Buffett Partnership Letters: Still Helpful Today

[link01]

i especially found this paragraph interesting:

 

<<The third strategy where the Buffett Partnership concentrated was control situations. These were events where the partnership would initiate a large enough position in a company and try to influence corporate policy. A famous control situation is Berkshire Hathaway (BRK.A), which started out as an undervalued position.>>

 

shades of west, maybe? still too early to tell with a high degree of confidance, but i'm not waiting for for till the story becomes obvious one way or the other. i've hitched my wagon, despite all the nagging questions, controversy, & second guessing, my own included...

 

http://seekingalpha.com/article/150108-buffett-partnership-letters-still-helpful-today?source=yahoo

 

http://www.ticonline.com/buffett.partner.letters/1962.01.24.pdf

 

 

[claphands22]

Shades of west is an understatement.

 

I'm with you link01, I think Biglari has all the personality traits to make west a great capital allocating machine like brk. He knows the playbook; standing on the shoulders of giants should help.

 

My two reservations are these:

1. Does he love money or does he love business? It's ok if he likes the money, but he has to love the business...malcolm gladwell type of love. This is hard to measure.

2. Will west have the same capital allocating opportunities as brk? Brk invented the game which spawned lots of competition for west. I doubt west will be as lucky...but predicting the future is probably trickier than understanding sardar's personality. 

 

Great post link01. Buffett letters are always a good read.

 

[Parsad]

I read the old Buffett Partnership Letters again on the weekend.  If you read the letters along with the corresponding chapters in Alice Schroeder's Snowball, you get a very clear picture of what he was doing.  

 

Much of it also aligns perfectly with what Sardar is doing...Sanborn, Dempster and then finally Berkshire Hathaway all look eerily familiar to what happened at WEST, then Friendly's and finally Steak'n Shake.  Although the outcome at SNS has been far better than the early days of the Berkshire textile business.  Even the teaming up with various other "associates" to increase their controlling stakes is very similar, but that probably has more to do with working with small amounts of capital.

 

- Sanborn was targetted for their investment portfolio, while the map business was free...WEST's restaurant business was flailing, but Sardar developed the investment portfolio within the business by raising capital from existing shareholders.

 

- Dempster was targetted for the sum of the parts and then sold off...Friendly's was targetted for the sum of it's parts, but then acquired by someone else with Biglari's approval for a nice fat profit.

 

- Berkshire was more of a personal vendetta because the company was so poorly managed and the CEO undercut Buffett's offer price to sell his shares...Biglari wanted Gilman gone because they had done such an awful job the last few years, while doing everything to protect their own asses - it had also become very personal.

 

While many on the board suggest that Biglari is no Buffett, I see far more similarities between the cut-throat young Buffett of the partnership days and the young Biglari we see today.  There won't be another Buffett, but Biglari is doing a very nice job of following the playbook!  Cheers!

[Parsad]

My two reservations are these:

1. Does he love money or does he love business? It's ok if he likes the money, but he has to love the business...malcolm gladwell type of love. This is hard to measure.

 

Both!  Even Buffett loved the money immensely.  He wasn't by any means high maintenance, but he loved the money.  I'm sure Biglari loves the money as well.  But I assure you both love the game more, as do many other managers including myself. 

 

2. Will west have the same capital allocating opportunities as brk? Brk invented the game which spawned lots of competition for west. I doubt west will be as lucky...but predicting the future is probably trickier than understanding sardar's personality.  

 

Probably not.  You are correct that there is significantly more competition now.  But it doesn't take a whole whack of ideas to do well.  As long as Sardar can come up with one or two great ideas every year or two, he will do very well.  The other thing is that the period we are currently going through, may create some significant opportunities for Sardar that were comparable to what Buffett was seeing in the 80's.  Maybe not quite that cheap, but I'm certain we will see plenty of opportunity over the next several years.  Cheers!

[netnet]

If you read the letters along with the corresponding chapters in Alice Schroeder's Snowball, you get a very clear picture of what he was doing. 

 

 

That's a great idea--reading the letters and Snowball together!

[EdWatchesBoxing]

I share common thoughts with WEST and I'm not waiting for the story to be told. I am also in early. I am hoping that WEST will be seen as one of the ultimate Phil Fisher type stocks in 10 to 15 years. This is one holding that I plan to stash away and pull it out 20 years from now, retire, move to Vegas and play poker for the rest of my life :) I don't think I can say the same for anything else I own. What excites me the most is that Sardar is one year younger than me. I am positive Sardar will do well with his skill and a little luck.

 

I think Biglari is showing his business acumen and determination with his role with SNS. Very few thought that the current improvements were possible in such a short period of time. I also like that that Sardar has many opportunities (ie: pink sheets, Mustang Capital) because he is working with small amounts of capital.

[scorpioncapital]

I think you guys are being a bit too optimistic on WEST and/or management. There is absolutey nothing special or particularly interesting about this company that I can see, or even any evidence of something special that may develop in the future.

[Junto]

I think you guys are being a bit too optimistic on WEST and/or management. There is absolutey nothing special or particularly interesting about this company that I can see, or even any evidence of something special that may develop in the future.

 

i agree that the forum has a biased opinion regarding WEST and Biglari, but one thing he has done is put results on the table. We will see how it plays out from here but I am certainly riding out the rebound in SNS for the time being.

[bargainman]

I think you guys are being a bit too optimistic on WEST and/or management. There is absolutey nothing special or particularly interesting about this company that I can see, or even any evidence of something special that may develop in the future.

 

I'm really curious on what you base this assertion.  The fact that Biglari has outperformed the S&P by 17% per year (if I remember correctly from one of Sanjeev's posts) over the last 7(?) years in his hedge fund, and is using WEST as a vehicle for investments in the future makes it at least somewhat special/interesting.  The fact that he focuses on capital allocation and finding the best use for capital as opposed to just putting money back into the same businesses is somewhat special compared to a lot of companies out there.  The fact that at the age of 30 something he's had a very successful hedge fund, taken over a reasonably large public company in a proxy battle, and turned it around in a very short period of time is somewhat interesting.

 

I'm not a complete Sardar groupie (I do think he's had his share of less than perfect moments), but I don't see how you can say that WEST is "absolutely nothing special or particularly interesting".  Please let us know what you base this statement on.

 

Thanks.

[scorpioncapital]

I think you guys are being a bit too optimistic on WEST and/or management. There is absolutey nothing special or particularly interesting about this company that I can see, or even any evidence of something special that may develop in the future.

 

I'm really curious on what you base this assertion.  The fact that Biglari has outperformed the S&P by 17% per year (if I remember correctly from one of Sanjeev's posts) over the last 7(?) years in his hedge fund, and is using WEST as a vehicle for investments in the future makes it at least somewhat special/interesting.  The fact that he focuses on capital allocation and finding the best use for capital as opposed to just putting money back into the same businesses is somewhat special compared to a lot of companies out there.  The fact that at the age of 30 something he's had a very successful hedge fund, taken over a reasonably large public company in a proxy battle, and turned it around in a very short period of time is somewhat interesting.

 

I'm not a complete Sardar groupie (I do think he's had his share of less than perfect moments), but I don't see how you can say that WEST is "absolutely nothing special or particularly interesting".  Please let us know what you base this statement on.

 

Thanks.

 

I just don't see anything interesting in the balance sheet/income statement. It trades for more than 2x tangible equity and yet the operating business makes a poor return on the capital employed - something like 5-10% I don't know about the past performance in previous vehicles but current investors don't benefit from it, that isn't sufficient to say this investment will in the future do well.

[CorpRaider]

Does anyone have a pdf file combining all the partnership letters?  I would appreciate having a copy of all of then in one legibile file.  Thanks very much.

[matjone]

here you go

BuffettPartnershipLetters_1_2.pdf

[CorpRaider]

here you go

 

Thank you sir!

[Guest longinvestor]

here you go

Thank You!

[muscleman]

I share common thoughts with WEST and I'm not waiting for the story to be told. I am also in early. I am hoping that WEST will be seen as one of the ultimate Phil Fisher type stocks in 10 to 15 years. This is one holding that I plan to stash away and pull it out 20 years from now, retire, move to Vegas and play poker for the rest of my life :) I don't think I can say the same for anything else I own. What excites me the most is that Sardar is one year younger than me. I am positive Sardar will do well with his skill and a little luck.

 

I think Biglari is showing his business acumen and determination with his role with SNS. Very few thought that the current improvements were possible in such a short period of time. I also like that that Sardar has many opportunities (ie: pink sheets, Mustang Capital) because he is working with small amounts of capital.

 

It is amazing how much has changed since the board first talked about Biglari.

A Buffet premium now has become a Biglari discount. :)

 

[netnet]

Matjone,  did you transcribe these yourself?

 

I went looking for my old copies to read this weekend and couldn't find my electronic copy, having ditched my hard copies and went looking on the "Corner" for the letters.  My copies were copies of old copies.