Biglari Adds Old Rival To Biglari Holdings Board

by: Inelegant Investor - February 13th, 2012   1 Comment

Sardar has acquired a reputation as mercurial CEO, engaging in multiple proxy fights and hostile bids for companies he’d like to acquire.  In a particularly prolonged battle, spent well over a year attempting to acquire Michigan Insuracorp through his (BH) vehicle.  Fremont went so far as to have a Michigan state law passed making it impossible for Biglari to carry out his plan for a period of time. Fremont finally sold itself to another buyer at a rich premium early last year.

Given this history, we were surprised to see that in a filing this past Friday after the market closed, Biglari Holdings announced that William L. Johnson has been elected to its Board. Johnson was the Vice Chairman of the Fremont Board that so vigorously resisted Biglari’s overtures.

Biglari recently failed in a proxy fight for Board representation at Cracker Barrel(CBRL). The company’s incumbent management painted him as a hostile slash and burn executive.  Is Biglari attempting to soften his image by co-opting a former rival?

Disclosure: The author holds shares in

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Bankrupt Kodak Finally Starts Killing Hopeless Businesses, Retains Doublespeak

by: Inelegant Investor - February 9th, 2012   Add Comment

Eastman (EKDKQ), in with its shares destined to be worthless, is finally starting to make the

English: This is a Kodak EasyShare LS743 digit...

A Kodak "Digital Capture Device"

moves that might have helped it avert this fate had failed CEO Antonio Perez undertaken them sooner. The company announced today that “it plans to phase out its dedicated capture devices business“.  Perhaps part of its failure lies in its insistence on using  obtuse language to describe its actions and products. Dedicated capture devices business?  Does McDonald’s speak of its “Animal derived protein-based human consumables business”?  Even the Postal Service doesn’t talk about cutting “physical object routing and transmittal personnel”.

With bankruptcy rumors swirling late last year, Kodak’s defenders were talking about imagined strength in Kodak’s digital camera business. With the company killing this business and saving $100 million per year by doing so, we now see that many of the rosy claims made about Kodak were not grounded in reality. One wonders why the company is continuing its struggling consumer printer business.

Long ago, the company split into a chemicals business and an imaging business. Its brand was once synonymous with photographs, though the cameras were often made by others. The company needs to return to these roots and pursue an asset-lite “Kodak-inside” business model, licensing its brand, intellectual property, and components for inclusion in others products.

Disclosure: The author holds no position in any stock mentioned

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On The Irrelevance Of The Dow Jones Industrial Average

by: Inelegant Investor - February 9th, 2012   Add Comment

Though its influence has finally waned somewhat in recent years, for over a century, the has been, and, for many, remains, synonymous with the stock market.  News reports continue to proclaim “the market” is up or down, referring to this index.

Yet, the index consists of a mere 30 stocks, not particularly representative of the market, and is price-weighted- a nonsensical choice inferior to market-capitalization-weighted indexes such as the S&P 500, which, with 500 stocks is much more representative of the market as a whole.

The fine folks at Bespoke Investment Group often have fascinating insights.  They recently published a fascinating article, showing what would have happened if (AAPL) had been added to the index in June 2009 rather than (CSCO).  This one single swap would have left the index 14% higher today, at an all time high. The fact that the selection of a single stock can lead to such a wide divergence in the index over such a short period of time should give anyone pause before paying any heed to this index.

The numbers, from Bespoke:

Even though was not chosen to replace GM, it is always fun to see what might have been.  To that end, we have recalculated the performance of the to reflect how it would have done if AAPL was added to the instead of .  The chart below shows the current (blue line) compared to the ‘Apple’ (red line).  Currently, the is trading at a level of roughly 12,865, which is about 12.1% off its all-time high of 14,198.10 from October 2007.  If AAPL was in the , though, the index would not only be significantly higher (14%), but it would also be trading at an all-time high of 14,636.  Granted, you cannot go back and change the past, but we wonder if investor sentiment would be more positive if the was trading at record highs?

Disclosure: The author holds no position in any stock mentioned

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