Biglari's $300 Steak Burger?

No the steakburgers are not really $300, actually you can get a double steakburger with fries for a very reasonable $4. The $300 price tag I'm referring to is the newly 1-20 reverse stock split. Starting Monday the 21st of December 2009 Steak n Shake will trade in the $250-$300 per share range. Steak n Shake just released their full year and fourth quarter results for 2009 earlier in the week which you can find here. In his annual letter to share holders Biglari points out that he will focus Steak n Shakes future growth through the purchase of other equities other than just the restaurant business. In a nut shell this is no longer just a hamburger chain but a investment holding company. As I mentioned in my last update that Steak n Shake ($SNS) has taken a 10% stake in Freemont Michigan Insuracorp ($FMMH) a small insurance company located in the town of Freemont, Michagan. Biglari will look for undervalued companies which he will purchase through his new investment vehicle Steak n Shake. As stated in his annual shareholder letter, they "aim to grow long-term cash flows, not reported earnings. Their view on reported earnings is that they are not real until converted to cash." Wall Street always focuses on earnings and this is what you often see in the media. In the long run a company must earn money however what should be focused on is the free cash flow. Earnings can be manipulated and often can show a distorted picture while cash flow is more transparent. It will be interesting to see the transformation take place over the coming quarters and next few years.

Relevant Articles:

Biglari Finding Value In Those Steakburgers

Steak n Shake Transforming Into Mini- Berkshire Hathaway

Author currently long SNS

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/Symbol	Market Cap	Cash	Book 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

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Steak N Shakes Flipping Burgers into $$$

I have written about Sardar Biglari a few times since the start of the year. It appears more on Wall Street are taking notice of this fund manager. This article is from the Wall Street Journals news wire... Steak N Shake 'Already Flowing with Cash'. Biglari runs a partnership much like the one Warren Buffett ran earlier in his career. Biglari who started buying Steak N Shake shares a couple years ago is currently the largest shareholder. He is also the acting CEO. He is what you would call a share holder activist. Share holder activists are usually investors who usually take a large stake in a company and push for a turnaround, this is usually when the stock has performed poorly. Not always is this good for the small shareholder but in the case with biglari, his interests are in line with shareholders. As the article states Steak N Shake is already producing free cash flow. Trailing 12 months free cash flow is 35.9 million (see chart below). Biglari has stated before that he could use the cash to buy back shares which decreases the shares outstanding which would help boost the bottom line. He can also take the excess cash and put it to use in better performing businesses, much like buffett has done over the last half century. Management Direction "New management, during the fourth quarter of fiscal year 2008, enacted a change in strategic direction under which we began to operate in a manner designed to generate cash. Our long-term objective is to maximize intrinsic business value per share of the Company. (Intrinsic value is computed by taking all future cash flows into and out of the business and then discounting the resultant number at an appropriate interest rate.) Thus, our financial goal is to maximize free cash flow and return on invested capital. We regard capital allocation as immensely important to creating shareholder value. Steak n Shake is transforming into a holding company. Its basic premise is to reinvest cash generated from its operating subsidiaries into any investments with the objective of achieving high risk-adjusted returns. Pursuant to a resolution of the Company’s Board of Directors on June 17, 2009, all investment and other capital allocation decisions are made for the Company by Sardar Biglari, Chairman and Chief Executive Officer. " Steak N Shake might sell burgers, fries and shakes, however one day they could very well be selling insurance. Biglari is also the largest shareholder of Western Sizzlin (WEST) which he plans on rolling into Steak N Shake which should take place in the coming months. Free Cash Flow $Mil 2006 2007 2008 TTM Cash from Operations 69.6 43.4 24.4 42.0 Cap Ex (80.8) (68.6) (31.4) (6.1) Free Cash Flow (11.3) (25.2) (7.0) 35.9 Author is currently long SNS

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Update on Steak n Shake!

Sardar Biglari, CEO of Steak n Shake continues to whittle down the debt while increasing free cash flows. The stock has made a nice move over the last couple weeks. Biglari has added to his stake by purchasing an additional $4,000,000 dollars worth. Traders may want to give this Value play a look, it is trading near its 12 month high.

Links to recent articles: Biglari & Co. Find Value In Those Famous Steakburgers, Biglari: The Young Buffett, Market Report- In Play SNS