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Steak n Shake Transforming Into Mini Berkshire Hathaway

November 10, 2009 | About:
Inoculated Investor

STOCKMANMARC

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Sardar Biglari acting CEO of Steak n Shake has wasted no time in turning the company into a holding company much like Warren Buffett did with Berkshire Hathaway.

Biglari is using Steak n Shakes $SNS free cash flow to buy a 9.9% steak in Fremont Michigan Insuracorp $FMMH. Fremont Michigan InsuraCorp, Inc. is a holding company owning all of the outstanding shares of Fremont Insurance Company. Fremont Insurance Company is a Michigan licensed property and casualty insurer operating exclusively in the State of Michigan and writing principally personal lines, commercial lines, farm and marine insurance policies through independent agents. They were founded in 1876 and have served Michigan policyholders for over 131 years.

They market policies through approximately 175 independent insurance agencies. Fremont Insurance Company has a financial strength rating of “B++” (Good) by A.M. Best. Biglari had mentioned before he would like to get into the insurance arena if the right opportunity came along. Why an insurance business? The insurance business should add another stream of income and more free cash flow to acquire other businesses as they arise. Fremont has over 10 million in cash with no debt.

Current book value is $23.63 per share. This looks like a good candidate for Biglari and company however I do not see Biglari being a passive investor in this investment. Could this be just an initial stake, soon to be a subsidiary of Biglari's Steak n Shake holding company? Time will tell. Take note that this is much like Buffett started out over 50 years ago and we no how that turned out.

Company/SymbolMarket CapCashBook Value p/sharePrice p/share
Steak n Shake / $SNS$348.3 mil$37.8 mil$10.02$12.09
Fremont Mich Insuracorp / $FMMH$37.4 mil$10.5 mil$23.63$21.45


More Relevant Articles from these great sites:

"This tiny company could be the next Berkshire Hathaway" @ The Daily Crux"Sardar Biglari Buys 9.9% Fremont Insuracorp" @ Street Capitalist"Western Sizzlin Corp Completes Distribution of Special Dividend of Steak n Shake Shares" @ CNN Money

Author is currently long SNS

STOCKMANMARC

http://stockmanmarc.blogspot.com/

About the author:

STOCKMANMARC

My name is Ben C. and I am 2nd year MBA candidate at the Anderson School of Business at the University of California- Los Angeles. I have a BS in Economics from the Wharton School of Business at the University of Pennsylvania. Before coming to Anderson I worked as a generalist equity research analyst for Right Wall Capital, a long-short equity hedge fund located in New York City. Prior to working at Right Wall I worked as an analyst at Blue Ram Capital, another long-short equity hedge fund located in Rye Brook, NY. This past summer, I worked for West Coast Asset Management as a research analyst. West Coast, which was co-founded by Kinko’s founder Paul Orfalea, is run by well-known value investors Lance Helfert and Atticus Lowe.



Rating: 3.1/5 (7 votes)

Comments

billspetrino
Billspetrino - 5 years ago
I enjoyed the article thank you

But if teh CEO was really like WEB he would have spent 2009 buying companies with much larger moats and better businesses IMO or a property and casualty owner in its ENTIRITY like WEB did when he bought Jack ringwalts business out

Then you could deploy the float like WEB did .Biglari cant control the float and if you cant control the float why not buy MSFT when it was 17 or GS when it was 85 or AXP when it was 10 etc

Im not "questionng" the owner i just dont see how he is shapinga "baby Berkshire"





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