This is a good deal for Heinz shareholders and for Berkshire Hathaway shareholders and does say something about Buffett’s confidence in the sector(he’s not, for example, financing today’s big airline merger). But, be aware, the deal Berkshire is getting and the securities they’re buying, would not be available to the individual investor.

Disclosure: The author owns shares of BRKB

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• Firms including Warren Buffett’s to buy Heinz (denverpost.com)

The post Buffett Is Not Buying Heinz- He’s 3G’s Banker appeared first on Inelegant Investor.

A year ago, we questioned Eastman Kodak’s solvency, and discovered a strange world of what Donald Rumsfeld might have called “dead-enders” who believed in a pot of gold at the end of the Kodachrome rainbow despite all evidence to the contrary.  One rallying cry amongst these folks was huge, multi-billion dollar patent sale that was imminent.  Well, apparently, imminent meant a year later, and billions meant 525 million.

A sobering reminder- don’t invest based on the rosiest projections you can find. Insist on a wide margin of safety.

Disclosure: The author owns no position in any stock mentioned.

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• Apple and Google team up to buy Kodak’s patents (digitaltrends.com)
• Apple Joins Google in $500 Million-Plus Bid for Kodak Patents (bloomberg.com)
• Surprise Allies Apple, Google Team Up for Kodak Patent Bid (businessweek.com)
• Apple and Google reportedly join forces to buy Kodak patents (slashgear.com)

The post Bankrupt Eastman Kodak Sells “Billions Of Dollars” Worth Of Patents For $525 Million After 18 Months Of Trying appeared first on Inelegant Investor.

Bilgari Holdings(BH) Chairman and CEO Sardar Biglari has, on multiple occasions, let us all know that Biglari Holdings is a ‘jockey stock’ and that he is the ‘jockey’.  It seems though, that the horse’s owners continue to resist his orders.  Biglari first tried to classify the stock in February 2011, but was unsuccessful in that attempt.  More recently, Biglari proposed a modified plan on October 5, scheduling a special meeting for November 2.

On November 2, the day of the meeting, Biglari abruptly delayed it until December 14. Most recently last night at 9:15, hours before the scheduled meeting, the company announced that the meeting would be delayed once again with no new date proposed.

Clearly, Biglari is finding that the support for his proposal is not there among shareholders. This should not come as a surprise to anyone.  The stated justification for the move is unconvincing- it is clear to all that this is a transparent attempt by Biglari to usurp more authority for himself at the expense of shareholders.

Biglari deserves credit for his successful turnaround of Steak N Shake. However, this should not give carte blanche to his megalomaniacal delusions. Despite the company’s name change and claims to be a diversified holding company, the firm has no significant operating business beyond Steak N Shake, despite several years of effort. Biglari’s reputation has become a competitive disadvantage in pursuing acquisitions. His annual letters are notable for their vacuity, pages of high-falutin’ language saying nothing more than “I’m smarter than you, I’ll do what I want, and if you don’t like it, sell.”. Well, shareholders are sending a message to Biglari over and over again- “we’re still here, and there are limits to your power”

It’s becoming increasingly clear that Biglari’s inability to work well with others, his narcissism, his dishonesty, and his limitless greed will outweigh his intelligence and operational skills. We have been selling off our stake over time and will continue to do. Biglari’s reckless behavior cannot be trusted.

Disclosure: The author owns shares in BH

The post ‘Jockey’ Biglari And His Recalcitrant Horse A Late Scratch-Special Meeting Postponed Again At Last Minute appeared first on Inelegant Investor.

There is rampant speculation this morning after Berkshire Hathaway(BRKA) announced it had repurchased 9200 class A shares from “the estate of a long-time shareholder”.  Many are reporting, irresponsibly, in our opinion, that the stake comes from David Gottesman. This makes no sense to us for two reasons. First, Mr. Gottesman, being very much alive, has no estate. Secondly, as a Director of Berkshire, Mr. Gottesman and the company would be required to disclose.

We have done some sleuthing, and believe that the source of the shares was Albert Ueltshci.  Ueltshci, who died in October at the age of 95, received 16,256 shares when he sold FlightSafety International to Berkshire in 1996.  He had recently signed Buffett’s Giving Pledge as well.  Ueltshci who borrowed $3500 to buy his first plane and sold flights for $1, was Pan Am founder Juan Trippe’s personal pilot and started FlightSafety on the side, with Trippe’s backing and support.

In any event, the price that Buffett paid, 120% of book value, is leading others to conclude that the stock is undervalued, pushing up the price today on the news.

Disclosure: The author owns class B shares of Berkshire Hathaway

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The post Who Did Buffett’s Berkshire Hathaway Buy Back $1.2 Billion In Shares From? Not Gottesman. Our Guess: Albert Ueltshci appeared first on Inelegant Investor.

As an activist, Sardar Biglari has taken stakes in various companies, and, when he hasn’t gotten his way, pushed his agenda in the name of good governance.  See, for example, the recent amendment by the Chairman and CEO of Biglari Holdings(BH), of his 13D on Cracker Barrel(CBRL). Emphasis is added:

On August 16, 2012, BH delivered a letter to the Secretary of the Issuer nominating Sardar Biglari and Philip L. Cooley to stand for election to the Board of Directors of the Issuer (the “Board”) at its 2012 annual meeting of stockholders (the “2012 Annual Meeting”).  The Reporting Persons have had and will continue to have discussions with the Issuer about representation on the Board.  The Reporting Persons continue to believe that the Board requires directors who have a meaningful ownership interest in the Issuer as well as highly consequential industry experience.  The Reporting Persons are committed to seeking such representation for the benefit of all shareholders without the need for a costly proxy contest. As a consequence, the Reporting Persons have communicated to the Issuer’s CEO and recently designated Independent Chairman their desire for two Board seats, their interest to work constructively with the Board, and their interest in avoiding a costly proxy contest. The Reporting Persons are awaiting the Issuer’s response and maintain that all shareholders’ best interests lie in a favorable outcome.

Related articles

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The post Sardar Biglari’s First Rule Of Corporate Governance: Do As I Say, Not As I Do appeared first on Inelegant Investor.

On August 14, 2012, the Board of Directors (the “Board”) of Biglari Holdings Inc. (the “Company”) increased the size of the Board to six members and elected James P. Mastrian as a director of the Company. The Board also appointed Mr. Mastrian to serve on both the Audit Committee and the Governance, Compensation and Nominating Committee.

Mr. Mastrian, age 69, retired from Rite Aid Corporation in August 2008. He was the special advisor to the Chairman and Chief Executive Officer. Prior to that, from October 2005 to August 2007, he was the Chief Operating Officer of Rite Aid Corporation.

Interestingly, the filing fails to note that Mr. Mastrian is also a Director at CCA Industries(CAW), in which Biglari Holdings owns a 12.8% stake, and on whose Board Sardar Biglari and Phil Cooley, Biglari Holding’s Vice Chairman, sit. This is obviously public information, but is a glaring omission in this filing. Mr. Mastrian owns no shares of CCA accoriding to the most recent proxy statement despite having served on the Board for some time.

Mr. Mastrian’s executive experience was almost entirely at Rite Aid(RAD) a perpetually troubled drugstore chain whose stock has underperformed for years while competing with some of the country’s most successful retailers, Walgreens(WAG) and CVS(CVS). In an industry with robust products, Rite Aid has long been headed towards bankruptcy.

There is nothing in Mr. Mastrian’s history to suggest that he will be a strong independent Director at Biglari Holdings, and the failure to mention his service at CCA is a disturbing omission. Mr. Biglari has said that the company should be viewed as a’ jockey stock’ and as such he has packed his Board with sycophantic groomsmen, of whom Mr. Mastrian is only the latest.

Disclosure: The author holds shares in BH and CAW

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• Cracker Barrel Adds Another New Board Member; Name Is Still Not Sardar Biglari (inelegantinvestor.com)
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The post Sardar Biglari Adds Another Puppet To Biglari Holdings Board, Fails To Disclose Ties appeared first on Inelegant Investor.

We’re sure that the business experience Mr. Johnson has from the filtration industry is top notch, but we question what makes him the best candidate for this seat.  We also look forward to seeing how much of his own money he will use to purchase shares of the company.

Biglari, who mounted a proxy fight last year and lost, has continued to buy shares through Biglari Holdings(BH), reporting a 17.3% stake in the most recent filing.  Cracker Barrel has done everything it can to avoid giving Biglari a seat; just last week the Chairman of the Board agreed to step down. It will be interesting to see how long it can persist in denying the will of such a large and aggressive shareholder.

Disclosure: The author owns shares of BH

The post Cracker Barrel Adds Another New Board Member; Name Is Still Not Sardar Biglari appeared first on Inelegant Investor.

It’s perhaps not a complete surprise that the firm has chosen to expand in this way, given its chairman’s long experience operating restaurant chains, but it remains unconventional.

The new direction makes comparisons to Berkshire Hathaway(BRK) inevitable. Berkshire, of course, has built its portfolio of stocks and companies  using float from its successful insurance businesses.  Biglari Holdings(BH), whose CEO, Sardar Biglari has been almost comical in his attempts to emulate Berkshire, remains primarily in the restaurant business, despite several failed attempts to purchase insurers.

Even at its current scale, Fidelity’s restaurant business, together with some other non-insurance businesses, represents a small part of the company’s revenue, and an even smaller part of its profit. At the rate the company is acquiring new properties, that will change quickly.

The company trades at an attractive earnings multiple, has a 3% yield, and is actively buying back stock. If the restaurant strategy succeeds, investors will be amply rewarded. But ,beware- there are major risks inherent in such a drastic new direction.

Disclosure: The author holds shares in BH and BRK

If the strategy succeeds, this

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The post Title Insurer Fidelity National Financial Agrees To Purchase… Another Restaurant Chain? appeared first on Inelegant Investor.

engineering background, but found it difficult to explain to outsiders exactly how this changed the game for Yahoo, particularly in terms of the company’s ability to attract top engineering talent.  I’ve always had a hard time convincing non-engineering management that engineers are not Legos- they don’t all have identical skills and speeds. In fact, there’s a power law, where the top engineers are an order of magnitude more productive and innovative than the rest.

Though it is true that the man-month is mythical, there is also a powerful network effect that can be unleashed by having talented engineers interact in unstructured ways.  This is the secret of Google’s(GOOG) 20% time, and Facebook’s(FB) famous Hackathons.

I was pleased then, to see “Marissa Mayer To Board: Yahoo Needs More Engineers” at Business Insider this morning.

We know what one of those ideas is, and it’s pretty simple: Mayer wants to hire more front line engineers – a lot more.

According to a source familiar with Mayer’s conversations with Yahoo’s board prior to her hiring, she told the board that a quick examination of its headcount and org structure made it clear to her that the company does not have the kind of engineer-to-everyone else ratio that Google or Facebook has, and that fixing that ratio would be among her top priorities.

This might seem like an obvious move, but consider that before Yahoo’s board hired Mayer, it considered making Ross Levinsohn CEO. One of his first moves was going to be to get rid of thousands of engineers by shipping off Yahoo’s ad tech business.

Likewise, Carol Bartz’s signature move was shipping Yahoo’s search business – and many of the engineers running it – off to Microsoft.

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The post Marissa Mayer Gets It – New Yahoo CEO Wants More Engineers appeared first on Inelegant Investor.

It’s still only a few hours after the horrific attack on an Aurora, Colorado movie theater midnight showing of The Dark Knight Rises killed 12 and injured 38.  A group of people, young and old, looking for relaxed enjoyment on a summer night, cut down in their primes, or forever scarred. We have a name for the monster responsible: James Holmes, and reports that his apartment may have been booby-trapped with explosives.  Unusually, he was captured alive.

In the coming hours and days, details will come out about Holmes.  These details will inevitably be scrutinized, and pundits and readers will nod knowingly at the “warning signs” that were missed.  This is a most dangerous activity.  None of these armchair diagnosticians will then trace their results back the other way: how many thousands of others exhibited the same warning signs without massacring innocents?  The blame and smug nods are worthless if they don’t yield specific and actionable solutions to prevent future tragedies.

Too often, they will merely produce TSA-like security theater with huge costs, both in money and in personal freedom, but without any measurable improvement in security or safety.  It is a strange paradox, that the increasing rarity of violent events(see Steven Pinker’s The Better Angels Of Our Nature), lead us to have an increasingly low tolerance for the inevitable residual violence.  Violent acts can never be fully eliminated, but our response to them, to recognize this, to keep our heads, and to avoid extreme measures- this is the only rational and effective response.

As a postscript, we would add that this same hindsight bias is the biggest danger to investors.  It’s always easy to see why something was an obvious short or long after the fact. But, since none of us have time machines, we need to learn to only focus on those ideas which work prospectively.

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• 14 Shot Dead, 50 Wounded During Dark Knight Rises Showing in Colorado [Shootings] (gawker.com)

The post James Holmes, Mass Murderer And The Danger Of Hindsight appeared first on Inelegant Investor.