Back in late February, I expressed some optimism in a name that I've both owned for years -- and also had a love/hate relationship with.
Biglari Holdings (BH) (BH.A) has been both a fascinating and frustrating company over the years. It's a "sum of the parts" story that, in my opinion, has been too difficult for investors to understand, among other things.
The company is run by CEO Sardar Biglari who controls the 70% of the vote, and his hedge-fund like compensation structure has also been a thorn in some investor's sides. However, his goal to build a "museum of businesses" appears to finally be paying off.
The shares are off to a great start in in 2023, with BH up 53% year-to-date (the A-shares, BH.A, are up 52%).
The Biglari "museum" is concentrated in three main area: restaurants, oil and insurance. Within restaurants, the company owns 9.3% of Cracker Barrel (CBRL) (worth $205 million), a 5.2% stake in Jack in the Box (JACK) (worth $93 million), and the Steak n Shake and Western Sizzlin restaurant chains. Of note, Biglari owns the land and buildings for 155 restaurants (primarily Steak n Shake), and another nine properties, which equates to fairly substantial real-estate holdings.
Within oil and gas, the company owns 90% of Abraxas Petroleum, and the Southern Oil Company. In insurance its holdings include First Guard Insurance and Southern Pioneer Property & Casualty. In addition, the company owns brand licensing company Maxim, and holds (via interests in investment partnerships The Lion Fund, and Lion Fund II) at last count, 360,000 shares of Ferrari N.V (RACE) , currently worth $106 million.
In terms of the sum-of-the-parts calculation, we know that Biglari Holdings current market cap is $654 million. While its difficult to put a value on the holdings that are not publicly traded, the value of holdings in CBRL, JACK, and RACE total $404 million alone. Throw in everything else -- oil & gas, Steak n Shake and Western Sizzlin', and the insurance operations -- and you've still got an interesting sum-of-the parts story, likely worth well in excess of current market cap. In addition, debt is minimal at $69 million (mainly capital leases; operating lease liabilities not included).
For its most recent quarter, the company earned $65 million or $222.48 per A share. Due to its structure, the company does include investment partnership gains in income/losses, which makes earnings lumpy, and somewhat difficult for investors to comprehend.
One of the difficulties for value investors is that in order for value to be realized, it must be unlocked, and sometimes that is a painfully slow process. In addition, that's assuming your presumption that there actually is value is correct in the first place. We'll see if Biglari can continue to close the gap between current market value and intrinsic value.
Keep in mind, this is a rather simplified look at a complex company.
