• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Controversial Biglari Holdings Shows Promise in a Down Market

Can recent successes translate into real value for investors?
By JONATHAN HELLER
Mar 02, 2022 | 11:00 AM EST
Stocks quotes in this article: BH, BH.A, CBRL

With the S&P 500, Russell 2000, and Russell Microcap Indexes all down around 10% year-to-date, at least one thing again becomes clear: The overall direction of the markets has a huge impact on the direction of individual stocks. Now, that may sound like either a stupid, or overly obvious statement depending on your perspective, but it is a simple concept too often forgotten by investors.

In this environment, a company has to do something out of its norm, perhaps a better-than-expected quarter, or show that it is turning around, in order to fight the overall trend of a down market. This week, we got a great example.

Mini-conglomerate Biglari Holdings (BH) , (BH.A) , which owns among other things the Steak n Shake and Western Sizzlin restaurant chains, First Guard Insurance, Southern Oil Company, and Maxim magazine, has been a controversial name over the years, for many reasons. But the release of the company's 10-K last week -- it is not big on earnings releases, and garners no analyst coverage -- showed great progress, and the shares have rallied (BH is up 24%, BH.A up 30%) the past two trading days.

Shaking Things Up

The key takeaway is the turnaround in Steak n Shake, which has been a disaster in recent years. Biglari acquired the company in 2008, at which point it was in terrible shape, and turned it around. But in 2017, performance began to suffer. The company ended up closing many of the locations, and adopted a new strategy to sell franchises for $10,000, plus up to 15% of revenue and 50% of store profits. It sounded like a losing strategy to me, a last gasp to keep the chain from going under. However, three years in, that strategy appears to be bearing fruit. In 2021, Steak n Shake generated $13.5 million in operating earnings, following losses of $4.6 million in 2020, $18.6 million in 2019, and $10.7 million in 2018.

In addition, BH paid off Steak n Shake's $152.5 million in debt in 2021; there were fears at one point that Steak n Shake would go bankrupt due to the debt. What remains is a debt-free 536-store chain, that is now generating significant franchise revenue.

Biglari still owns 199 units, down from 415 in 2017, but has essentially flipped to a franchise model, which typically generates higher margins. There is still a real-estate play here, though; Biglari owns the land and buildings for 157 locations, and 10 other restaurant properties.

The company also retains an 8.8% stake in Cracker Barrel  (CBRL) , worth about $255 million. Considering that BH's current market cap is just under $450 million, that is a considerable stake. In addition, BH currently trades at just 0.88x tangible book value, and earned $111.83 per Class A share (BH.A) in 2021, putting the trailing price-earnings ratio at less than 7.

Value Dreaming

Biglari is not without controversy; CEO Sardar Biglari calls the shots, controls the voting rights of the company with 70.4% of the voting interest, and has not endeared himself to investors, or some shareholders (myself included). The company owns an undervalued package of assets, at least in my view, but has been hampered by what I call the "Biglari Discount." One way to potentially fight through that is to demonstrate success in the acquired assets, and 2021 has shown promise in that regard.

The purchase of Southern Oil Company in 2019 for $51.5 million was a bit of a head scratcher at the time, but appears to be paying off. Since the acquisition Southern has reportedly returned nearly $41 million in cash to BH.

Biglari, which should be a value investors dream, has been hampered by its reputation. We'll see if recent successes help to alter that dynamic.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Heller was long: BH, BH.A.

TAGS: Earnings | Fundamental Analysis | Investing | Markets | Small Cap | Stocks | Trading | Value Investing | Restaurants | U.S. Equity

More from Stocks

Tesla's Rally Gets More Juice Thanks to General Motors

Bruce Kamich
Jun 9, 2023 6:46 AM EDT

The electric vehicle maker's stock already was trending higher and is receiving a boost from a deal with GM to use Tesla charging stations.

The Bull Is Out of the Gate

Helene Meisler
Jun 9, 2023 6:00 AM EDT

Look how quickly we got bulled up. Let's check sentiment, the surveys and the International Securities Exchange call/put ratio.

A Roundabout on Wall Street

James "Rev Shark" DePorre
Jun 8, 2023 4:25 PM EDT

The big caps turn out big again, with Apple, Microsoft and Nvidia at the wheel.

Ignore Carvana's Backseat Drivers

Ed Ponsi
Jun 8, 2023 1:09 PM EDT

I'll take a ride with CVNA, but I will wear my safety belt -- and know when to get out.

GameStop Needs to Unlock a Secret Door to a New Business

Stephen Guilfoyle
Jun 8, 2023 12:27 PM EDT

After another GME earnings blunder and change of players, I see the stock as this: pure speculation with a strong balance sheet. But I believe the company can find a way to the next level -- though it could get zapped before getting there.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:19 PM EDT CHRIS VERSACE

    AAP Podcast: This Company Is Not Going 'Solo'

    Listen in as I talk with the very diversified Solo...
  • 01:51 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Adjusting Your Trading Approach to Shifting Market...
  • 06:54 PM EDT CHRIS VERSACE

    AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

    Listen in as the Action Alerts PLUS Podcast tackle...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login