ragnarisapirate

ragnarisapirate, Firstly, apologies for the really late response to this. I'd meant to respond earlier. Re. the impairment to IV as a result of Sardar's compensation arrangement, reason dictates that the most fundamental assumption in your (and all the detractors') valuation, albeit implicit, is incorrect. The future will show it. Best, Ragu Ragu, RespectfullyI am not incorrect here... This is a matter where we are probably working with a different set of underlying assumptions. Let me clarify: I was working under the assumption that he was going to keep a pretty low salary, that wasn't going to move up so much. I also didn't peg Biglari for the type of guy who would sandbag shareholders in his allocations due to a lower salary (basically, I figured he would do the same job he is now, for less money). I also assumed that he wouldn't screw up very often and post operational shortfalls very often. When the compensation package came out, it made the company worth less than the day before, as he got a HUGE pay raise, which is cash that can never get allocated for shareholders... Again, my (and likely others) assessment was based on the fact that we had no reason to think that he was going to turn the company into a glorified hedge fund. That said, I don't blame Biglari for wanting to get rich and hold no grudge. I think the compensation package is a great incentive for him. I also think that BH will be worth a lot more in the future than it is now. There have been few people that will sing the praises of Biglari more than me. However, the compensation package did destroy IV. I hold no position in the company, because I think that it is fairly valued at the moment and can find better deals. If BH were (all things equal) to go to $200 bucks a share tomorrow, I would buy it in a big way.

Is anyone looking at them? A bunch are trading at big discounts to book... I have read a few 10Ks, and, it's almost comical how the whole of them are almost exclusively talking about all the reasons to not invest in them (black lung, workers comp, regulatory/legislative risk, etc, etc, etc...). Any insights?

Nate, I knew that you would have looked there. ;) Good work.

All, http://www.npr.org/2012/02/20/147158633/portugal-plays-by-the-rules-but-economy-slumps?sc=fb&cc=fp It seems that with this much upheaval in Portugal, there may be opportunities for capital allocation. No? Anybody been looking around there?

Right, I was just throwing a shareholder list request out there as a way to figure it out pretty quickly.

What about getting a shareholder list?

I don't know about you guys, but, I just went all in into stocks... In fact, I just took out a huge margin loan, a few more mortgages on my house, and got cash advances on all of my credit cards. Obviously, I am going to get RICH! I credit this article and Parsad for this stroke of investing brilliance on my part. Thanks! ;)

While you may have said that in jest, it ain't a bad idea... I too signed up, and thank you and Miguel for the links. :)

Maybe their margins won't do so much better after all. Hester, this is kind of what I was getting at in my article. Especially at the end, when I said that they were going to have to figure out a ton of different ways to make money to justify their share price- the uncertainty of that alone makes me uneasy. If everybody uses FB on a platform that doesn't really support ads, then they are screwed. As a side note, facebook doesn't make nearly as much money on me as their typical user; I have installed an app on chrome (and they make it for firefox as well) called AdBlock. I have not seen a Facebook ad in a while. It's kind of nice. You guys might want to check it out. AND it also blocks the ads on this very site! Sorry Sanjeev. (but not too sorry) ;)

While I agree that FB is overvalued, that is a ridiculous assumption. There is huge leverage, new advertisers/users do not add much expenses so most of the revenue flows to the bottom line and earnings grow much faster because of the gearing. Cost of revenue as a % of total revenue has gone from 29% to 23% over the last 2 years, for example. A large portion of today's expenses are spent on growth, so earnings are depressed, and FB is just at the beginning of monetizing their user base. If everyone in the world was on facebook they would put their attention solely on monetizing, instead of growth. The market isn't focused on current financials, and they are right not to. Growth matters now, monetization will come later. But the expectations of how much monetization is possible and the risks entailed are too high. I don't mean to be argumentative, but, did you read the link? When I was talking about growth, I did mention how they could juice more money out of the site, and how I was doubtful that they could do it in such a way that would justify the stock price. I also talked about how I am skeptical that their cost structure would get cheaper forever (it's kind of along the lines of a marginal cost curve)...

http://ragnarisapirate.blogspot.com/2012/02/running-like-hell-from-facebook-ipo.html If they got every person in the world to use facebook, and ad revenue/earnings per user stayed where it is, they would trade between 13 and 19x earnings, provided that their market cap is between 75 and 100 billion, as has been quoted in the media... This is madness.

It's tragic: this is probably a the BEST time to send money Bruce's way. All of the bad seeds have left! If you can time it right, investing in funds like this could be more rewarding than investing in a company with permanent capital (such as BRK/FFH).

It is crazy illiquid and small, but, Sitestar is investing in distressed residential (there is a smidge of commercial) real estate at the moment... I was out in Virginia looking at the properties; some are pretty rough and some are pretty nice. In virtually all cases though, they seem to be buying them for less than they are worth. They don't seem to be using leverage on them either. They are renting some of them and have a lot of them for sale. A few look like they are just sitting there, waiting to be fixed up. As I don't want to be accused of pumping up the stock, I will again say... it is super small. And by that, I mean, it's recently increased market cap is still well under $2 million dollars. They have a spread that you could drive a truck through. In the spirit of disclosure, while not a ton of money, I do own a decent percentage of the company. It certainly isn't a stock for everybody, but, if you like Paul Sonkin's style, it seems pretty legit.

Please help me understand better if I am wrong here, but when people say 5% of inventory is $400-500 million dollars, isn't it also fair to say that 55-65% of SHLD's inventory is owned free and clear of any invoices at any given time? In other words, in the event that more suppliers lost financing, the shelves would not at all be empty at the stores. If at any given time over half of merchandise is owned, there is a $3 billion credit line to supply up to 30% of needed inventory, and history shows that Lampert is not afraid to buy SHLD commercial paper into the hundreds of millions of dollars, I don't know that there is a solvency issue the way that perhaps Linen's and Things had. Most retailers don't own as much inventory as SHLD. I also think if push comes to shove, Lampert could and would buy SHLD bonds and effectively refinance SHLD debt, either outright or by converting debt into common stock. I don't think Lampert bought 5 million shares personally for the purpose of inspiring confidence, I think he knows he controls the situation and he's probably got a backup plan at any given time for nearly any possible outcome. Other alternatives could be a credit line from Fairholme Fund, Commercial paper purchases from Fairholme Fund (which has happened in the past), more store closings, or outright liquidation. I don't think SHLD has a solvency issue at all. Someone please argue the other side if you think I am wrong. Fairholme is fully deployed, and is likely even getting redemptions. I doubt they could do much to help out... JOE has a couple hundred million on the balance sheet that they MIGHT be able to use, though? Not really sure how much that would help out though.

"Let me reiterate that we would like to reach an agreement which advances the best interests of the company. " Nice...

I did for quite a while...I wore a Western Sizzlin hat...then a Friendly's hat...finally a Steak'n Shake hat. I stopped at wearing a Biglari Holdings hat, once the CEO took 25% of the long-term intrinsic value away from me. As such, the only hats I continue to wear are Fairfax and Berkshire, and the CEO's would never dare dream, let alone actually do, the same thing. Cheers! It is good to know that we both valued the compensation package at about the same amount of an impairment to IV. I feel in good company. :) I need a new hat. If any fund managers out there want to send me one, I will likely advertise for you.

I wonder if Steak 'n Shake is going to get a cult fund manager type of following. Kind of like how a lot of people on this board wear Fairfax hats, or bought jewelry at Borsheim's/Helzberg

Artificial scarcity, at it's finest.

Southern Yankee: I think that you overestimate the intelligence of most of the republicans in congress. Parsad: Ron Paul is the solution. (I say this as a jab, as, I would imagine that you are not a fan, but, I really do like the guy...)

I guess that you can kind of see it here... http://nyctmc.org/google_popup.php?cid=421 It is really freaky that you can do stuff like that... If they ever go HD, it's just a matter of time til we are all employed as online traffic counters. ;)

That's exactly what I was getting at... Rupert's store is around the corner, and I am guessing is still in business. Anyway, how do you know it's catching attention of people walking by? Do you have spies or a stream? ;)

Putting it next to the ed sullivan theater, where Dave Letterman (an indianapolis native) is, is absolute brilliance.

the bonds have been crushed signaling no confidence in the shld business plan. he needs to buy back debt and forget about the stock. For some reason, I am having trouble getting bond quotes at the moment. Help? lt debt is 60% of par. That seems damned cheap. Honestly, I can't imagine that there isn't money to be made at prices like that. It does seem crazy to not buy back debt on the cheap, rather than the common. It would certainly do a lot to improve their book value.

the bonds have been crushed signaling no confidence in the shld business plan. he needs to buy back debt and forget about the stock. For some reason, I am having trouble getting bond quotes at the moment. Help?

SHLD is getting closer and closer to tangible book... I never thought it would ever get there again. Also, how much are we thinking is going to get bought back? It isn't like the company has a ton of float.