The Brooklyn Investor published his notes from the Biglari Holdings (BH) annual meeting. I am consistently impressed with Sardar Biglari’s letters which I consider a must read. In these notes, Biglari covers the value of activist investing, Steak n’ Shake performance and his recent fight with Cracker Barrel (discussed here).
Value of Activism One chart Biglari showed at the beginning of the annual meeting was what happens to an investment if bought for 50 cents on the dollar and comparing that to what happens to this investment if they can participate on the board of a company and help it grow value to $2.00. Now you are talking about turning $0.50 into $2.00 instead of $1.00.
So if they can buy $1.00 of assets for $0.50, the return in 5 years would be 15%/year. But if they can participate in value enhancement to get the value up to $2.00, that would boost the return to 32%/year instead of 15%/year.
A key point is that even if the activism doesn’t work out, they should do well.
For those who follow Biglari, check out TBI’s notes here.
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About the author:
Frank is an entrepreneur who owned four restaurants by the time he was twenty. He sold his businesses and returned to school, completing a concurrent Law / MBA degree. At the same time, he successfully completed all three levels of the CFA exams. He now invests full time with a focus on value investing. Frank Voisin writes about value investing topics at http://www.frankvoisin.com.
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Great article! I recommend reading the Harvard Business case study on Biglari's activist involvement at Friendly Ice Cream if you have the chance.