Author Topic: BH - Biglari Holdings  (Read 1313674 times)

giofranchi

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Re: BH - Biglari Holdings
« Reply #510 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
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ragu

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Re: BH - Biglari Holdings
« Reply #511 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

giofranchi

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Re: BH - Biglari Holdings
« Reply #512 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
« Last Edit: May 16, 2014, 06:26:37 AM by giofranchi »
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ragu

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Re: BH - Biglari Holdings
« Reply #513 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

giofranchi

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Re: BH - Biglari Holdings
« Reply #514 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
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OracleofCarolina

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OracleofCarolina

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Re: BH - Biglari Holdings
« Reply #516 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.

giofranchi

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Re: BH - Biglari Holdings
« Reply #517 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
« Last Edit: June 11, 2014, 12:30:11 AM by giofranchi »
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wachtwoord

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Re: BH - Biglari Holdings
« Reply #518 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?
"Beware of he who would deny you access to information, for in his heart he dreams himself your master"

giofranchi

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Re: BH - Biglari Holdings
« Reply #519 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
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