+ Watch BH
on My Watchlist
The Company is engaged primarily in the ownership, operation and franchising of Steak n Shake restaurants.
Perhaps this sounds like sour grapes, but I really, really think this kid is not the second coming of the oracle, Warren Buffett. For one thing, unlike Mr. Buffett, there is no evidence that Biglari has come up with many new ideas of his own. Every play seems an exact replica of know Buffett schemes. Second, Biglari atended a third-rate school. I know, I know, it sounds snooty. But ask yourself, if you were a Persian kid from a wealthy family AND you attended a third-rate school, well.... Third, all of his shenanigans are finally catching up with him. 25% of any increase in book?? Get a break. This kid needs to be sent back to elementary school.
Apparently schools don't really matter. They are still preaching the efficient market hypothesis in the "first rate" schools......come on, even Eugene Fama knows it's now a joke. Have you seen Biglari's 10 year track record? I suggest you do a bit more research.
What is his ten year track record? Truth is, I really don't know. Tell me.I do know that famous quip that "pigs get slaughtered" and that his new compensation deal will scare of cheap capital so that Biglari has foolishly limited himself for the sake of his greed. I know that school status does not matter much, especially when you have real world accomplishments to fall back on and that educational status conferred from tony schools means little once you've got your foot in the door. But it's a filter. It speaks to his brain-power and work ethic, not in any particular order, if it's also paired with the assumption that he was the beneficiary of the opportunities provided by an upper middle class secondary education in the US. But again there is a rebuttal which might say that he did not find his niche in parochial demands of secondary schooling.In his defense also, Persian kids as a group do not stray far from home and family to go to college. So perhaps this is what happened here. Biglari didn't get into Rice or something and needed to be close to his family.What I see is a kid who is being touted as being on par with the master, the very same one who established all of the principles of modern value investing, and I also see a snot-nosed kid who does not deserve that mantle, who has probably made a few good decisions but who has also had an extraordinary run of good luck. I have examined some of his picks. He has typically re-established profitability by dropping capex, an easy trick. The game plan for any company like that once you have control is simple. The private equity guys do the same crap. You drop capex to the minimal amount required to satisfy the health inspectors enough to keep the doors open. You sell off any properties at locations where the highest and best use is no longer the franchise. You take that cash and maybe you pay down debt. This formula is fine if you are in the for a quick buck. But it is not a way to make lasting shareholder value. Dropping the capex misstates free cash flow by artificially lowering the number beyond what it should be. Given enough time, sales will drop and company goodwill be damaged.A long-term view of establishing shareholder value might take the exact opposite approach. Spend a ton in capex. Keep the stores in tip-top shape thereby enhancing goodwill which can then be monetized by increased sales and growth through the franchise side of the business.
I forgot to mention the rather ridiculous reverse split that the kid accomplished to make his share price look like he'd performed in the past. What a joke! First off, the master Buffett may not be shooting straight when he says that a higher share price should not matter. Instead, he always meant that a really high share price provides a stabler investor base. That is probably true, even if it's not been empirically proven. But that's not what we're talking about here. Biglari wanted to be like Buffett. Doesn't want to wait to grow the base -- or more importantly knows that he cannot! -- and so engaged in financial engineering to give himself a higher share price.
I'm certainly no expert. I don't have a background in finance/business. You certainly have a nice long term record here at CAPS so that does say a lot about your abilities. From the little that I can piece together, it appears that the lion fund has generated somewhere around 20% per year(annualized)over the last 10 years. I believe that beats out guys like Mohnish Pabrai. From what blogs I've read, the lion fund has a very low fee structure compared to other partnerships so this adds a great deal to ones final return as well. Again, it is hard to piece all this together. If I had to bet, I would say that 10 years down the road this guy will be much better known than he is today.As for the Buffett comparisons.......well, it he appears to be much more like a Carl Icahn than a Warren Buffet. In the end it is the long term track record that counts......we shall see. Should be interesting to watch this guy.BTW....I'm adding you to my favorites list since you have an excellent long term record here at CAPS......it also appears you are a stock picker rather than a "leveraged etf" player like so many here. I respect that in a player.
I've held BH since it was SNS at $11 a share. I can tell you, as a long term 20+ year time frame i had myself, I was beyond pissed at the reverse SPLITS (multiple) that he forced on us through his shares and his lion fund. I had the utmost respect for Sardar and I actually like eating at steak n Shake - which is how i found him in the first place. I have no doubt that 10 years from now this company will be more berkshire-esq....However, Buffett he is not. Buffett would never play games with the reverse splits like that and kill his shareholders long term value. Buffett also would NEVER wage war publically with other companies - Freemont Insurance, and now cracker barrel - WB has been well documented as saying he is buying management just as much as he's buying companies. Icahn is a good comparison, but icahn earned his reputation through a long track record of making his shareholders very wealthy.... not reverse splitting his way there. Sardar said it all in his annual report...basically it's quicker and easier for a $200 stock to go to $400 than it is for a $20 stock to go to $40. That's when i sold. at $423. Took my profits and left. SB is young, and there is nothing wrong with that. But its like calling sydney crosby the next gretzky... he may move like him and have hands like him, but until he hoists as many Cups and wins as many championships, he isn't the next gretzky. plus crosby cries like a sissy. and i'm starting to think Sardar does the same. I may go back in this again in the future, but until then, I would rather make money with other people. I'm still long in CAPS, and won't close it because this is a game. but i no longer have my real money in there.
I also wish there was a way for me to take my comments off my pick without closing it.
People forget that in his late 20's and early 30's Buffet did hostile moves at Dempster Mills, Stanborn Maps, a small Bank and Washington Post, a farm insurance company that I dont remember the name of. There was also Berkshire Hathaway, he kicked old Seabury Stanton out the front door. He caught alot of flack for laying off employees at Dempster. Once he made a name for himself I think deals started coming his way. In the beginning it seems like they both have similar approaches. School means nothing, greatest companies of our generation were started by dropouts. Biglari's compensation plan is very close to Buffett partnership compensation plan. Once Biglari has a similar inflation adjusted net worth he may be willing to take on the same comp plan that Buffet did after ending the partnerships. I think that is about 100 million inflation adjusted. I might be off on the number just a guess.
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