Monday, November 9, 2009

Steak n Shake Transforming Into Mini Berkshire Hathaway


Sardar Biglari acting CEO of Steak n Shake has wasted no time in turning the company into a holding company much like Warren Buffett did with Berkshire Hathaway. Biglari is using Steak n Shakes $SNS free cash flow to buy a 9.9% steak in Fremont Michigan Insuracorp $FMMH. Fremont Michigan InsuraCorp, Inc. is a holding company owning all of the outstanding shares of Fremont Insurance Company. Fremont Insurance Company is a Michigan licensed property and casualty insurer operating exclusively in the State of Michigan and writing principally personal lines, commercial lines, farm and marine insurance policies through independent agents. They were founded in 1876 and have served Michigan policyholders for over 131 years. They market policies through approximately 175 independent insurance agencies. Fremont Insurance Company has a financial strength rating of “B++” (Good) by A.M. Best. Biglari had mentioned before he would like to get into the insurance arena if the right opportunity came along. Why an insurance business? The insurance business should add another stream of income and more free cash flow to acquire other businesses as they arise. Fremont has over 10 million in cash with no debt. Current book value is $23.63 per share. This looks like a good candidate for Biglari and company however I do not see Biglari being a passive investor in this investment. Could this be just an initial stake, soon to be a subsidiary of Biglari's Steak n Shake holding company? Time will tell. Take note that this is much like Buffett started out over 50 years ago and we no how that turned out.

Company/SymbolMarket CapCashBook Value p/share Price p/share
Steak n Shake / $SNS$348.3 mil$37.8 mil$10.02 $12.09
Fremont Mich Insuracorp / $FMMH$37.4 mil$10.5 mil$23.63 $21.45

More Relevant Articles from these great sites:

"This tiny company could be the next Berkshire Hathaway" @ The Daily Crux
"Sardar Biglari Buys 9.9% Fremont Insuracorp" @ Street Capitalist
"Western Sizzlin Corp Completes Distribution of Special Dividend of Steak n Shake Shares" @ CNN Money

Author is currently long SNS

Posted via email from stockmanmarc's posterous

Posted by STOCKMANMARC at 7:21 PM
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24 comments:

  1. As I tweeted, FMMH came out with earnings and book value is now above $25. Story is getting better. Need to do more reading, but there are reasons why SNS can't buy more than 9.9% right now, I believe relating to the FMMH demutualization. I think the restriction may expire sometime soon.
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