Biglari Holdings’ Operational Strength Shines Amid Volatile Investments

Biglari Holdings Inc. (NYSE: BH.A; BH) has long been a paradox for investors: a company whose core businesses deliver steady growth, yet its reported financial results are routinely overshadowed by the volatility of its investment portfolio. The first-quarter 2025 earnings release, announced on May 9, 2025, reinforces this dynamic. While the company reported a net loss of $33.3 million due to a $51.2 million investment loss, its pre-tax operating earnings—the metric it prioritizes—rose to $9.99 million, marking a significant improvement over prior periods. This divergence underscores the importance of separating Biglari’s operational performance from its market-driven investment swings.

Core Operations Defy Investment Headwinds

Biglari’s primary revenue driver, its restaurant division—home to Steak n Shake and Western Sizzlin—continues to deliver. The company’s pre-tax operating earnings, which exclude investment gains or losses, grew by 75% year-over-year, reflecting stronger performance across its foodservice segment. This growth aligns with management’s emphasis on operational excellence, which has historically insulated the company from economic downturns.

The insurance and energy segments also contributed stability. While details on these divisions remain sparse in public filings, the consistent focus on operational metrics suggests these units are maintaining their roles as reliable cash generators.

The Investment Conundrum

The $51.2 million investment loss in Q1 2025 starkly contrasts with the $23.7 million gain in the same quarter of . This volatility is not new. In Q2 2024, for instance, a $82.6 million investment loss offset strong operating earnings of $19.7 million. Biglari’s management has repeatedly cautioned investors not to overreact to such swings, arguing that short-term market movements in its investment portfolio—which includes stakes in companies like Wendy’s and AMC—are unrelated to its operational health.

The data shows a clear disconnect between the two metrics. For example, in Q1 2024, net earnings were $22.6 million despite pre-tax operating earnings of just $5.7 million, due to investment gains. Conversely, Q1 2025’s net loss was driven entirely by investment losses, even as operating performance improved. This pattern reinforces management’s stance: operating earnings, not net earnings, are the true measure of Biglari’s core performance.

Stock Market Reaction: Looking Past the Loss

Despite the net loss, Biglari’s stock price reached a 15-month high of $237.11 on May 7, 2025, before the earnings release. Trading volume surged by 63% on May 9, suggesting investor interest in the company’s long-term prospects.

Investors appear to be distinguishing between operational and investment results, a strategy management has encouraged. This separation may explain why the stock’s 12-month return of ~20% (as of May 2025) outpaces broader market indices, despite quarterly net losses.

Risks and Strategic Considerations

Biglari’s reliance on a concentrated investment portfolio remains a risk. Its top holdings, including AMC and Wendy’s, face industry-specific challenges such as rising labor costs and shifting consumer preferences. Additionally, the company’s non-GAAP measures, while useful for operational analysis, may mask underlying financial pressures.

However, the company’s balance sheet remains robust. With $1.4 billion in cash as of December 2024 (per its 2023 10-K filing), Biglari retains flexibility to capitalize on market opportunities or weather downturns. Its diversified business model—restaurants, insurance, energy—also provides a buffer against sector-specific risks.

Conclusion: A Long-Term Play on Resilience

Biglari Holdings’ Q1 2025 results highlight its dual identity: a well-run operational business burdened by volatile investments. The pre-tax operating earnings growth of 75% year-over-year signals that core operations are on a positive trajectory. Meanwhile, the $51.2 million investment loss, while painful in the short term, aligns with the company’s historical pattern of market-driven swings.

Investors who focus on operational metrics and long-term resilience may find value here. Biglari’s stock price performance, which rose to a 15-month high ahead of the Q1 results, suggests that market participants are already pricing in this narrative. Key data points support this view:
- Pre-tax operating earnings have grown by 40% over two years, from $7.1 million in Q1 2023 to $9.99 million in Q1 2025.
- Restaurant revenue, the company’s largest segment, has seen consistent year-over-year growth since 2021, even during periods of investment volatility.
- The stock’s 12-month return outperformed the S&P 500 by ~15 percentage points as of May 2025, indicating investor confidence in management’s strategy.

Biglari’s path forward hinges on maintaining operational discipline while navigating its investment portfolio’s inherent risks. For investors willing to look beyond quarterly noise, the company’s fundamentals—strong cash flows, a diversified business base, and a track record of operational improvement—suggest it remains a compelling, if volatile, long-term opportunity.