Will Steak n Shake Become the Next Mini Berkshire Hathaway?

Includes: BH, FMMH
by: Stockmanmarc

Sardar Biglari, acting CEO of Steak n Shake (SNS), has wasted no time in turning the company into a holding company much like Warren Buffett did with Berkshire Hathaway (NYSE:BRK.A). Biglari is using Steak n Shake's free cash flow to buy a 9.9% steak in Fremont Michigan Insuracorp (OTC:FMMH). Fremont Michigan InsuraCorp, Inc. is a holding company owning all of the outstanding shares of Fremont Insurance Company.

Fremont Insurance Company is a Michigan licensed property and casualty insurer operating exclusively in the State of Michigan, and writes principally personal lines, commercial lines, farm and marine insurance policies through independent agents. They were founded in 1876 and have served Michigan policyholders for over 131 years. They market policies through approximately 175 independent insurance agencies.

Fremont Insurance Company has a financial strength rating of “B++” (Good) by A.M. Best. Biglari had mentioned before he would like to get into the insurance arena if the right opportunity came along. Why an insurance business? The insurance business should add another stream of income and more free cash flow to acquire other businesses as they arise. Fremont has over 10 million in cash with no debt. Current book value is $23.63 per share. This looks like a good candidate for Biglari and company, however I do not see Biglari being a passive investor in this investment.

Could this be just an initial stake, soon to be a subsidiary of Biglari's Steak n Shake holding company? Time will tell. Take note that this is much like Buffett started out over 50 years ago and we know how that turned out.

Company/Symbol Market Cap Cash Book Value p/share Price p/share
Steak n Shake $348.3 mil $37.8 mil $10.02 $12.09
Fremont Mich Insuracorp $37.4 mil $10.5 mil $23.63 $21.45

Disclosure: Author is currently long SNS.