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Steak'n Shake Quarterly Results Out Monday


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at the risk of sounding like a one note charlie, where are the shareholder letters for 2008 for both west & sns? i know i'm not the only one wondering. i've seen the same question asked on other boards. i've even heard that there's been no letter to shareholders in the lions fund for a longer than usual time, tho i cant confirm if thats true.

 

-has sardar simply been much too busy rolling up his sleeves in the trenches, working 17 hr days, & just hasnt found the time?

 

-has he had a change of attitude about their value & efficacy, preferring instead to use the annual meeting to answer questions & provide the kind of color that cant be had from 10k's alone?

 

-is he waiting until he feels there are sufficient new changes & developements in the works to justify a letter, conventional schedules be damned?

 

whatever the reason is, i hope he addresses it at the west annual meeting if we havent rec'd a letter by then

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at the risk of sounding like a one note charlie, where are the shareholder letters for 2008 for both west & sns? i know i'm not the only one wondering. i've seen the same question asked on other boards. i've even heard that there's been no letter to shareholders in the lions fund for a longer than usual time, tho i cant confirm if thats true.

 

-has sardar simply been much too busy rolling up his sleeves in the trenches, working 17 hr days, & just hasnt found the time?

 

-has he had a change of attitude about their value & efficacy, preferring instead to use the annual meeting to answer questions & provide the kind of color that cant be had from 10k's alone?

 

-is he waiting until he feels there are sufficient new changes & developements in the works to justify a letter, conventional schedules be damned?

 

whatever the reason is, i hope he addresses it at the west annual meeting if we havent rec'd a letter by then

 

The Lion Fund Annual Report for 2008 has been out for about two weeks.  I did not want to mention it here, since not everyone has access to the site, and I don't want anyone giving out the website passwords without Sardar's permission.

 

I spoke to Sardar shortly after that regarding a WEST shareholder letter.  He told me he owes WEST shareholders a letter, and that he would write one...so Noisefreeinvesting can probably remove that from his site.  Sardar wrote a letter last year to SNS shareholders that is on the website.  I believe he will write another one this year after the fiscal year is complete near the end of September, as their fiscal year is different than WEST and TLF.

 

That being said, as much as I want to hear Sardar's comments, I would much rather have him working his butt off on improving fortunes at TLF, WEST and SNS, rather than writing three seperate letters...and his letters are never short ones.  Since so much of TLF and WEST's future resides in SNS, I think that letter once a year is probably fine.  But as I said, he will do a WEST letter and put it out whenever he has some spare time.  I think most of us can make out what is happening at WEST and SNS simply from the 10-Q's and 10-K's, so it's not terribly important.  Cheers! 

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I think that line of thinking --  most of us can make out what is happening at WEST and SNS simply from the 10-Q's and 10-K's, so it's not terribly important -- is dangerous for a few reasons:

 

1) not all shareholders read the 10-Q/K so these shareholders are left clueless as to what's happening at the company they own.

2) that implies that a shareholder letter is never terribly important because shareholders can read the Q's and K's and if they can't they should be able to?

3) shareholders miss the ability to gage the honesty of management without a letter. (Is what they say reflected in the report or are they looking through rose colored glasses?)

...

 

Keep in mind, Sardar is only doing what he is at SNS because the owners of WEST (of which he is a large one through LF) enabled him to do so. He's using other people's capital at every level (LF, WEST, ...) which has enabled him to gain personal wealth (his annual salary as SNS is around 1/2 to 1/3 of his net personal worth). So, yes, I expect him to have his head down and working all day if for no other reason than a lot of people have entrusted him with their money and that comes with a certain responsibility.

 

I think we all know he's your 'friend' and you guys email and such -- but he shouldn't get off on a fundamental corporate governance issue because of that (perhaps you are falling prey to the liking/loving bias?). Alternatively, not writing a letter because he's working too hard is just folly.  He owes a candid explanation of what has transpired over the last year (it's been 14 months since the last WEST letter) to the owners of WEST before the annual meeting so shareholders can question him on his observations and thoughts.

 

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"think that line of thinking --  most of us can make out what is happening at WEST and SNS simply from the 10-Q's and 10-K's, so it's not terribly important -- is dangerous for a few reasons:

 

1) not all shareholders read the 10-Q/K so these shareholders are left clueless as to what's happening at the company they own."

 

I suggest that you immediately sell any stock where you're not willing to read the 10-Qs and 10-Ks, because if you aren't, you're just gambling.

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TariqAli,

 

Do you really think every shareholder of every company reads the Q's and K's? com'on...

 

The vast majority of people don't read the Q's and the K's and, to be honest, they shouldn't have to. Management should be credible and tell them everything of significance in the letter -- even if at a high level. Reading the Q's and K's is great for a subset of people who think they have an edge and can earn more attractive returns than the market offers. But there is a point to a letter, and thinking that because a Q and K exist that it's not terribly important to have a letter is flawed in my mind.

 

So there is no confusion I'm not saying there needs to only be a letter. I think there needs to be a letter and Q's and K's and so on. These give you a complete picture of what is happening at a company and its management. I'm also a big fan of reading the Q's and K's and do so myself but i can also see how it's not really gambling if you don't.

 

I know a few Berkshire Shareholders who only read the letter from Buffett? are they gambling? should they sell? How far should you take this -- should the old lady with the GE stock living off the dividends sell cause she can't read the Q and the K? What about people who own stock through a proxy like a mutual fund or investment manager? should they sell because they trust someone else to mange their money and have no idea what's going on at those companies? ...

 

Although, it's fun to ponder what would happen Monday if everyone had to sell stock they own that they haven't read the Q and the K for. Even more fun if they had to do it for stock they indirectly own -- like say, having to sell your BRK shares because you haven't read the WFC report or selling your mutual fund because god only knows what's in there.

 

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If you're not reading the 10Ks or 10Qs of companies you invest in, you're not taking the time to actually understand and analyze the business. You're speculating based off of what you read in a letter. It's dumb.

 

As for the "vast majority"... the vast majority underperforms the market, likely because they don't take the time to analyze the 10Ks and 10Qs and actually invest, rather than speculate based off of some bogus prospects they hear in a newspaper article or Jim Cramer.

 

And the grandmother, living off of dividends from GE? Again she's gambling too. I saw a number of stories this past year about people like that who thought they could live on the dividends from companies like GM -- look where that got them.

 

That's why most experts, even Buffett, will say that you should invest in INDEX funds if you're not willing to take the time to actually analyze the companies you're thinking about investing in.

 

I'm unsure of why you're comparing a mutual fund side by side with investments in individual companies. With a mutual fund, part of your investment is taken as a management fee. You're paying the fund manager with the understanding that they are competent and able to do the due diligence necessary to make educated investments. When you invest in WEST or SNS, you're not paying a management fee. It's an entirely different proposition. 

 

 

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The Lion Fund Annual Report for 2008 has been out for about two weeks. I spoke to Sardar shortly after that regarding a WEST shareholder letter.  He told me he owes WEST shareholders a letter, and that he would write one...

 

thanks! most shareholder letters arent really worth much more than the paper they're written on...many tend to read like they were wriitten by the co's marketing dept. but there are a few that invariably rise above that & are valuable if intangible guides to a deeper understanding of the co & the ceo's personal vision. 

 

That being said, as much as I want to hear Sardar's comments, I would much rather have him working his butt off on improving fortunes at TLF, WEST and SNS, rather than writing three seperate letters...

 

complete agreement here, tho it would be cause for worry if it were wholly an either/or proposition

 

I think most of us can make out what is happening at WEST and SNS simply from the 10-Q's and 10-K's, so it's not terribly important.  Cheers! 

 

well, thats true. but i also seem to recall an aweful lot of interest on this board from shareholders that were unable to attend the sns annual meeting for transcript notes of what was said there from other shareholders that could attend. and if i recall, that interest was was amply rewarded with the kind of supplemental details that amplified & enhanced understanding beyond what could be gleaned from the 10k alone. or maybe i should only be speaking for myself. in any case, a thoughtful shareholders letter can do the same. and just to be clear: i'm in no way shape or form arguing for more than that, ie qtrly conference calls, media interviews, co press releases at every turn for every event or milestone, real or imagined or just strategically 'manufactured' for mass consumption! other than that i plead guilty...i'm hungry for as much info as i believe its fair & reasonable to expect, but no more than that.   

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In the interest of continuing the discussion - in part because i can feel your passion over this issue -- I don't think the differentiation between 'gambling' and not gambling boils down to people who read detailed financial reports versus people that don't.

 

For instance there can be people who read the Q's and K's and (1) know what they are doing, (2) don't, or (3) think they do.

 

People who read Q's and K's and don't know what they are doing are 'gambling'

People who read Q's and K's and think they know what they are doing are 'gambling'

People who read Q's and K's and know what they are doing only gain more information to make a decision... I don't know if this fact alone differentiates between gambling and not. I don't think it's that black and white.

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“An investment operation is one, which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” - Benjamin Graham

 

Simply reading a shareholder letter is hardly an example of "thorough analysis"

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The point is that shareholders deserve an annual letter (in part because not all of them read the Q's and the K's.) Shareholders include, among others, gamblers, speculators, and let's call them business investors. Thinking that everyone is a 'business investor' is wrong which seems to be the thrust of the original post by Sanjeev that started this thread when he said shareholders can read the Q's and the K's and understand what is going on. Well no, business investors can (or at least think they can) and they are only one subset of shareholders.

 

Now the other question embedded here surrounds what is gambling and what is not. I'm not convinced that not reading Q's and K's automatically means you are 'gambling' (just as reading the Q's and K's doesn't mean you are not gambling). However, i think we're quickly wearing out our welcome here as i doubt other board members are getting anything from this conversation -- drop me an email farnamstreet@ g m a il i would be interested in continuing this conversation.

 

 

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I have read all of WEST's SEC disclosures but I am a little confused on WEST's role today.  Over the past 2 years, WEST appeared to be Sadar's active/operating company investment vehicle.  With his focus on SNS and the ability to use its cash like WEST's has SNS become the new operating company vehicle?  I think the annual letter would provide clarity to what his plans are.  This is important because I want to be invested in the active/operating company vehicle.  The adj NAV of WEST investments plus operations @ 10x FCF is about the share price.  If WEST is no longer this vehicle I may want to change my investment mix.

 

Packer

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I think we all know he's your 'friend' and you guys email and such -- but he shouldn't get off on a fundamental corporate governance issue because of that (perhaps you are falling prey to the liking/loving bias?).

 

I think this is a ridiculous assertion.  Unlike Fairfax, where I do know alot of the people, the only real contact I have with Sardar and his various companies over the last couple of years is usually stuff related to questions from this board on when is a report coming out, or can I get into a specific meeting without being a shareholder.  That's when I contact him.  I used to meet him regularly in Omaha, and I did an interview in the past, but since then my contact has been related to questions from this board.

 

I think the real problem is a routine over-reaction from investors.  Whenever any issue comes up...be it with Berkshire, Fairfax, Biglari, Mohnish, whoever and whatever, I think there are a handful of investors that rely on their own expectations on an issue, rather than judiciously applying a bit of patience to see what the outcome actually is or how an issue is handled.

 

My comments were that Sardar said he owes WEST shareholders a letter.  I said that personally, I don't care if he writes the letter or not, as long as there are improvements in the business.  How am I letting him off a corporate governance issue that he has already stated he expects to meet?  He wrote one every year for TLF did he not?  And he wrote one for SNS last year and will again this year, correct?  And I told you he said that he will write one for WEST...so what exactly are we debating?

 

By the way, I'm probably the last person on this board that actually falls in love with a stock.  We sold all our Fairfax last year simply to buy other stuff that was cheaper, and we bought it back again this year.  I'm a student of Buffett, but we own no Berkshire other than in our corporate account and that's primarily for the annual report.  We own no WEST outside of our corporate account...again primarily for the annual report.  If Steak'n Shake hits or exceeds our estimate of intrinsic value, I will be the first person on this board to sell some, no matter how much I like Sardar.

 

Finally, the shareholder letter is often the biggest selling tool an executive has for shareholders.  As much as investors want their management to be honest and ethical, shareholder letters are always from the manager's perspective...always a biased perspective, regardless of who it is...even my own MPIC Fund letters will be from my perspective.  Every investor should pay more attention to the 10-Q's and 10-K's, regardless of their level of sophistication.  Otherwise they are playing Russian roulette by relying only on the shareholder letter.  Cheers!   

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Most folk would suggest that shareholders have a right to an annual shareholders letter & quarterly 10Q and 10K disclosures. But ... when the business has a material, and very significant active involvement in a specific investment, those letters should be every 6 months.

 

Shareholder letters speak to the operational thinking, expectations, and reasons behind the various changes. It is not glorified MD&A disclosure, & it exists because todays decisions produce tommorows financials.

 

 

We have no 'skin' in SNS, but consider;

 

Media 'misses' (work conditions, service, mgmt letters, etc) seem to be happening with increasing frequency. Most would suggest its evidence that mgmts operational control is breaking down.

 

There is a noticable group think on this board concerning SNS. Nothing wrong in that, but it behooves one to look a little closer, & independently, at the case against.

 

Would the same amount of investment time & energy not produce a better result elsewhere? There are other investments, & management would seem to have its hands full on more pressing matters.

 

SD

 

 

 

 

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Most folk would suggest that shareholders have a right to an annual shareholders letter & quarterly 10Q and 10K disclosures. But ... when the business has a material, and very significant active involvement in a specific investment, those letters should be every 6 months.

 

i'm one of those who values a shareholders letter from the ceo, but every 6 months? thats extreme. and i dont at all see the added significance that having 'a material, and very significant active involvement in a specific investment' bestows. every ceo should have a material & active involvement-a vested interest- in the co's they lead.

 

Shareholder letters speak to the operational thinking, expectations, and reasons behind the various changes. It is not glorified MD&A disclosure, & it exists because todays decisions produce tommorows financials.

 

100% agreement. its an important part of the more qualitative aspect of trying to understand a co & its guiding philosophy/culture vs the admittedly more important quantitative info from a pure investment perspective contained in 10k's etc

 

 

Media 'misses' (work conditions, service, mgmt letters, etc) seem to be happening with increasing frequency. Most would suggest its evidence that mgmts operational control is breaking down.

 

i dont see it the way you do, & whatever evidence you think you see is probably more to do with the last vestiges & remnants of prior mngts actions

 

There is a noticable group think on this board concerning SNS.

 

i have to say that the term "group-think" has become one of the most carelessly flung about & abused i've seen lately. is it someting in the water? because i see a fair sized plurality of opinions about west, sns, & sardar here...even among shareholders. and shareholders by definition are bound to be united in many of their beliefs & opinions about what constitutes an attractive investment value, no?

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Most folk would suggest that shareholders have a right to an annual shareholders letter & quarterly 10Q and 10K disclosures. But ... when the business has a material, and very significant active involvement in a specific investment, those letters should be every 6 months.

 

Shareholder letters speak to the operational thinking, expectations, and reasons behind the various changes. It is not glorified MD&A disclosure, & it exists because todays decisions produce tommorows financials.

 

I politely disagree Sharper.  I put weight in certain shareholder letters (Berkshire, Fairfax, and a couple of others), because I use them as educational tools.  But realistically, shareholder letters are probably the least pertinent pieces of information for making a calculated assessment of a business' intrinsic value. 

 

I'm sure Enron put out a great letter about operations and expectations, but we know today that those letters were complete bunk...as I'm sure Madoff's great letters were.  The balance and income statements don't lie (at least not usually  ;D), they don't accentuate the positives and reduce the negatives, and they give no opinion on future prospects.

 

Even the proxy filings, news releases, statuatory filings are far more important.  If you look at any sort of management commentary, the MD&A should take a far greater precedent than any shareholder letter, as these pass directly through the hands of the CFO, the audit committee and the auditors.  There is no greater tool to sell a business than the shareholder letter.  It is rare for a CEO to ever say they did a crappy job this year or that things do not look optimistic.  Cheers! 

 

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The only good piece of information I get out of a shareholder letter is if management admits to their mistakes.  Very rarely is this done and for the most part these letters are not worth the paper it is printed on.  In saying that, I enjoy some of the letters for the educational value they bring.  Reading over a couple of Sandar's past shareholder letters, he is on my list of letters I enjoy reading.  As a shareholder of SNS, I would rather him spend the time dealing with all the current outstanding issues with the company, instead of spending all this free time writing letters for every company he is involved in.  The letter is not going to increase the value in the company.  On the other hand, getting some of these lawsuits resolved is a better use of his time.

 

 

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The Lion Fund Annual Report for 2008 has been out for about two weeks.  I did not want to mention it here, since not everyone has access to the site, and I don't want anyone giving out the website passwords without Sardar's permission.

 

 

Sanjeev,

 

You are wrong about that. The Lion Fund annual letter has been out for almost 4 months. It came out in mid April.

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