When Will Biglari Holdings Inc (BH)’s Price Catch Up To Its Value?

Page 1 of 2

Biglari Holdings Inc (NYSE:BH)

The other day, I was covering Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)‘s  third-quarter earnings and re-examining the position of one of its largest shareholders: Sardar Biglari of Biglari Holdings Inc (NYSE:BH). Biglari’s Cracker Barrel position has a current market value of roughly $465 million. The total market cap of Biglari Holdings is $587 million. Now, this isn’t a new thesis, as others have asked the question, but are we to believe that Biglari’s other assets, the entire Steak ‘n Shake chain as well as Western Sizzlin’, are worth a combined $220 million? Either there is something missing here, or Biglari Holdings is an undervalued stock.

Can it be?
So, upon seeing this glaring disconnect between Biglari’s market cap and the company’s assets, my first inclination was that I missed something.

To repeat, Biglari Holdings Inc (NYSE:BH)’s Cracker Barrel stake is worth $465 million — today. Taking out cash and adding in long-term debt, you have an enterprise value of roughly $700 million, implying a market value of $122 million for the remainder of Biglari Holdings, and an enterprise value around $220 million.

In the recently ended 16-week period, Steak ‘n Shake and Western Sizzlin’ hauled in $218.74 million. The company generated nearly $19 million in cash flow in the same period. If we annualize Steak ‘n Shake’s free cash flow to, say, $50 million (likely more), Biglari’s restaurant operations are trading at 4.4 times one-year forward cash flow.

As of the end of April, the company had about $20 million in cash and long-term debt of $131 million.

A reason or two
I can understand some mispricing due to the fact that Biglari Holdings Inc (NYSE:BH) is not a household name, and even though its founder modeled the business after Berkshire Hathaway Inc. (NYSE:BRK-B) (and has thus far performed in a similar manner), it doesn’t hold near the weight that Berkshire does on the investment scene. The stock is also more than $400 per share, perhaps discouraging would-be investors. But I don’t see any fund managers buying up the stock meaningfully, either. Mario Gabelli holds a decent position, but his investment business is gigantic and not necessarily based on stock picking.

Biglari Holdings Inc (NYSE:BH) angered investors after taking hold of Steak ‘n Shake — he renamed the firm Biglari Holdings, consolidated other operations, and gave himself a hedge-fund-esque salary. I, for one, don’t mind paying a hedge-fund-manager salary if the manager compounds my money at an attractive rate. I especially don’t mind paying it when it appears that I am getting all of the Steak ‘n Shake I want for a bargain.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!