Author Topic: BH - Biglari Holdings  (Read 1314826 times)

ragu

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Re: BH - Biglari Holdings
« Reply #330 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




giofranchi

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Re: BH - Biglari Holdings
« Reply #331 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
« Last Edit: December 05, 2013, 06:08:00 AM by giofranchi »
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gg

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Re: BH - Biglari Holdings
« Reply #332 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...

giofranchi

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Re: BH - Biglari Holdings
« Reply #333 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
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rkbabang

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Re: BH - Biglari Holdings
« Reply #334 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.

giofranchi

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Re: BH - Biglari Holdings
« Reply #335 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
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wescobrk

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Re: BH - Biglari Holdings
« Reply #336 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.

ragu

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Re: BH - Biglari Holdings
« Reply #337 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 (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

bookie71

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Re: BH - Biglari Holdings
« Reply #338 on: December 05, 2013, 12:19:03 PM »
It is nothing but old fashioned "green mail" from the 80's.
Always remember, Pigs get fat and hogs get slaughtered.

giofranchi

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Re: BH - Biglari Holdings
« Reply #339 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
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