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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!