Shares of Biglari Holdings (BH) , (BH.A) have put together a nice run since late February when they literally fell off a cliff in one month of trading. BH (class B shares) fell 62% during that period, while BH.A (the class A voting shares) fell about 60%. It was a near perfect storm, a company that is not well understood, run by a controversial CEO/owner, with substantial business interests in restaurants and oil. The company's annual meeting, a well-attended event held in New York each April was delayed, then moved to San Antonio in June. Normally, there is significant reporting on this multi-hour event, but there were only crickets this time around, and my sense is that it was not well attended given the pandemic and location.
Shares have had a nice run, however, since bottoming in March. BH hit the $105 range last week (they closed at $96.38 Tuesday), and are up about 130% since the March "bottom". That sounds good in isolation, but not as much when you consider that shares are still down 16% year-to-date, and I won't even mention performance over the past few years.
BH has made a couple of purchases in the past year, first buying Southern Oil Company of Louisiana for $51.5 million last September, and then Southern Pioneer Property and Casualty Insurance Company in March. The latter increases the company's presence in insurance, alongside commercial trucking insurance company First Guard Insurance, a historically well-run and higher-margin business, which is often held out as the company's gem (unfortunately it is not big enough to have a meaningful impact on results).
The company's position in Cracker Barrel (CBRL) has been reduced over the years, and stood at just over two million shares, or 8.4% of the outstanding shares as of 6/30. At CBRL's current price, that stake alone is worth more than $270 million, substantial when you consider that BH's current market cap is just $298 million. BH was also selling covered calls on CBRL, according to a 13D filed on 8/20. The company sold its holdings in Tiffany (TIF) , but now has a stake in Berkshire Hathaway (BRK.B) of 389K shares, worth $85 million.
There's not been a great deal of information on the company's wholly owned Steak 'n Shake brand, which was already in shambles prior to the pandemic, However, second quarter restaurant segment sales (which also includes Western Sizzlin') were down 51%. The jury is still out as to whether Steak 'n Shake can rebound under its new franchise system.
BH has got a boost (up 28%) since releasing second quarter results, reporting net income of $42.5 million on revenue of $96.5 million. While pre-tax operating income was negative, investment gains of $61 million bolstered the bottom line. Class B shares earned $24.30 for the quarter, while class A shares earned $121.51. BH shares currently trade at just .56 X book value.
Finally, the company has been buying back class A shares, and repurchased 3652 - a seemingly small number of shares until you consider that it represents 1.8% of the total class A shares outstanding between 8/13 and 8/17, according to a recent 13D filing, and at an average cost of about $462/share. Class A shares closed at $475 on Tuesday.
Nice to finally get some positive news on this name, but it still has a lot to prove.
