Biglari Holdings Reveals Sonic (SONC) Position ~ market folly

Thursday, August 5, 2010

Biglari Holdings Reveals Sonic (SONC) Position

Sardar Biglari's investment firm Biglari Holdings (BH) has disclosed a new position in Sonic Corp (SONC). Per a 13G filed with the SEC, Biglari Holdings now shows a 5.9% stake in the Sonic restaurant chain with 3,623,668 shares due to portfolio activity on July 28th. Biglari has extensive experience in the fast food industry because Biglari Holdings is actually the new holding company name for Steak 'N Shake.

Back on June 28th, 2010 BH also disclosed a 6.0% ownership stake in Red Robin Gourmet Burgers (RRGB) with 941,189 shares. Burgers apparently, are Biglari's specialty. And as a side note, we also highlighted how Patrick McCoarmack's hedge fund Tiger Consumer Management took a stake in Red Robin as well.

Earlier in the year, many pondered whether Steak 'N Shake was the next Berkshire Hathaway. Sardar Biglari has long been an admirer of Warren Buffett's and appears to be trying to follow in his footsteps. In fact, Biglari had taken a similar path as Sears Holdings chairman Eddie Lampert as he gained control of the company and inserted himself at the head of the company. Biglari then essentially merged his hedge fund (The Lion Fund) into Steak 'N Shake and created Biglari Holdings, coincidentally (or not) the same initials as Berkshire Hathaway.

Further evidencing his experience in the fast food business, Steak 'N Shake acquired Western Sizzlin under Biglari's watch. Since then, Biglari has transformed the fast food chain into a Berkshire Hathaway-esque holding company. He has even performed a 1-for-20 reverse stock split in order to garner a higher stock price in an effort to thwart off short-term traders. The comparisons go on and on, but there was one recent maneuver that was distinctly non-Buffettesque. Many notable financial blogs have highlighted Biglari's pay package and have blasted him for it.

While the manager has attempted to buy an insurance company to provide the necessary float to make investments, he has yet to fully succeed. We'll continue to monitor the developments regarding this potential mini-Buffett in the making. He certainly has a long way to go.

For more on the real Warren Buffett, be sure to head to Berkshire Hathaway's portfolio activity, as well as Warren Buffett's recommended reading list.

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