Biglari Holdings: A Second Chance to Buy it, Now…

It was only a few months ago when Alexander Green added “the next Berkshire Hathaway,” Biglari Holdings (NYSE: BH), to the All-Star Portfolio.

The stock was recommended with a buy-limit price of $365 at the time. And in short order, the stock plowed right through that price level, and on into the low $400s. A few Oxford Club members even wrote in to say, “Why the heck did you guys recommend BH with that limit price, if I can’t actually buy it somewhere close to that level?”

Well, thanks to the vagaries of Mr. Market… You now have a second chance to buy Biglari Holdings close to the original recommendation price.

Biglari Holdings: On Sale Now

Biglari Holdings spent the month of January trading in the $400 to $406 range. Then came the holding company’s latest quarterly earnings report. BH reported $3.53 a share in the first quarter, which was below analysts’ expectations.

In addition to this, same-store sales for Steak ‘n Shake only grew 1.3%. That’s down from 5.5% in the first quarter of 2012. Customer traffic decreased to 1.6% from 5.7% in 2012, as well. Not all was bad for the company, though. Net sales increased 1.4% from $161,516 to $163,739. Cash flow from operations also ticked higher about $500,000, compared to year-ago levels.

Ultimately, the future success of Biglari Holdings all boils down to one person, Sardar Biglari, the firm’s CEO and chairman.

Sardar is undoubtedly one of the most highly regarded business owners and investors on Wall Street. But he’s also one of the most controversial people, as well.

Just take a look at Cracker Barrel (Nasdaq: CBRL), for example.

Controversial… But on Purpose

BH currently owns about 20% of CBRL, and Sardar would like to own more if he could. However, Cracker Barrel’s board of directors doesn’t want him around at all. In 2011 and 2012, Sardar tried to gain a seat on Cracker Barrel’s board, but was denied both times.

This year, CBRL even offered to buy out Biglari’s stake for $300 million before its 2013 proxy contest. Sardar rejected the board’s offer. But as if this weren’t enough tension already, Forbes adds, Cracker Barrel even has in place a ‘poison pill’ that “would allow [CBRL] to issue stock to dilute Biglari’s stake if he bought more [shares].”

As you can see, Biglari isn’t making many friends on Wall Street. Yet, he still gets compared to the likes of Warren Buffett, perhaps the greatest value investor of all time. That’s because, when you see behind the headlines, no one can deny Biglari’s ability to create shareholder value.

Since November 2008, shares of Cracker Barrel have nearly quintupled. As a major shareholder, Biglari also receives the added benefit of collecting CBRL’s 3% dividend yield. Steak ‘n Shake, according to QSR Magazine, experienced 10 straight quarters of same-store sales growth, as of the third quarter in 2011. In addition to this, Steak ‘n Shake went from losing $100,000 a day in 2009 to making more than $100,000 a day in 2010.

Like Buffett, Bilgari has a unique ability to buy into distressed businesses and quickly turn them into profitable establishments again. Still, perhaps the best thing about owning shares of Biglari Holdings is that Sardar is only 35 years old. That gives him decades to boost shareholder value and fight his way to the top of the world of investor finance.

Sardar’s age – and his demonstrated prowess at picking cash-rich, undervalued companies – makes Biglari Holdings worth owning to Club members. After all, picking up a few shares today of “the next Berkshire Hathaway” at a mere $375 per share could end up one of the best financial moves you’ll ever make.

Good investing,

Jeff