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The Western Sizzlin' Letters (Sardar Biglari)


farnamstreet
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thx, farnamstreet. that was a kind of a bittersweet trip down memory lane for me, I have to say. I still see the exceptionally talented business & investor side of him that I saw then, but most Buffett-like qualities of character that I 'imagined' back then have unfortunately morphed into something else with the passage of 6 yrs time, success, & the resultant tempting opportunity-sets that came his way seemingly for the grabbing.

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thx, farnamstreet. that was a kind of a bittersweet trip down memory lane for me, I have to say. I still see the exceptionally talented business & investor side of him that I saw then, but most Buffett-like qualities of character that I 'imagined' back then have unfortunately morphed into something else with the passage of 6 yrs time, success, & the resultant tempting opportunity-sets that came his way seemingly for the grabbing.

 

On the contrary, reading those letters with the benefit of hindsight I have found amazing how consistent Biglari is to this day in his reasonings about:

 

1) The qualities of a franchise business, and how to run it for maximization of cash flow;

2) The qualities of a concentrated portfolio of investments, and how to choose and manage them;

3) The qualities of activism, and how to influence management effectively;

4)  enhancefriendlys.com, enhancesteaknshake.com, enhancecrackerbarrel.com;

5) The qualities of rights offerings, and therefore why BH’s shareholders should expect more of them in the future;

6) The qualities of Western’s overall strategy, which was back then precisely what BH’s overall strategy is today.

 

As I have already said in the BH thread, Biglari’s biggest mistake in those days has been an unfortunate promise to work for free! ;)

 

Gio

 

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Steak n Shake has exemplified the antithesis of a value-based strategy, proving that sales growth is not tantamount to value growth. Growth at a competitive disadvantage — when cost of capital exceeds return on capital — destroys shareholder wealth. The decision to plow money back into low-return investments has resulted in the detrimental effect of lowering the price of the stock. A larger company has been created with  more  company-operated  restaurants,  but  shareholders  have  been  denied  the opportunity to reinvest their capital elsewhere in more remunerative opportunities. In our proxy contest, we advocated that a moratorium be placed on new store openings.

 

You could easily exchange Steak n Shake for Cracker Barrel, couldn't you? ;)

 

Gio

 

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These letters are very interesting. I didn't know that he did rights offering in 2006 and 2007. No wonder he did more rights offering in 2013 and 2014.

The only difference is that back in 2006 and 2007 he was considered the next Buffet, so no one criticized the rights offering. In 2013 and 2014 he is considered a corporate thief, so everyone hates him so much that people ask "why do you keep diluting existing shareholders"!  :)

 

I don't think the value investor base is in general more rational than momentum investors and clueless gambling investors.

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