Here is the preceding Chairman's Letter. Also, you should check out Jeff Annello's notes-they are a much more complete than mine, hopefully, I added to his thoughts.
Overall, there were around 45 people in attendance, all of whom were pretty young. I was astonished that I, being 23, was not the youngest person there-which has historically been the case at shareholder meetings. I met, and talked to some new people-all of whom had interesting stories and ideas to share. No surprise, but there were a ton of fund managers there... I should have asked them how they went about starting their funds, but that's a whole different story.
Here are the issues that were addressed, in roughly the order that questions were asked; with a little bit of my own commentary... Keep in mind it has been 7 months, so some of it is a little fuzzy.
Reverse stock split/NASDAQ listing
- Hopeful of reducing transaction costs
- Wanting to reduce the spreads related to share price...
- Dividends, common stocks, whole companies, etc.
- Previously involved with Whataburger, Sonic, GE, and Merrill Lynch.
- Had yet to sign a contract with the company (a testament to the culture of WEST)
- Overly enthusiastic about contacting franchisees, finding out their intentions on growth, and restoring a good relationship with them (similar to what Tim Taft did at Pizza Inn.)
- Constantly asking himself "what is best for the brand?"
- Spoke of unit economics and how the new prototypes are incredibly scalable.
- Noted that year over year sale for new restaurants can be deceptive, since when a store initially opens, it does quite well, with traffic eventually dropping off.
- Biglari noted the sizable ownership that WEST has.
- Stated that he had been spending 17 hours a day reviewing the workings of the company and re-allocating capital.
- Joked with Phil about how everything that could have gone wrong, had gone wrong.
- Stated that the boardroom had a 'collegial' setting, and that the other members were coming over to their line of thinking. Also noted that age restrictions would change the makeup of the board.
- Franchisees are interested in opening more locations, and historically, make sales go up when a unit is re franchised.
- Made mention of tax savings
- Kenneth Cooper addressed the lands developed good value when it was altered- so that the flood plain wouldn't be an issue.
- The property has 1,400 linear ft facing I-10, and is on the Rim in San Antonio, where there are over 800 acres of mixed use land.
- Noted how hard it had been to acquire, since there were 9 different owners of the 23.5 acre plot.
- Said "you make money when you buy real estate" as I am a small time landlord, I will attest to this being true.
- "Comfortable" with the position WEST has.
- A hedge fund manager stated that International Monetary Systems had been sought by Itex to buy them, rather than go with a WEST purchase. Obviously, they were/are on the verge of insolvency and in no position to buy Itex!
- Learned that un-solicited offers generally are not received well, and that solicited ones are very friendly, but generally cost the acquirer more money.
- Bought with the intention to call and keep the stock-due to the rights offering that WEST did to raise cash.
- Will most likely use strategy in the future, despite bad results with SNS.
- Has been looking for insurance companies to buy, though, non have been attractive.
- Mentioned a small Texas company run by 1 guy, who insures cars that cross the border for a few days at a time.
- Noted that insurance is not necessary, Buffett started in textiles... it's all about buying undervalued assets.
- Eventually hopes to buy a well managed property and casualty company on the cheap.
- Rights offerings are the cheapest way to get capital, and you don't deal with the fixed costs of an investment bank.
- Noted that while ownership may be diluted, there is more capital to allocate.
- Noted that the business is highly decentralized, essentially running it's self.
- The depreciation WEST has is accounting, not economic.
Phil:
- Equity Analysis by John Stowe
- Wisdom of Crowds by James Surowiecki
- Unwarranted Intrusions by Martin Fridson
- Fooling Some of the People, All of the Time by David Einhorn and Joel Greenblatt
Overall, it was a great meeting and totally worth the trip. I plan on going back this year-after all, it is certainly a good excuse to meander around Manhattan for a few days- eating fresh sushi just about every meal!
Disclosure: I am long SNS and ITEX, I have no holdings in WEST.
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