Author Topic: BH - Biglari Holdings  (Read 1447585 times)

giofranchi

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Re: BH - Biglari Holdings
« Reply #670 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
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writser

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Re: BH - Biglari Holdings
« Reply #671 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 ;) .
« Last Edit: July 27, 2014, 03:50:55 AM by writser »
I'm sorry if I have offended you. Please contact this forum's safe space coordinator to work things out.

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tombgrt

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Re: BH - Biglari Holdings
« Reply #672 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.

tombgrt

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Re: BH - Biglari Holdings
« Reply #673 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.

writser

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Re: BH - Biglari Holdings
« Reply #674 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.
I'm sorry if I have offended you. Please contact this forum's safe space coordinator to work things out.

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giofranchi

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Re: BH - Biglari Holdings
« Reply #675 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
« Last Edit: July 27, 2014, 05:38:10 AM by giofranchi »
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giofranchi

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Re: BH - Biglari Holdings
« Reply #676 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
« Last Edit: July 27, 2014, 05:02:11 AM by giofranchi »
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giofranchi

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Re: BH - Biglari Holdings
« Reply #677 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
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giofranchi

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Re: BH - Biglari Holdings
« Reply #678 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
« Last Edit: July 27, 2014, 05:25:19 AM by giofranchi »
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giofranchi

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Re: BH - Biglari Holdings
« Reply #679 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
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