Monday, June 15, 2009

Auto Legend Penske Sees Value In Saturn

The news has been out for about a week now on Roger Penske buying Saturn Motors which has been a division of General Motors for the last 19 years. Who is Roger Penske? Well to most he is the team owner of Penske Racing, the most dominant racing team in American Open Wheel racing. However, if one takes a closer look at Mr. Penske he is one shrewd business man. I would even go so far to call Roger a Value Investor. To many that read this blog will say how does Roger Penske buying Saturn pertain to picking stocks. Remember folks investing whether it be buying shares in a company or the whole company is still investing. Value Investing is just digging a little deeper for the true deals. Why do I call him a value investor? This is due to him stepping in and buying Saturn when things look pretty dim in the auto industry as well as the overall economy.

Now I do not know whether Mr. Penske and Warren Buffet know each other, but it seems as though The Captain has taken some cue's from the Oracle of Omaha. Meaning that Penske is sticking to a business he knows very well, plus buying an established brand on the cheap. As most true value investors know that this is when you generally find some of the most attractive deals. Penske has made a career in the auto industry for nearly 50 years. I think he sees an established brand that has a loyal customer base that needs some tweaking. Its much easier to buy a existing auto manufacturer than start from scratch.

Here is what some others are saying:

Penske has a unique plan put into place where the production function of the automobiles will be outsourced Jeremy Rooney at The Examiner

Saturn dealers can collectively breathe a sigh of relief. Having Roger Penske as the boss will mean good things for Saturn Keith Crain at Automotive News

Tuesday, June 2, 2009

Biglari & Co. Find Value In Those Famous Steakburgers

Steak n Shake (SNS) long known for their signature Steakburgers, Crispy Fries and Hand- dipped real- milk Milk Shakes is still offering a value in more ways than one. Since current CEO Sardar Biglari has taken over the helm from the struggling food chain Biglari & Company have acted quickly to instigate a turnaround. While the stock price is well below its 5 year high of nearly $22 per share the business itself represents a company that is being overlooked by the investment community. At the end of 2008 Steak n Shake put in place their 4 meals for under $4 in hopes of driving traffic to their stores. Is this working? Well according to their latest 10-Q they earned .08 cents a share or almost 2.3 million dollars versus a -.14 cent loss from the previous year I would say that their headed in the right direction. However, I do not want to focus on what they earned but the VALUE in the shares of the business.

Like Warren Buffett has often quoted "Price is what you pay and VALUE is what you get."

"We must first cut the knowable, the COSTS, and then invest to increase the unknowable, the sales." Sardar Biglari.

Biglari & Company have whittled down the capital expenditures from 69 million at the end of 2007 to 31.4 million at the end of 2008. Currently the trailing twelve month CapEx is 10.2. The trailing twelve month cash from operations is 36.4 less the current CapEx of 10.2 mil. gives them a Free Cash Flow of 26.2 million. Their current book value is $9.88 per share and the stock is trading around the $8.75 range. At the end of 1999 book value was $4.71 per share while the stock price was $10.13 per share. Most of the property they sit upon is company owned with a value of $413 mil. which equates to $14.35 per share. As of the end of 2008 the company had 415 company owned stores and 75 franchised stores. Recently the stock was ranked in the top 10% in year to date performance of small cap stocks.

While this might not represent a company that is growing at hyper growth rates like many of your social media companies today, this is a company who has been in business since 1934 and has stayed close to their core product line - burgers, fries, and shakes. As you can see by some of the numbers, this stock is trading at a cheaper valuation, than where it was ten years ago. Here is a company who is run by a young man who seems to find undervalued situations much like Ben Graham did through out his career and also like Warren Buffett'S early years when he ran a partnership.

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The Author suggests further research before investing.
Author is long SNS