The Dhandho Investor Sells Ternium, Buys Capital Source!

Mohnish Pabrai aka the Dhandho Investor just released his 13F-HR filings seen here. Pabrai exited out of all of his Ternium ($TX) position. He had this in his portfolio since August 2007 quarterly filing. Pabrai started a new position in Capital Source ($CSE). Pabrai usually has around 15-20 different stocks in the portfolio. As of his latest filing Potash Corp ($POT) and Teck Cominco look to be his two largest holdings.

Pabrai made somewhat of a name for himself between 1999 and 2007 when he racked up returns that far outpaced the market. But as 2008 rolled in, the Pabrai Funds rolled over with the market taking a pretty big hit. However over the last year the Pabrai funds have enjoyed a nice move up along with the market but well out pacing it.

Mohnish Pabrai runs a group of partnership funds based on Warren Buffett's original Buffett Partnership Fund which existed between 1956-1969.

Author currently has NO positions in the issues mentioned

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

Biglari: The Young Buffett

Interesting read in the Wall Street Journal this morning on Sardar Biglari. For those that are not familiar with this young 31 year old CEO, let me bring you up to date. Biglari runs several investment partnerships or (hedge funds) out of San Antonio Texas. The most notable is The Lion Fund. Biglari is what's known in the investment community, as a shareholder activist. He buys a large stake in the company and often ends up as a director on the board, pushing for change or turn-around. In the case with Steak n Shake ($SNS) he became CEO. Biglari runs his partnerships much like Warren Buffett's early years when Warren ran Buffett Partnership between 1956-69. Biglari also runs the old Western Sizzlin Steakhouse ($WEST), and at some later date plans to roll them into one company. According to the most recent shareholder filings, Biglari added to his already large position in Steak n Shake purchasing an additional 107,500 shares. Biglari is a value investor who has studied the readings of Benjamin Graham "Security Analysis" (1934) and "The Intelligent Investor" (1949) as well as the legendary Warren Buffett.

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Value Investor Mohnish Pabrai - The Dhandho Investor

For those of you that are not familiar with Mohnish Pabrai, he is a devout disciple on the teachings by Warren Buffett and Ben Graham. Mohnish runs a fund identical to Warren Buffett's original Buffett Partnership which was the predecessor of Berkshire Hathaway. Pabrai wrote a book about 2 years ago titled the Dhandho Investor. The word Dhandho which is pronounced dhun-doe is a Gujarati(a state in India) word. Dhan comes from the Sanskrit root word Dhana meaning wealth. Dhana-dho, literally translated, means "endeavors to create wealth". Pabrai is a focus investor usually holding about 12-18 stocks in his portfolio. Pabrai likes to put no more than about 5% to 10% in each stock. Currently Pabrai holds 17 stocks in his portfolio with about 235 million under management. Ternium $TX, Harvest Natural $HNR, Teck Cominico CL B shares, Berkshire Hathaway $BRKB and Fairfax Financial Holdings $FFH are his 5 top holdings. The current 13F filings show that Pabrai bought a large position in Brookfield Properties $BPO while closing out his position in Sears Holdings $SHLD . For those of you that have not read the Dhandho Investor, you should, it is simple to understand and makes a lot of sense.

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An Off Shoot Of Buffett's Partnership: The Sequoia Fund

Here is an interesting link on The Sequoia Fund. Sequoia is a value oriented mutual fund managed by Ruane, Cunniff, & Goldfarb. The Seqouia Fund $SEQUX has a large number of companies in their portfolio however Sequoia concentrates a large percentage of its dollars to a hand full of companies. Warren Buffett's Berkshire Hathaway $BRKA, $BRKB currently is their largest holding followed by Martin Marietta Materials $MLM, Fastenal $FAST, IDEXX Labs $IDXX, and Mohawk Industries $MHK. Sequoia has an excellent track record stretching back to 1970. The Sequoia Fund is not really an off shoot of Berkshire Hathaway, however they have a long history together. Bill Ruanne who was the founder of the fund was one of a small group of investors along with Warren Buffett that trace their roots back to the Father of Security Analysis Ben Graham. It seems back in 1969 Buffet ended his Buffett Partnership after a 13 year run. Buffett steered his partners over to Ruane who in turn started the Sequoia Fund. The Fund was closed off to new investors for 26 years and reopened in 2008.

Relevent Article

Buffett And Reopened Seuoia Fund Still Intertwined After Decades

A Stock Canidate That Walter Schloss Might Like!