A Stock That Mimics Warren Buffett’s Berkshire Hathaway

This week I am going to take a look at a few stocks that aim to mimic Buffett’s Berkshire Hathaway. These companies do not invest in the exact same assets as Buffett but have formed holding companies that invest in a bunch of different assets. The first company that seeks to imitate Warren Buffett is Biglari Holdings (BH).

Stock Analysis

Biglari Holdings is a $650 million dollar holding company managed by Sardar Biglari. Biglari is the 33 year old Chairman of Biglari Holdings.  Sardar Biglari has been able to make a lot of money stock investing as the Chairman of the Lion Hedge Fund.

Biglari Holdings is the holding company for a number of different restaurant chains including Steak n Shake, Western Sizzlin, Western Sizzlin Wood Grill, Great American Steak & Buffet, and Quincy Steakhouses. The company owns over 500 restaurants. The company was known as Steak n Shake until last April. Biglari switched the company’s name as he sought to transform the company from its restaurant businesses into a fully diversified holding company. The ocmpany now owns Biglari Capital Corporation, Western Investments, and Western Mustang Holdings LLC.

Mini Berkshire Hathaway

If you visit the Biglari Holdings Company website, you will notice that it is eerily similar to Buffett’s Berkshire Hathaway website. The company does not pay a dividend and its shares trade at $458 per share. (No stock splits just like Buffett). The company just placed a bid to acquire Fremont Michigan InsuraCorp for $31 a share. What other long time investor loves to buy insurance companies due to their massive float?

The company’s shares currently trade at 19 times earnings and 16 times next year’s earning projections. Shares trade at 2.5 times book value and 0.9 time sales. Biglari trades at 8.3 times cash flow. This metric has been improving for the past three years. Forward earnings are projected at 13% which means that shares are trading at 1.4 times earnings growth.

Enterprise value to free cash flow was 11.1 last year. Net margins have averaged 4.7% over the past three years and operating margins were at 7.7%. Revenue growth has increased1%.

Biglari Holding has $80 million in cash and $164 million dollars in debt. Biglari generates $68 million dollars in free cash flow. The company has $55 per share in cash on its balance sheet which equates to roughly 12% of of its value.  Berkshire has a higher cash valuation with its $20,000 in cash per share accounting for 16% of its total value.

Many of the company’s internals look attractive but I still need to do further due diligence before recommending that investors purchase Biglari Holdings. I want to see how the company integrates its recent Steak n Shake acquisition into its holdings and who the company selects as its CEO. Biglari has made my watchlist as I like a number of the moves that the company is making.

Comments

  1. avatar retireby40 says:

    I don’t understand. Why would you want a copy cat when you can get the real thing? Anyone can buy BRK-B.
    I don’t like you new pop up. It float around too long with no way to close it.

    • avatar Mark says:

      It’s because Berkshire is a maturing cash cow with low growth rates. I am always looking fot the next Berkshire Hathaway that can make investors wealthy. This lightbox popup has been on the site for over a month. There is a X box that closes it.

  2. Once I get out of debt, I will definitely be looking into these investments that you write about. I just love your stuff!

  3. avatar Sanborne says:

    Biglari certainly tries to mimic Berkshire as much as possible, but there is at least one very important distinction to consider. WEB has always treated his fellow shareholders as partners. His compensation is more than reasonable and he truly walks the walk when he states he wants to profit with investors, not at their expense.

    Biglari say similar things, but his actions should be evaluated against his actions which include a very generous salary as well as an incentive compensation plan that was quite controversial when proposed last year. After BH acquired The Lion Fund, Sardar Biglari put forth a plan that would pay him 25% of the increase in book value per share above 6% per annum. This plan met resistance (notably from GAMCO) and was altered to be a bit more shareholder friendly but the basic plan didn’t change.

    Would WEB ever have considered a plan like that, and does Biglari want to profit with his shareholders or profit from them a bit as well? That’s a question each investor must evaluate on their own.

  4. avatar Tedy Raviv says:

    I jast don’t like BH, the value of the stock didn’t go up to 400$ , Mr Biglari did a reverse split that isn’t so good for investors.
    Buffet isn’t agenst dividends and Mr biglari salary and bonuses are to high.

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