On August 8, 2023, Sardar Biglari, through his firm Biglari Holdings Inc., made a significant investment in El Pollo Loco Holdings Inc (LOCO, Financial), acquiring 4,000,000 shares. This transaction has made a substantial impact on Biglari's portfolio, with LOCO now accounting for 63.9% of his holdings. This article will delve into the details of this transaction, the profiles of Biglari and El Pollo Loco, and the potential implications for value investors.
Profile of Sardar Biglari and Biglari Holdings Inc.
Sardar Biglari, the man behind Biglari Holdings Inc., is a renowned value investor known for his strategic investments. His firm, based in San Antonio, TX, holds a diverse portfolio with a strong focus on the Consumer Cyclical and Consumer Defensive sectors. Biglari's top holdings include Cracker Barrel Old Country Store Inc (CBRL, Financial), Jack In The Box Inc (JACK, Financial), Alibaba Group Holding Ltd (BABA, Financial), Coca-Cola Co (KO, Financial), and Taiwan Semiconductor Manufacturing Co Ltd (TSM, Financial). The firm's equity stands at $24 million across eight stocks.
Details of the Transaction
The transaction took place on August 8, 2023, with Biglari Holdings Inc. purchasing 4,000,000 shares of El Pollo Loco Holdings Inc at a price of $10.74 per share. This acquisition has significantly increased Biglari's stake in LOCO, making it a new holding that now represents 63.9% of his portfolio. Furthermore, Biglari now holds 11.28% of LOCO's total shares.
El Pollo Loco Holdings Inc: A Brief Overview
El Pollo Loco Holdings Inc, a fast-casual chicken restaurant chain based in the USA, operates and franchises hundreds of outlets across the country. The company's revenue streams include company-operated restaurant revenue, franchise advertising fee revenue, and franchise revenue. As of August 10, 2023, the company's market capitalization stands at $359.254 million.
The company's stock, symbol LOCO, is currently priced at $10.13, representing a 5.68% decrease since the transaction. Despite this, the stock is considered modestly undervalued with a GF Value of 13.77 and a price to GF Value ratio of 0.74. The stock's year-to-date performance shows a gain of 3.68%, although it has fallen 46.68% since its IPO on July 25, 2014. The stock's GF Score is 77/100, indicating good outperformance potential.
El Pollo Loco's Financial Health and Performance
El Pollo Loco's financial health and performance are crucial factors in understanding the potential value of this investment. The company's Financial Strength is ranked 5/10, with a Profitability Rank of 7/10 and a Growth Rank of 5/10. The company's GF Value Rank is 10/10, and its Momentum Rank is 4/10. The company's Piotroski F-Score is 4, and its Altman Z score is 1.61, indicating potential financial distress.
In terms of performance, the company's interest coverage is 12.22, and it has a ROE of 7.88 and a ROA of 3.91. However, the company has seen a decline in its gross margin and operating margin growth, as well as its EBITDA and earnings growth over the past three years.
Conclusion
In conclusion, Sardar Biglari's significant investment in El Pollo Loco Holdings Inc represents a strategic move that has substantially impacted his portfolio. Despite the recent decline in LOCO's stock price, the company's modest undervaluation and good outperformance potential, as indicated by its GF Score, suggest potential for future gains. However, investors should also consider the company's financial health and performance indicators, which show some areas of concern. As always, thorough research and careful consideration are essential when making investment decisions.
