

is this is everybody else's assessment?  Are most rights offerings like this? I would think that if he wanted to raise money he would be able to do it in a manner that was less dilutive and would give him more cash. It seems like an awfully large discount..
Title: Re: BH - Biglari Holdings
Post by: WideMoat on July 26, 2014, 04:29:43 PM
Why is he offering shares at a price so far below the current market shareprice? ...

Are most rights offerings like this? I would think that if he wanted to raise money he would be able to do it in a manner that was less dilutive and would give him more cash. It seems like an awfully large discount..

What if an executive was required to purchase shares with a certain percentage of his annual compensation?  Would be nice to do so at a discount, right?

"The Incentive Agreement provides that Mr. Biglari will use an amount equal to at least 30% of his annual pre-tax incentive compensation to purchase shares of BH’s common stock on the open market within 120 calendar days of his receipt of such payment, subject to restrictions under the Corporation’s insider trading policy. This requirement represents approximately 50% of his after-tax incentive  compensation. Mr. Biglari is then required to hold such shares for a minimum of three years from the date of purchase, subject to the terms of the Incentive Agreement." [http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=7480538-1192-220709&type=sect&TabIndex=2&companyid=11049&ppu=%252fdefault.aspx%253fcik%253d93859 (http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=7480538-1192-220709&type=sect&TabIndex=2&companyid=11049&ppu=%252fdefault.aspx%253fcik%253d93859)]
Title: Re: BH - Biglari Holdings
Post by: Myth465 on July 26, 2014, 07:04:31 PM
I am glad I have my popcorn, this is a most entertaining show.
Will be interesting to see what great lengths Gio and Ragu go to to make this seem perfectly normal, and actually advantageous to the company and its shareholders.....

Who ever said cognitive dissonance was on to something.

Leon Festinger's theory of cognitive dissonance focuses on how humans strive for internal consistency. When inconsistency (dissonance) is experienced, individuals largely become psychologically distressed. His basic hypotheses are listed below:

Consistently inconsistent as it relates to BH - Biglari Holdings......
I still think Ragu is Mr. Biglari, he is a bit too personally attached to this idea and the perception of its CEO...
Title: Re: BH - Biglari Holdings
Post by: peter1234 on July 26, 2014, 07:35:51 PM
I am glad I have my popcorn, this is a most entertaining show.
Will be interesting to see what great lengths Gio and Ragu go to to make this seem perfectly normal, and actually advantageous to the company and its shareholders.....

Who ever said cognitive dissonance was on to something.

Leon Festinger's theory of cognitive dissonance focuses on how humans strive for internal consistency. When inconsistency (dissonance) is experienced, individuals largely become psychologically distressed. His basic hypotheses are listed below:

Consistently inconsistent as it relates to BH - Biglari Holdings......
I still think Ragu is Mr. Biglari, he is a bit too personally attached to this idea and the perception of its CEO...

This just elevated it to a whole new level. Now we have conspiracies as well...

 ;D
Title: Re: BH - Biglari Holdings
Post by: ragu on July 26, 2014, 09:31:02 PM
I still think Ragu is  Sardar Mr. Biglari [...]

Get with the program. We want to keep Sanjeev happy, don't we? ;)

Best,
Ragu
Title: Re: BH - Biglari Holdings
Post by: QLEAP on July 26, 2014, 10:07:46 PM
I still think Ragu is  Sardar Mr. Biglari [...]

Get with the program. We want to keep Sanjeev happy, don't we? ;)

Best,
Ragu

LoL Myth. I hate to burst your bubble but I have met Ragu in person and he is no Sardar!

Supremely rational and outstanding investor too :=)


Title: Re: BH - Biglari Holdings
Post by: Myth465 on July 26, 2014, 10:51:18 PM
I still think Ragu is  Sardar Mr. Biglari [...]

Get with the program. We want to keep Sanjeev happy, don't we? ;)

Best,
Ragu

Yes we do, yes we do  :)

I still think Ragu is  Sardar Mr. Biglari [...]

Get with the program. We want to keep Sanjeev happy, don't we? ;)

Best,
Ragu

LoL Myth. I hate to burst your bubble but I have met Ragu in person and he is no Sardar!

Supremely rational and outstanding investor too :=)

All may be true, but I have so rarely seen someone so passionate in the defense of a CEO.
Just trying to figure out why. Ultimately this will all sort itself out via SEC fillings and BH events.

This is fast becoming about as useful a thread as the one on Sears or the one on LVLT.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 01:48:15 AM
Quote
edit: oh, & if biglari continues with these rights offerings below book value its going to take some adjustments to calc bh's real growth in bvps when attempting to plot his scorecard on that metric. I thought it was interesting that he said he'll continue to make use of rights offerings at least until he's able to push thru a shareholder vote for a dual class of stock, tho I don't remember where I read that at this time

My guess is that he will continue to do rights offerings so he can get more of the company when he has the capital at a lower price. Makes perfect sense - IMO.

Well, to calculate BVPS I simply use the number of shares in the first page of the 10-K filing. Just like Biglari himself has suggested to do. That number has increased from 2010 to 2013, and, if Biglari keeps making use of these rights offerings, it will get larger and larger.

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 02:16:04 AM
gio, I think that's only part of it. besides the cbrl concerns you mention there's also sns: operating earnings declined from 19m to 12m 2012 to 2013, $ ebit from 46.5m to 28.4m.

tho biglari states that he believe sns never the less increased its intrinsic value I don't think there are a lot of investors disposed to take him at his word or give him the benefit of a doubt. however, on this point I do. when he says "We willingly traded near-term profits for higher long-term cash flows. In fact, we could have had record earnings in fiscal 2013. Instead, we chose to reinvest rather achieve a low cost structure, and to grow through franchising. We will continue to allocate capital on the basis of creating significantly greater dollar value per dollar spent." I believe him. he may be in a hurry to get rich but he has strongly held value investing principles & business operating beliefs that I don't think he will compromise, even if it hampers short term performance. "We are subscribing to Sam Walton’s philosophy in which he stated, “By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price.”

here's how he traded higher costs now for a stronger franchise & profits down then road:

" Restaurant operating costs increased because of, inter alia, increased staffing in our stores of $4.3 million, higher supply costs of $2.3 million, and higher insurance costs of $1.6 million. Increased training in 2013 resulted in a $2.7 million higher expense, largely tied to franchise openings. In addition, our efforts to franchise the Steak n Shake concept domestically and internationally has steadily increased General and administrative expenses. In fiscal 2013, direct franchising costs represent 24.8% of Steak n Shake’s general and administrative expenses, up from 14.8% in fiscal 2012."

and I estimate direct franchise costs were 9.5m in 201 & 19m in 2013. adding the increase in all these investment related costs up YOY is real money at +20.4m. that more than offsets the -17.2 decrease in YOY ebit mentioned above. BH does indeed look undervalued, tho whether its enough to compensate for the mistrust biglari has engendered will help determine how much more undervalued it can get before the scales are finally tipped the other way.

Guys,
We could go on talking about ethics, about psychology, about cognitive dissonance (you like that, don’t you? Sounds very intellectual!),… if you’d like, we could also talk about religion and astrology (maybe Biglari’s horoscope isn’t that favorable after all!)…

In the end what matters in business is our willingness to be rational. Period. And, when someone has a great business, honesty is always the best policy. To be a thief and a liar, like detractors call Biglari, would be a stupid behavior, would be bad investing, would be seriously limiting his own long term wealth. Do you have any doubt Biglari is not stupid? Do you have any doubt Biglari is a great investor? Do you have any doubt Biglari knows how to maximize his own long term wealth?

And don’t be mistaken: Biglari has a wonderful business! If you have any doubt about this, read link01’s post again and again.

Listen,
Have you seen what I did with Lancashire? When I say I don’t fall in love with a business, I really mean it: Lancashire was a much bigger investment for me, than BH is today. This notwithstanding, as soon as Lancashire ceased to be what I thought it to really be, I sold my whole position. I disposed of a 25% position the very same day Lancashire announced Brindle’s retirement.

When the facts change, I change my mind.

Gio
Title: Re: BH - Biglari Holdings
Post by: writser on July 27, 2014, 03:34:39 AM
The Lancashire episode demonstrated that your judgement of entrepreneurs is not infallible. But instead of being cautious, the next investment you make is based solely on your judgement of a highly controversial entrepreneur that everybody here is trying to warn you about. In defense of your investment decision you spend half of your time on this forum praising mr. Biglari post after post and by doing so you are effectively maneuvering yourself into a position where it will be very difficult to change your mind about him. Hence somebody mentioning the risk of cognitive dissonance.

If the biggest (only?) risk in your investment process is that you are sometimes wrong when judging people, why would you a) invest in somebody who is highly controversial in the first place and b) work yourself into a position where all you do is defend the guy? Wouldn't the inverse process be much safer? Only invest in the most reputable businessmen and always try to find reasons to knock them of their pedestal.

It looks like you are inadvertedly setting up a situation where you maximize the chances of something going wrong. Regardless of who is right about mr. Biglari Sardar.

Quote
Do you have any doubt Biglari knows how to maximize his own long term wealth?

Nobody is doubting that. Question is whether he will do it at your expense or not ;) .
Title: Re: BH - Biglari Holdings
Post by: tombgrt on July 27, 2014, 03:58:17 AM
Listen,
Have you seen what I did with Lancashire? When I say I don’t fall in love with a business, I really mean it: Lancashire was a much bigger investment for me, than BH is today. This notwithstanding, as soon as Lancashire ceased to be what I thought it to really be, I sold my whole position. I disposed of a 25% position the very same day Lancashire announced Brindle’s retirement.

When the facts change, I change my mind.

Gio


You speak of rationality and LRE in the same sentence?  :o Lancashire suddenly ceased what it was because Brindle left? How much of an impact do you think exactly Brindle had those last few months/years with the exact same team, operations and culture in place? If you think Brindle was worth a 30% premium (you bought at +- 800 GBX yet don't buy now) I simply don't know what magical powers you think Brindle brought to the table! LRE is simply a good insurer with great corporate culture that is likely to do very well for quite some time.

In the end what matters in business is our willingness to be rational. Period. And, when someone has a great business, honesty is always the best policy. To be a thief and a liar, like detractors call Biglari, would be a stupid behavior, would be bad investing, would be seriously limiting his own long term wealth. Do you have any doubt Biglari is not stupid? Do you have any doubt Biglari is a great investor? Do you have any doubt Biglari knows how to maximize his own long term wealth?

And don’t be mistaken: Biglari has a wonderful business! If you have any doubt about this, read link01’s post again and again.


You don't have to be stupid to do really stupid shit.

Gio, sorry to say but you are the master of platitudes.
Title: Re: BH - Biglari Holdings
Post by: tombgrt on July 27, 2014, 04:07:09 AM
The Lancashire episode demonstrated that your judgement of entrepreneurs is not infallible. But instead of being cautious, the next investment you make is based solely on your judgement of a highly controversial entrepreneur that everybody here is trying to warn you about. In defense of your investment decision you spend half of your time on this forum praising mr. Biglari post after post and by doing so you are effectively maneuvering yourself into a position where it will be very difficult to change your mind about him. Hence somebody mentioning the risk of cognitive dissonance.

If the biggest (only?) risk in your investment process is that you are sometimes wrong when judging people, why would you a) invest in somebody who is highly controversial in the first place and b) work yourself into a position where all you do is defend the guy? Wouldn't the inverse process be much safer? Only invest in the most reputable businessmen and always try to find reasons to knock them of their pedestal.

It looks like you are inadvertedly setting up a situation where you maximize the chances of something going wrong. Regardless of who is right about mr. Biglari Sardar.

Quote
Do you have any doubt Biglari knows how to maximize his own long term wealth?

Nobody is doubting that. Question is whether he will do it at your expense or not ;) .

Writser, I liked your post better before the edit. That was exactly how it went down. ;)

Gio, have you met mr. Raina? He is a great compounder, very intelligent and very young! He also talks in terms we value guys appreciate.
Title: Re: BH - Biglari Holdings
Post by: writser on July 27, 2014, 04:13:52 AM
Haha, I didn't want to make my post too rude so I removed it again :) . I agree with you though. Selling a 25% portfolio stake at far lower prices the same morning the CEO announces his retirement doesn't sound rational to me. It was consistent with Gio's previous posts, sure, but not a rational assesment of the business.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 04:45:22 AM
Once again, this is not rational.
I have repeated over and over again that I look for 2 things:
1) a great entrepreneur
2) a business that gives him/her steady and safe fcf
And I have always said that I require BOTH.
When Brindle resigned, Lancashire was no longer what I look for. Period.

The real take away, that evidently you have missed, is this one:
Notwithstanding all the work and hours I had put into the effort of understanding Lancashire, as soon as it was no longer what I look for, I sold.

I never said my judgment is infallible… Far from me! But the truth is this: if I have 7 Lancashire, in which my judgment proves to be flawed and each time I lose the money I lost in Lancashire, then I have 3 investments in which, instead, my judgment proves to be right, results overall will be very satisfactory indeed.

If the biggest (only?) risk in your investment process is that you are sometimes wrong when judging people, why would you a) invest in somebody who is highly controversial in the first place and b) work yourself into a position where all you do is defend the guy? Wouldn't the inverse process be much safer? Only invest in the most reputable businessmen and always try to find reasons to knock them of their pedestal.

Now, tell me of another thread where an investment is more attacked than BH… Not easy to find, right? The reason I read every post of detractors’ is exactly because I want to be aware of every possible risk!
Then, let’s put it this way: if you find the home of your dreams, in the neighborhood of your dreams, in the city of your dreams… and someone shouts: “Move away… because 10 years, 3 months, 2 weeks, and 3 days from now an asteroid is destined to hit you!!”… and you don’t decide to move to a home that you like far less, in a neighborhood that you like far less, in a city that you like far less… who is behaving irrationally?

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 04:56:06 AM
Gio, sorry to say but you are the master of platitudes.

Tom,
I don’t understand… You have already expressed very well your thoughts about what I write in my posts… I guess everyone on this board already knows that you think I write platitudes… Why do you go on repeating and underlying that concept? Probably, but it is only a guess, you do so because you care to let also new members know…?! ;D ;D

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 05:15:07 AM
You speak of rationality and LRE in the same sentence?  :o Lancashire suddenly ceased what it was because Brindle left? How much of an impact do you think exactly Brindle had those last few months/years with the exact same team, operations and culture in place? If you think Brindle was worth a 30% premium (you bought at +- 800 GBX yet don't buy now) I simply don't know what magical powers you think Brindle brought to the table! LRE is simply a good insurer with great corporate culture that is likely to do very well for quite some time.

Maybe… But the simple fact is that I am not sure… I run two businesses… And my idea of the difference I make in their performances is much more than… 30%… Unless, of course, you meant 30%… annual!! ;D ;D
You surely know Lancashire much better than I do, and you might be positive about what you have just said…
Let’s say that, when I invest in businesses through the stock market, I like to be redundant in the quality of what I look for: why should I accept only 2), if I can get somewhere else both 1) and 2)?

Of course, answer my question only if it is not too big a platitude for you!! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 05:23:11 AM
Selling a 25% portfolio stake at far lower prices the same morning the CEO announces his retirement doesn't sound rational to me.

Remember that I average down… You don’t know my cost… And yet you judge… I am not saying I didn’t lose money. I have always admitted I lost money.

I am up 11% this year. After compounding my firm’s equity at a CAGR of 20% for the last three years.

Despite the fact I write platitudes, results are not that bad… ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 05:36:51 AM
Gio, have you met mr. Raina? He is a great compounder, very intelligent and very young! He also talks in terms we value guys appreciate.

If I say I have no idea what you are talking about… sounds like another platitude? ;D ;D

Gio
Title: Re: BH - Biglari Holdings
Post by: writser on July 27, 2014, 05:43:16 AM
Once again, this is not rational.
I have repeated over and over again that I look for 2 things:
1) a great entrepreneur
2) a business that gives him/her steady and safe fcf
And I have always said that I require BOTH.
When Brindle resigned, Lancashire was no longer what I look for. Period.

The real take away, that evidently you have missed, is this one:
Notwithstanding all the work and hours I had put into the effort of understanding Lancashire, as soon as it was no longer what I look for, I sold.

I didn't miss that. I said it was a consistent approach - but not rational. Every business is worth a price, with or without a great CEO at the helm. You value Lancashire at a couple of billion with mr. Brindle but at zero without him. Such a black-and-white approach will lead you to make stupid decisions like selling a 25% portfolio stake in a single morning regardless of price. What your costs were or if you averaged down doesn't matter: I hope you even made money. I just think the thought process is flawed. Your past results are irrelevant in that context. I didn't judge the results.

The comparison with a dream house doesn't make sense to me. You are saying you would buy that regardless of the asteroid risk because you love it, right? That doesn't make it a good investment though !! If you are looking to buy real estate solely to make money you'd be impersonal about its location and if several contractors warn you the foundations might be rotten you'd rather buy something else. Especially if your previous mansion just collapsed :) .
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 05:59:22 AM
I didn't miss that. I said it was a consistent approach - but not rational. Every business is worth a price, with or without a great CEO at the helm. You value Lancashire at a couple of billion with mr. Brindle but at zero without him. Such a black-and-white approach will lead you to make stupid decisions like selling a 25% portfolio stake in a single morning. What your costs were or if you averaged down doesn't matter: I hope that you even made money. I just think the thought process is flawed. Your past results are also irrelevant in that context.

writser,
it clearly is not so… I simply found a better place for my capital… what I think might turn out to be a better place… As I have always said, I might be wrong!
I ask you the same question I have asked Tom:

why should I accept only 2), if I can get somewhere else both 1) and 2)?

Of course my past results are not irrelevant at all… because my thought process hasn’t changed! ;)

The comparison with a dream house doesn't make sense to me. You are saying you would buy that regardless of the asteroid risk because you love it, right? That doesn't make it a good investment though. I hope that is not the way you consider your stock picks. If you are looking to buy real estate solely to make money you'd be impersonal about its location and if people from the neighbourhood warn you the foundations are rotten you'd rather buy something else.

Well, not only I read every post by detractors… if you have noticed, I also try to answer as many as I can… because the process of writing the answers to those posts helps me very much to understand if they are prophesizing an asteroid, or are true warnings about rotten foundations… I hope this answer is plain enough to let you understand which conclusion I have reached till now. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: writser on July 27, 2014, 06:07:04 AM
it clearly is not so… I simply found a better place for my capital… what I think might turn out to be a better place… As I have always said, I might be wrong!

Back in April you mentioned you suddenly had a boatload of cash and no good ideas. You also said that you wouldn't buy back Lancashire at that point - regardless of price. As far as I am concerned that is not "finding a better place for your capital". It is also not a case of "why accepting only 2) when you can get 1) and 2) somewhere else".  I would call that "dumping a huge position at any price".
Title: Re: BH - Biglari Holdings
Post by: Charlie on July 27, 2014, 06:12:04 AM
I always thought that the real reason Gio gets comfortable with Biglari is because as an Italian he was used to Berlusconi.  ;)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 06:28:57 AM
writser,
the problem is you are judging a thought process… without knowing it!
So, now let me try to summarize it as best as I can:

I buy businesses to hold them as long as possible.

I run two businesses every day.

This activity doesn’t let me jump in and out of stocks frequently.

I wouldn’t be able to muster the required confidence, and therefore I would make many mistakes.

If you buy and hold, to get satisfactory results, you must choose well.

JNJ, KO, WMT, etc. most probably won’t do.

My idea of choosing well is small to medium caps, with still great potential for growth.

They are risky: LRE is no JNJ, KO, WMT… LRE was founded the year I founded my company…

Then, how to reduce the risk? Two ways:
a) To be always very conscious about the price I pay
b) To require also an outstanding owner/manager

In fact, I require 1), 2), and 3): an outstanding owner/manger, steady and safe fcf, a good price.

If I’d invest in JNJ, KO, WMT, 1) would clearly not be a requisite.

Adding that requisite, and concentrating on small to medium caps, which are inherently riskier, I hope to achieve better results, running almost the same level of risk.

I am not saying my thought process is good for you, or anyone else. There are plenty of ways you certainly might do much better! And, probably, if I quit running my businesses, and I concentrate only on trading, I might become richer, faster!… But I love what I do. Some additional percentage points at the end of the year are no good reasons for a change…

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 06:37:26 AM
it clearly is not so… I simply found a better place for my capital… what I think might turn out to be a better place… As I have always said, I might be wrong!

Back in April you mentioned you suddenly had a boatload of cash and no good ideas. You also said that you wouldn't buy back Lancashire at that point - regardless of price. As far as I am concerned that is not "finding a better place for your capital". It is also not a case of "why accepting only 2) when you can get 1) and 2) somewhere else".  I would call that "dumping a huge position at any price".

Almost the very same day I sold LRE, I also bought LMCA, GLRE, TPRE, and more ALS. ;)

They might not have been great ideas, because 3) was not truly a bargain price… Yet, I preferred GLRE at 1.2 x BVPS with Einhorn to LRE at 1.4 x BVPS without Brindle… Is that so difficult to understand? ???

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 06:52:09 AM
I always thought that the real reason Gio gets comfortable with Biglari is because as an Italian he was used to Berlusconi.  ;)

Berlusconi had done exceptionally well for his shareholders, while he ran his companies… When he became a politician, two things happened:
1) He wasn’t able to do almost any good to his country
2) His companies’ performance started disappointing
Evidently, in politics those who predict asteroids win! ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: premfan on July 27, 2014, 08:26:42 AM
Hello Gio,

You seem like a great businessman and a rational investor.  Hence I don't see why you seek approval and validation in your approach. Continue compounding and living the dream. Forcing people to see the world in your view is a recipe for argument and useless semantics.  If your desire is to be a teacher or future investment guru then results speak louder than words. I would encourage you to build a public track record. This would satisfy your urge to preach your thoughts ( via shareholder letters).

It seems to me the context of the majority of your posts is teaching. You enjoy explaining your investment process. I bet you would write brilliant shareholder letters. Maybe investigate how to get in the public domain. This would build you credibility and a platform to teach to your followers.

premfan
Title: Re: BH - Biglari Holdings
Post by: cobafdek on July 27, 2014, 08:38:52 AM

Gio, sorry to say but you are the master of platitudes.

Platitudes?  Perhaps.  But platitudes embedded within 24-carat prose are no longer platitudes. 

In a similar vein, emoticons are generally annoying.  Yet, somehow, when wielded by Gio, they are no longer annoying.  It all adds up to what is Gio-style.

I, too, look forward to shareholder letters by Gio.

I can't tell who is winning this debate.  All I know is I don't want it to end.  Keep it up everyone, and pass some more popcorn.
Title: Re: BH - Biglari Holdings
Post by: txitxo on July 27, 2014, 09:02:56 AM
  Come on, guys, lay off Gio. I think that the strategy he is following is quite rational.

   Most people here will agree that no matter how many copies of Security Analysis are sold every year, there is only a small fraction of investors in the world who can consistently generate alpha during long periods of time. And only a handful of those can work the magic with very large amounts of money. Look at what Buffett has done when looking for successors. He could have hired a small army of smart, highly rational people out of college, and then train them to invest using his style for 20 years. But that does not work. Great investors are born, not taught, and their skill is extremely scarce.

  Gio's approach is to carefully identify a subset of them, the so called owners-managers, and then make sure, after thorough analysis, that the vehicles they use (their companies) are not too expensive. That's a very solid investing approach, almost guaranteed to significantly beat the market in the long term with a fraction of the work (and the distress) required by other methods. Gio says that he just  behaves like a businessman, etc. That's his story, but in the end, what the numbers say is that he is buying consistent, diversified, long term alpha at cheap prices.

 It therefore makes sense, using his framework, to sell when Brindle retires. Independently of how expensive or cheap the company is, there is no guarantee the new team will produce the same long term returns.

    Regarding BH, yes, Biglari is likely to keep generating significant alpha in the future. But his long term track record indicates that most of that overperformance will go to his pocket, and not the shareholders'...


 


Title: Re: BH - Biglari Holdings
Post by: link01 on July 27, 2014, 10:03:50 AM
Hello Gio,

You seem like a great businessman and a rational investor.  Hence I don't see why you seek approval and validation in your approach. Continue compounding and living the dream. Forcing people to see the world in your view is a recipe for argument and useless semantics.  If your desire is to be a teacher or future investment guru then results speak louder than words. I would encourage you to build a public track record. This would satisfy your urge to preach your thoughts ( via shareholder letters).

It seems to me the context of the majority of your posts is teaching. You enjoy explaining your investment process. I bet you would write brilliant shareholder letters. Maybe investigate how to get in the public domain. This would build you credibility and a platform to teach to your followers.

premfan
no doubt that whenever gio gets actively involved in a thread it elicits a lot of interest! that's especially true when its a stock he has a position in & conviction in (actually, does gio ever have a stock position he doesn't also have conviction in?). his passion, generosity, & unfailing gentlemanly conduct is contagious. look at how the lre thread has all but dried up & withered since he sold & lost interest, despite the oft brilliant commentary from twa.

I don't get the same impression at all that gio seeks approval or validation or is interested in forcing people to share his world view. I think he just genuinely enjoys & seeks to learn from the debate between different & often diametrically opposed viewpoints.
Title: Re: BH - Biglari Holdings
Post by: writser on July 27, 2014, 10:51:59 AM
it clearly is not so… I simply found a better place for my capital… what I think might turn out to be a better place… As I have always said, I might be wrong!

Back in April you mentioned you suddenly had a boatload of cash and no good ideas. You also said that you wouldn't buy back Lancashire at that point - regardless of price. As far as I am concerned that is not "finding a better place for your capital". It is also not a case of "why accepting only 2) when you can get 1) and 2) somewhere else".  I would call that "dumping a huge position at any price".

Almost the very same day I sold LRE, I also bought LMCA, GLRE, TPRE, and more ALS. ;)

They might not have been great ideas, because 3) was not truly a bargain price… Yet, I preferred GLRE at 1.2 x BVPS with Einhorn to LRE at 1.4 x BVPS without Brindle… Is that so difficult to understand? ???

Gio

That would be completely understandable. But then why do you first tell us you don't know what to do with your boatloads of cash? And why tell us you won't buy back Lancashire at any price? Today you make it sound as if you swapped into something else based upon a conscious relative valuation. That's not the impression I got at the time. Guess I am wrong :) . Cheers.
Title: Re: BH - Biglari Holdings
Post by: Parsad on July 27, 2014, 06:29:08 PM
  Come on, guys, lay off Gio. I think that the strategy he is following is quite rational.


I don't think people are trying to specifically pick on Gio.

What you have is an investment manager who did everything he could in his early days to mimick Buffett...right down to the font and spacing used in the Berkshire annual reports.  Every thing he said and did sounded right!

Then when he began his foray using a public vehicle to acquire other businesses, once again, the prose, deeds, conduct were identical.

Then something started to unravel and the chinks in the armor began to appear.  Not a simple collapse in ethics, but massive breaches to install compensation plans, get control at all costs, and burnish a name rather than the reputation!  At this point, those sucked into the vortex began arguing that he never said he was Buffett. 

Gio, along with Ragu, and a handful of others are defenders of the faith.  Nothing wrong with that and completely entitled to say what they believe.  But then there are a number of others, including myself but I really don't care at this point unlike in the past, who can't swallow the chopped liver the defenders are feeding us. 

So no one is picking on Gio...they just don't like what he is feeding us!  Cheers!   
Title: Re: BH - Biglari Holdings
Post by: shalab on July 27, 2014, 06:39:30 PM
I love Gio - looking forward to him listing his company in OTC  ;D. He is ethical and honest and is investing his company's money.

Ragu also seems to be a decent value investor and shares his opinions openly - he has link to his blog in his profile.

Biglari is another animal altogether(IMHO) - his maneuvers should be added to 'financial shenanigans' - he has been very clever in how he played the game.

  Come on, guys, lay off Gio. I think that the strategy he is following is quite rational.


I don't think people are trying to specifically pick on Gio.

What you have is an investment manager who did everything he could in his early days to mimick Buffett...right down to the font and spacing used in the Berkshire annual reports.  Every thing he said and did sounded right!

Then when he began his foray using a public vehicle to acquire other businesses, once again, the prose, deeds, conduct were identical.

Then something started to unravel and the chinks in the armor began to appear.  Not a simple collapse in ethics, but massive breaches to install compensation plans, get control at all costs, and burnish a name rather than the reputation!  At this point, those sucked into the vortex began arguing that he never said he was Buffett. 

Gio, along with Ragu, and a handful of others are defenders of the faith.  Nothing wrong with that and completely entitled to say what they believe.  But then there are a number of others, including myself but I really don't care at this point unlike in the past, who can't swallow the chopped liver the defenders are feeding us. 

So no one is picking on Gio...they just don't like what he is feeding us!  Cheers!   
Title: Re: BH - Biglari Holdings
Post by: QLEAP on July 27, 2014, 08:02:15 PM

All may be true, but I have so rarely seen someone so passionate in the defense of a CEO.
Just trying to figure out why. Ultimately this will all sort itself out via SEC fillings and BH events.

This is fast becoming about as useful a thread as the one on Sears or the one on LVLT.

Well, Ragu has definitely put his money where his mouth is (I believe >50% of his portfolio is in BH) and he is in it for the long haul.

My last word on this thread (and not directed at you Myth):

what I find disconcerting is that there are folks on this thread who believed Chad Wasilenkoff was the second coming of Buffett just a year earlier ignoring the excessive compensation, share price destruction yada yada yada. Yet they are out here on this thread pontificating on Sardar/BH with no position in the stock. Why not throw water on your burning house before you help your neighbor?

Besides, BH has fared much much better than FTP. We will just have to wait and see how well he does.

PS: No position in BH and I have mixed feelings about Sardar
Title: Re: BH - Biglari Holdings
Post by: bargainman on July 27, 2014, 11:04:14 PM
Quote
edit: oh, & if biglari continues with these rights offerings below book value its going to take some adjustments to calc bh's real growth in bvps when attempting to plot his scorecard on that metric. I thought it was interesting that he said he'll continue to make use of rights offerings at least until he's able to push thru a shareholder vote for a dual class of stock, tho I don't remember where I read that at this time

My guess is that he will continue to do rights offerings so he can get more of the company when he has the capital at a lower price. Makes perfect sense - IMO.



Well, to calculate BVPS I simply use the number of shares in the first page of the 10-K filing. Just like Biglari himself has suggested to do. That number has increased from 2010 to 2013, and, if Biglari keeps making use of these rights offerings, it will get larger and larger.

Gio

I don't quite understand this logic. In particular doesn't each rights offering actually reduce book value per share? For each share he is issuing, he is only getting 250/420 worth of the value into book which by default means it should be reducing book value per share is that not correct? What does his compensation say about adjustments for these sorts of rights offerings? Do you know?
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 11:26:59 PM
Hello Gio,

You seem like a great businessman and a rational investor.  Hence I don't see why you seek approval and validation in your approach. Continue compounding and living the dream. Forcing people to see the world in your view is a recipe for argument and useless semantics.  If your desire is to be a teacher or future investment guru then results speak louder than words. I would encourage you to build a public track record. This would satisfy your urge to preach your thoughts ( via shareholder letters).

It seems to me the context of the majority of your posts is teaching. You enjoy explaining your investment process. I bet you would write brilliant shareholder letters. Maybe investigate how to get in the public domain. This would build you credibility and a platform to teach to your followers.

premfan
no doubt that whenever gio gets actively involved in a thread it elicits a lot of interest! that's especially true when its a stock he has a position in & conviction in (actually, does gio ever have a stock position he doesn't also have conviction in?). his passion, generosity, & unfailing gentlemanly conduct is contagious. look at how the lre thread has all but dried up & withered since he sold & lost interest, despite the oft brilliant commentary from twa.

I don't get the same impression at all that gio seeks approval or validation or is interested in forcing people to share his world view. I think he just genuinely enjoys & seeks to learn from the debate between different & often diametrically opposed viewpoints.

Quote
Reading makes a full Man, Meditation a profound Man, discourse a clear Man
--Ben Franklin

This is the only reason why I like contributing to the board so much: because I have found out that the process of a) writing about an investment thesis of mine, b) receiving feedbacks from many people around the world, with different cultural and working backgrounds, and c) reasoning about their responses and answering back, is a great way to get “clearness” of mind, and therefore conviction about an investment opportunity.

Besides this, I really don’t care about approval and validation, I don’t care about public fame or a public track-record, I certainly don’t care about forcing the way I see the world on anyone (I even doubt there is a “way” I look at the world…), and of course I couldn’t care less about teaching platitudes to anyone!! ;)

All I care for:
1) To live many joyful moments with the people I love
2) To compound my capital at 15% annual for the next 45 years

PS
I must admit I also find arguing with people who disagree with me… until they finally agree with me… to be much fun!! ;D ;D ;D

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 27, 2014, 11:49:18 PM
And why tell us you won't buy back Lancashire at any price?

Quote
The Master’s Eye will do more Work than both his Hands
--Ben Franklin

This might be another platitude… Actually, also Ben was accused by his detractors to be the master of platitudes… at least one thing we have in common!! ;)

Of course, for the JNJ, KO, WMT of the world that quote might not be true anymore…
Anyway, I think it is clear by now the companies I look at are still much younger, much smaller, and much riskier (of course, they also have imo the possibility of growing much faster).
Therefore, both if you look for downside protection, someone who knows all the risks and stirs the boat away from them, and if you look for future success, someone who knows all the opportunities for growth and stirs the boat towards them, I think you'd better demand a very capable and reliable “Master” at the helm.

Unfortunately, our knowledge of public companies is somewhat limited. And the only way we could judge a “Master” is by what he has achieved in the past… I know what Mr. Brindle has accomplished since he founded LRE and in the years before its founding… while I know nothing about Mr. Maloney...

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 28, 2014, 12:04:28 AM
I don't quite understand this logic. In particular doesn't each rights offering actually reduce book value per share? For each share he is issuing, he is only getting 250/420 worth of the value into book which by default means it should be reducing book value per share is that not correct? What does his compensation say about adjustments for these sorts of rights offerings? Do you know?

Sorry, what I meant is this:

Each rights offering increases the number of shares outstanding. Yet, in my calculation of a 21% CAGR in BVPS over the last three years I have already considered their dilutive effect and a larger number of shares outstanding at the end of 2013 than at the end of 2010.

I don’t know exactly how these rights offerings will effect Biglari’s compensation. Maybe Ragu does and might shed some light on this topic.

Gio
Title: Re: BH - Biglari Holdings
Post by: wachtwoord on July 28, 2014, 04:52:47 AM
Selling LRE: selling to swap into something else, or selling because you think the market price is above the value is rational. Selling at any price is not. There is a inherent value to any business and selling with for example 99% discount to that is irrational (except if you know of an investment with an even larger discount).
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 28, 2014, 05:09:48 AM
Selling at any price is not. There is a inherent value to any business and selling with for example 99% discount to that is irrational (except if you know of an investment with an even larger discount).

Ok, let’s put it this way: do you believe in staying inside your circle of competence? What’s the price you are willing to pay for something outside your circle of competence? Difficult to say, right? And what if I say that an insurer which achieves CRs around 70%, once left by the “Master” who has achieved such unbelievably low CRs for almost 20 years, suddenly falls outside my circle of competence?

Gio
Title: Re: BH - Biglari Holdings
Post by: tombgrt on July 28, 2014, 06:08:05 AM
Selling at any price is not. There is a inherent value to any business and selling with for example 99% discount to that is irrational (except if you know of an investment with an even larger discount).

Ok, let’s put it this way: do you believe in staying inside your circle of competence? What’s the price you are willing to pay for something outside your circle of competence? Difficult to say, right? And what if I say that an insurer which achieves CRs around 70%, once left by the “Master” who has achieved such unbelievably low CRs for almost 20 years, suddenly falls outside my circle of competence?

Gio


If your circle of competence is dependent on the manager running the company, you don't have a circle of competence in the first place. Don't kid yourself.
For all I care it's ok not to have a circle of competence, just don't tell yourself you have it solely because you rely on the track record of a CEO and his kind letters to shareholders, that just doesn't cut it.

I do appreciate your endless optimism! (no sarcasm here) I don't think there are a lot of millionaires here who even dare to think of achieving a $1billion net worth (assuming $2million equity in your company that is 100% personally owned compounded at 15% for 45 years). Good luck, you'll need it IMO as it will not be an easy feat.


All may be true, but I have so rarely seen someone so passionate in the defense of a CEO.
Just trying to figure out why. Ultimately this will all sort itself out via SEC fillings and BH events.

This is fast becoming about as useful a thread as the one on Sears or the one on LVLT.

Well, Ragu has definitely put his money where his mouth is (I believe >50% of his portfolio is in BH) and he is in it for the long haul.

My last word on this thread (and not directed at you Myth):

what I find disconcerting is that there are folks on this thread who believed Chad Wasilenkoff was the second coming of Buffett just a year earlier ignoring the excessive compensation, share price destruction yada yada yada. Yet they are out here on this thread pontificating on Sardar/BH with no position in the stock. Why not throw water on your burning house before you help your neighbor?

Besides, BH has fared much much better than FTP. We will just have to wait and see how well he does.

PS: No position in BH and I have mixed feelings about Sardar

If you are talking about me among others, I sold the stock during 2013 at prices multiples of what it is now. It was a huge mistake and lesson ... and ... exactly why I try to warn Gio of the dangers of focussing on management too much. Sooner or later he will get burned if he believes his circle of competence solely comes from believing in management.

I wish there was a very vocal "pretentious asshole" (as some might think of me that way now!  ;)) back then in the FTP thread who called me a fool, maybe I would have realized my mistake sooner. Maybe there was one (some definitely said something) and maybe I was lost anyway, I don't know. I think being an "ass" about things on this forum can have it's advantages. Let me know if you disagree Gio! ;)
Title: Re: BH - Biglari Holdings
Post by: txitxo on July 28, 2014, 06:27:45 AM
  Come on, guys, lay off Gio. I think that the strategy he is following is quite rational.


So no one is picking on Gio...they just don't like what he is feeding us!  Cheers!   

I agree with the critics of Biglari, as I said in my posting:

   Regarding BH, yes, Biglari is likely to keep generating significant alpha in the future. But his long term track record indicates that most of that overperformance will go to his pocket, and not the shareholders'...

But in this thread I was reading about platitudes, Berlusconi, LRE, etc. I don't think that has anything to do with Biglari.... :)
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 28, 2014, 06:34:50 AM
If your circle of competence is dependent on the manager running the company, you don't have a circle of competence in the first place. Don't kid yourself.
For all I care it's ok not to have a circle of competence, just don't tell yourself you have it solely because you rely on the track record of a CEO and his kind letters to shareholders, that just doesn't cut it.

Ok, if you don’t want to talk about “circle of competence”, I will call it "whatever gives me great conviction in a business future prospects". When we are talking about insurance, management is very important imo. Management is very important in a lot of other businesses as well… (Just out of curiosity, Tom, have you ever tried to run a business yourself? When you say management is not important, is it because you have read that somewhere, or because you are running a business that goes on autopilot, without the need of any strategic decision by you?)... But insurance results in particular are very subject to management’s behavior and discipline. 70% CRs are like 20% annual returns in investing: would you invest in The Baupost Group, if Mr. Klarman were to leave it?

The fact I require a great manager (to have great conviction in a business future prospects) doesn’t mean I rely solely on a great manager. I have said many times what I look for, besides a great manager! Otherwise, I would have invested in DELL, in SHLD, and probably in FTP. But I did not. ;)

Gio
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 28, 2014, 06:51:29 AM
I do appreciate your endless optimism! (no sarcasm here) I don't think there are a lot of millionaires here who even dare to think of achieving a $1billion net worth (assuming $2million equity in your company that is 100% personally owned compounded at 15% for 45 years). Good luck, you'll need it IMO as it will not be an easy feat.

Ahahahahah!!!! You know how the saying goes: you might have a goal, but what’s truly important is that you should enjoy the travel!

Ops… guess this is just another platitude of mine! ;D ;D

Gio
Title: Re: BH - Biglari Holdings
Post by: tombgrt on July 28, 2014, 07:04:31 AM
I know that you look at other things as well Gio, my point is that you can't partly disregard other aspects because management is good. You will now tell me that you don't and that management is simply a requirement but from what I have read I simply do think that you give way too much weight to management and what they say and do. I've learned the hard way that it's the numbers that speak the loudest and help to stay objective and give an objective view (unless there is fraud involved of course! ;)). LRE will be a great case in that regard: Will it slip into mediocrity quickly or will Brindle's talent leave a lasting effect for the foreseeable future?

Also, I have never said management is not important. It is one of many important factors. I do however believe that management is more than it's CEO and that there are things like culture that are equally, if not more, important for the lasting success of a business. We just seem to differ too much in opinion on this subject.
Title: Re: BH - Biglari Holdings
Post by: giofranchi on July 28, 2014, 07:25:39 AM
Listen, Tom… I really don’t want to sound polemic here… I know you are very young and very smart… Period.

In my first 10 years as a business owner and manager I think I have added much to th