They've made some major strategic mistakes and I think it's back to the drawing board for them. The sports idea made sense- large market and very fragmented. They thought they could consolidate. The problem is that it is fragmented because it's hard to create a sustainable competitive advantage. I doubt they can create a scalable platform there. Energy efforts were fine and doing very well until oil crashed. The oil companies have a conservative level of debt and should make it through the downturn. I wonder if they will buy more energy companies on the cheap or take the company in a different direction. The company has $200 million in cash and Warren L and company are very bright people with a good track record. SXCL makes up about half of SPLP value. My bet is that they figure out how to re-position the company and buying here will work well for good longer term returns.
I think he's buying shares to keep the stock price up in advance of the annual meeting. Think about how aggressively he bought shares when it was in the upper 300's. I believe then he was getting the stock price up as he prepared his slides in response to Groveland. Another poor capital allocation decision on his part- he had BH (the company) sell shares at 250, put the money into the fund and then had the fund pay 400 using the proceeds from the 250 offering. I also would like people to look into how he used company funds to buy up shares of Swenson's controlled companies. SB wasted several million dollars of shareholder money in order to try and intimidate Swenson.
JD, I've followed BH for years. i bought into the SB story years ago and sounded much like you do today. At the time, there were people warning me that he's an ego maniac and that his actions will not match the words of his annual letters.
I've found in time, that they were correct. I was wrong to buy into the story SB had crafted to describe himself. I've sold my BH and am now following the story to see how it plays out.
I've read Smacy for years- he's one of the few yahoo id's that I recognize. I always appreciate hearing his perspective. He's thoughtful and reasoned in his opinion. Most of the these boards are taken up by blowhards who like to flame throw insults, probably out of boredom in their life. that's pretty much how i see you.
Are you following the recent changes at COSN? Dormant for a long time and Steel is transforming it now. Still early in the story.
It interesting- it's now a profitable operating company with NOL's, cash and stock in NATH.
It's cheap and worth a look if you have time.
If I still owned shares I would have done the same as you.
I'm eager to see the voting results. I would bet that SB will got the Biglari shares because he'll need to in order to win the proxy.
I agree with you. I've sold all my shares because I want no part of ownership in a company where the CEO takes such advantage of his power. He's outrageous and his greed is equally surprising.
I hope Gabelli takes him to task- he's the only person powerful enough to do so. Groveland is correct in their analysis, however, they lack the credibility and experience to take over.
I saw that SB is cashing out of his CBRL through forwards. I wonder if he's going to put those proceeds into Lion Funds in order to further entrench himself and position for outsized compensation.
SB's presentation confirms, imo, his low level of ethics and fair play. He seems to be squandering a great situation due to his greed and lack of character.
According to the press release yesterday, COSN owns 97% of API. They can now buy the remaining 3% at the same terms.
Also, they are selling their NATH.
The company is now going to be an operating company generating about $7 million in earnings. I believe EBITDA is in the range of $15 million.
It's now a profitable operating company with a lot of cash.
Seems very cheap here.
It seems like Steel and COSN played this one well by gaining commitments on the shares held by the other funds. I can't imagine anyone wanting to hold a position in API with COSN being in such a control position.
Do you have an opinion on the value of COSN assuming this goes through?
Based on my rough numbers, I put it between $3 and $4 a share.
COSN will get over $11 million cash just from the NATH special dividend announced yesterday. Seems like a lot of value here with our without the API acquisition.
I sold all my BH Friday. His antics continue to concern me. The latest is that he had BH sell stock at 250. Took those proceeds and put them in the Lion Fund. Then he has the Lion Fund use that money to buy shares at ~380. That doesn't seem to make sense to me if your primary focus is BH rather than SB or TLF. The aggressive buying also appears to be trying to drive the stock price up.
Also, he buys two large positions in companies controlled by a fund who is challenging his antics at BH- seemingly using BH funds again primarily for his benefit.
The stock is cheap so there may be more money to be made. But add these two issues on top of the other corporate governance concerns and I'm moving on.
This is his one chance for the next 52 weeks to 'tell his story.' I'm interested in seeing how he addresses Maxim and how he positions the valuation.
Not sure I agree with you. If he sold and paid taxes on the gains, he'd have to reinvest the money and earn an approx 20% return just to make up for the taxes paid. He's better off just letting it ride and collecting the dividends and building out his company around owning 100% of SNS and 20% of CBRL. Those are two nice assets.
I agree with your point, smaycs4. However, he's done 2 rights offerings since he has bought CBRL. The rights offerings are weighing heavily on the stock. They are good only for those investors with a very long time horizon and those that want to invest more in the company. His capital allocation has been good. I also don't mind him raising money because he makes good decisions with the capital. In the end, I think he produces above average returns with BH. But, I'm not sure because he does continue to do the rights offerings, talk about A and B shares, and also puts BH money into the hedge fund structure paying high returns to SB, himself.
I guess, I want to believe in him. But, not sure that's the right move long term.
Hate on SB all you want. I understand the criticism and disagree with some of his corporate governance policies.
However, can anyone identify a major capital allocation mistake in the last 5 years? I can't.
CAW is as close as you're going to get. And really, who cares. It's a small investment that he made before he changed his strategy and went big into CBRL.
The last 5 years has been very challenging given all the cross-currents after the melt down. SB has made relatively few major investment decisions, which I view as a positive. And those that he has made have been very good.
Hate him all you want. His corporate governance decisions has pushed the stock to levels that make it compelling. He now has cash again.
I'm betting that he'll make another solid decision with the capital he has.
So, can any of you SB haters come up with a poor capital allocation decision?
Any thoughts on this valuation?
$635 million Portfolio Value as of September 2013
$35 million CBRL gain since Sept 2013
$10 million Value of First Guard and Maxim combined
$75 million Cash raised in recent Rights Offering
$125 million Value of Steak n Shake net of debt
$880 million Total Value
20 million Current shares outstanding
$440 per share in value
Just a casual observation- looking back at the first rights offering, the stock performed in a similar manner when compared to today.
SB buy a cash-using company like Maxim was a curious move, along with another rights offering isn't doing any favors for the stock. But, in the grand scheme, I like the company he is building and the valuation is good now. I still have concerns with his compensation and weak Board.
Add up the value of the stock holdings and SNS and you get a compelling risk/reward, imo.