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Biglari Holdings Annual Letter to Shareholders – Following in the Footsteps of Henry Singleton

September 23, 2011 | About:

You may not like his style, but I don’t think anyone can honestly deny that Sardar Biglari is a pretty sharp cookie.

I was lucky enough to come across his Lion Fund letters immediately after he took over Western Sizzlin which I quickly invested in. So I’m a bit biased as I’ve made a few dollars as a result of the actions of this young man.

Below is his most recent letter to shareholders, well worth taking the time to read:

Dear Shareholders of Biglari Holdings Inc.:

Ever since present management took over the company a little more than two years ago, significant changes have refashioned the purpose of the corporation, information which shareholders must fully understand. This letter will detail the founding of and transformation to Biglari Holdings, or BH, and the resultant alterations in the entire operation.

I am dispatching this letter to enlighten all shareholders concerning the new direction of the company. Phil Cooley, Vice Chairman of BH, and I view you as true partners of the business. To ensure a long lasting partnership, it is our beholden duty to communicate clearly our approach, business objectives, philosophy, principles — in an effort to cement an alignment of expectations with all owners. Step one is to make certain shareholders know what they own and what they do not own.

Diversified Holding Company

Simply put, BH is in the business of owning other businesses in whole and in part. Wholly- or majority-owned businesses steer earnings — those not retained for their growth — upstairs to the parent for reallocation to fuel holding company growth. With this perspective, BH is a liquidity provider. We seek to grow and diversify the cash streams going to BH through a collection of wholly-owned operating businesses as well as through an assemblage of positions in other publicly traded companies.

Moreover, because I have full capital allocation responsibility with maximum latitude, we resemble a capital allocating vehicle (akin to a hedge fund with a similar incentive system) except that most of our assets will continue to amalgamate in companies we control. However, the critical point is that we could in one particular moment derive most of our earnings from one industry, such as restaurants, and then with a single large acquisition begin to derive most of our earnings from a different industry. Therefore, it would be a sizable mistake if a shareholder owns BH assuming that he or she owns a restaurant holding company or if the owner is partial to a particular subsidiary. Although capital allocation is a crucial element at most businesses, it is our business at BH.

As I allocate capital, opportunity, not preconceived notions, will drive my decision-making. As a corollary, my idea of a master strategy for BH is to follow in the footsteps of the late Henry Singleton of Teledyne, Inc., who explained his grand plan thus: “My only plan is to keep coming to work every day.” In a similar vein, I have founded our capital apportionment approach unrestricted by institutional constraints. Therefore, we enjoy great flexibility in implementing our underlying concept.

Phil and I have set BH’s long-term economic objective as maximizing per-share intrinsic value.*In fulfilling that objective, we will require favorable investment opportunities, preferably controlling interests in businesses with diverse operating and financial traits. We are searching for businesses in simple, comprehensible, and predictable industries that are cash generating, not cash consuming.

Link to the entire letter to shareholders:


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Rating: 3.8/5 (4 votes)


Praveen Chawla
Praveen Chawla premium member - 5 years ago
Interesting that Sardar pay himself 25% of all increase in "adjusted book value" after an hurdle rate of 6% - however there is no dividend for the minority shareholder.
Rob24601 - 4 years ago    Report SPAM

It's also interesting that people continue to focus on this when it amounts to less than 2% of assets under the maximum payout annually. So less than any hedge fund manager out there and a similar structure to the Buffett partnership that no one seems to have had a problem with.

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