stockmanmarc
Mar 22
Berkshires McLane Unit Buys Spirits Distributor Kahn
Berkshire Hathaway (
$BRKB) subsidiary McLane Co. which is a 32 billion supply chain services provider is buying Kahn Ventures LLC which owns Empire Distributors, a wholesale alcoholicbeverage distributor based in Atlanta Georgia with operations in Georgia and North Carolina. Buffett likes buying private family run businesses and this one seems to fit the bill. As of this writing the price of the deal was not disclosed. Here again Buffett buys another simple to understand business, nothing fancy. According to other wire services its noted that Buffett might be using this as a base for further ventures in this field.
- Family run operation lead by Michael and David Kahn
- Empire has been in business since 1940
- According to industry analysts its the nation’s 15th largest beer and wine distributor.
- Revenue of 350 million a year(2006) according to latest figures I can come by
- They have eight facilities totaling over 850,000 square feet of operating space equipped with high-tech equipment, including bottle scanning and GPS routing, to help them operate efficiently.
Author currently long BRKB
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Feb 27
Operating like Berkshire Hathaway: Alleghany Corporation
While most eyes have been on Berkshire Hathaway (
$BRKA), (
$BRKB) lately and rightly so. Their are other companies that operate in a similar fashion to Berkshire one being
Alleghany Corp. (
$Y) .
Alleghany is one of those companies that fly under the radar.
Alleghany is an insurance company that takes the “float” (which is money that
doesn‘t belong to the company, but are premiums taken in from policy holders and paid out to policy holders).
Alleghany’s principal business is insurance, however with the access to this float (or cash) they reinvest the money in other businesses, much like Berkshire does.
Alleghany has over 60 publicly traded company’s amongst its investment portfolio.
“Alleghany’s objective is to create stockholder value through the ownership and management of a small group of operating businesses and investments, anchored by a core position in property and casualty insurance. Alleghany is managed by a select company staff which seeks out attractive investment opportunities, delegates responsibilities to competent and motivated managers, defines risk parameters, sets management goals for its operating businesses, ensures that managers are provided with incentives to meet these goals, and monitors their progress.
The operating businesses function in an entrepreneurial climate as quasi-autonomous enterprises.
Conservatism dominates Alleghany’s management philosophy. Alleghany’s philosophy shuns investment fads and fashions in favor of acquiring relatively few interests in basic financial and industrial enterprises that offer the potential to deliver long-term value to the investor.”
An interesting fact is that these guys at Alleghany were in Burlington Northern Santa Fe long before Buffett & Co. They have since divested their shares in Burlington and now hold over $825 million in cash in which they can use for future investments. Also they have NO debt and have managed to weather the last couple years quite well. They like Buffett use book value as their yard stick and not the actual price of the stock. The stock ($Y) trades at a discount to its current book value of $306.71.
2009 Results for Alleghany can be found here
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Feb 13
Lampert’s Sears Holdings Unlocking Some Value
It Looks like Eddie Lampert is unlocking some of Sears Holdings ($SHLD) value. What value? For most onlookers Sears is nothing but a washed up retailer, playing second fiddle to the likes of WalMart ($WMT) and Target ($TGT). But too the
value investor their is a different story. For those not familiar with Eddie Lampert, he is the acting CEO of Sears Holdings and a Hedge Fund manager with over 20 years of successful investing experience. When Lampert took hold of Sears via Kmart and merged the two earlier this decade most hailed Lampert as the stock climbed to new heights. But over the last few years in one of the worst economy’s since the Great Depression most have grown impatient wondering when and what he will do.
The Value that I was referring to is the
DieHard battery brand which is owned by Sears and was exclusively sold only through Sears outlets. However now Sears will start selling DieHardthrough other retailing outlets
(read here). This gives Sears another channel which could equate to more dollars down the line. Remember that Sears holds other brands that could later be sold through other retailers. Brands such as
Craftsman tools,
Kenmore appliance, and
Lands End.
Relevant Articles:
Author long SHLD
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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
($POT) and Teck Cominco look to be his two largest holdings.
Pabrai made somewhat of a name for himself between 1999 and 2007 when he racked up returns that far outpaced the market. But as 2008 rolled in, the Pabrai Funds rolled over with the market taking a pretty big hit. However over the last year the Pabrai funds have enjoyed a nice move up along with the market but well out pacing it.
Mohnish Pabrai runs a group of partnership funds based on Warren Buffett’s original Buffett Partnership Fund which existed between 1956-1969.
Author currently has NO positions in the issues mentioned
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Feb 11
Lampert’s Sears Holdings Unlocking Some Value
It Looks like Eddie Lampert is unlocking some of Sears Holdings ($SHLD) value. What value? For most onlookers Sears is nothing but a washed up retailer, playing second fiddle to the likes of WalMart ($WMT) and Target ($TGT). But too the value investor their is a different story. For those not familiar with Eddie Lampert, he is the acting CEO of Sears Holdings and a Hedge Fund manager with over 20 years of successful investing experience. When Lampert took hold of Sears via Kmart and merged the two earlier this decade most hailed Lampert as the stock climbed to new heights. But over the last few years in one of the worst economy’s since the Great Depression most have grown impatient wondering when and what he will do.
The Value that I was referring to is the DieHard battery brand which is owned by Sears and was exclusively sold only through Sears outlets. However now Sears will start selling DieHardthrough other retailing outlets (read here). This gives Sears another channel which could equate to more dollars down the line. Remember that Sears holds other brands that could later be sold through other retailers. Brands such as Craftsman tools, Kenmore appliance, and Lands End.
Relevant Articles:
SEARS NOT JUST YOUR AVERAGE RETAILER!?$$$
Billionaire Eddie Lamperts Sears Has More Ideas In-store!
Slicing up Eddie Lamperts Pie!?$$$
Author long SHLD
Jan 31
Steak n Shake Holdings To Change Name?
Well its been a little under two years that Sardar Biglari took over the stewardship of one of America’s oldest hamburger joints, Steak n Shake ($SNS). Since then he has moved pretty swiftly in shoring up the business and converting it into a holding company. Steak n Shake is no longer just a restaurant but an investment holding company. Currently under their umbrella are Steak n Shake, Western Sizzlin, and an insurance company Fremont Michigan Insuracorp. The latest news is that they plan on changing the parent name from Steak n Shake to “Biglari Holdings” (BH) which will emphasize the holding company. This also is to take away some of the confusion. This will be voted on at the shareholder meeting April 8th 2010.
Author currently long SNS
Nov 09
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 ”Western Sizzlin Corp Completes Distribution of Special Dividend of Steak n Shake Shares” @
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Nov 04
The Great Iron Horse BNSF New Engineer: Warren Buffett
Buffett gave us subtle hints almost 3 years ago when he stated he wanted to “bag an elephant”, who new the elephant was a “Iron Horse” (a pseudonym for steam engine). Buffett has said in the past he was looking for a large deal, something that would move the needle- the needle being Berkshires enormous stock portfolio. Well Warren Buffett just bought Burlington Northern Santa Fe, that is the whole company. BNSF will now be under the Berkshire Hathaway umbrella with companies such as Geico, Dairy Queen, See’s Candies, and Shaw Carpets (see the whole list here). This is by far the largest deal Buffett has ever done which totals a whopping 44 billion. Before this, Berkshire’s biggest acquisition was the $16 billion stock purchase of reinsurance giant General Re , announced in 1998. Buffett, who has been building up his rail holdings for several years was in the headlines back in early 2007 when it was announced that he had taken positions in several of the major rail carriers. But why did he zero in on Burlington Northern. Here are some of the pieces to the puzzle: 1) it’s a business (railroads) that easy to understand 2) it’s has a high return on equity which is currently 15% for the trailing 12 months (last year it was 19%) 3) it’s a business with a moat (has high barrier to entry) not just anyone can start a railroad company 4) it’s had consistent earnings 5) it’s very efficient way of moving goods 6) it’s a play on coal and other commodities 7) it’s throwing off lots of free cash flow 8) it has high-quality management (its track record speaks for itself) Many people wondered why he had suddenly fallen in love with the sector. The simple answer is globalisation. With booming demand for commodities from the Far East and a hunger for cheap foreign goods in the West, the rail companies linking consumer and producer look appealing for the long haul. Buffett has said he realized a few years late that railroads were an appealing investment. As diesel prices rise, shipping by rail instead of truck becomes more attractive, and it would be extremely difficult for a competitor to build a new railroad. Continuing upward pressure of fuel costs make rail transport increasingly more competitive with the trucking fleet and shall prompt more wholesale purchasing within our own continent. The dominant trend is the demand for raw materials and machinery to fuel the construction booms in China and India. US rail firms transport grains and building and construction products for export; US exports to China. “I basically believe this country will prosper and more people will be moving more goods 10, 20, 30 years from now and the rails will benefit,” Buffett told CNBC. It’s also a bet on the future of another country — China. China craves the coal and other raw materials that the U.S. produces. Those commodities fuel the great economic engine that is China, which is the factory to the world. U.S. coal and goods are shipped via rail to Pacific ports and then shipped to China. With his round-out purchase of Burlington Northern, Buffett thinks China will continue to be strong. |
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Oct 23
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 |
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Oct 05
Update On Thor Industries
Thor Industries $THO is the world’s largest manufacturer of recreation vehicles and a major builder of commercial buses. I first mentioned Thor back in January 2009 when it was trading at $13.50 per share. The stock was used as an example of a company that the seasoned value investor Walter Schloss might pick if he were still picking stocks on a professional basis. Schoss had a very impressive track record during his years managing money. He was also a part of Ben Graham’s alumni.
The stock has had an impressive run this year. I believe the stock price has gotten a little ahead of itself. They just announced today that they were making a special one time payout of 50 cents per share on their dividend. This is in addition to their quarterly payout of 7 cents per share. This is probably why the stock price ran up today.10 months ago this stock traded at around 1X book value, where as now it trades for 2.3 book. Management still holds a big stake in this company at 39%, which is a plus, and aligns them with shareholders. The company still has a nice cash cushion of over 328 million with NO debt and free cash flow. All good looking figures for any value investor on the lookout for a new business to allocate money in. In fact Warren Buffett bought a similar business Forest River back in 2005, it to had NO debt. It would not suprize me if Buffett or another company would come in and buy this company outright. While I still feel that this is a very well managed company and things are looking up, the margin of safety is not where it was 10 months ago.
*Author does not currently have position in $THO
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