The Biggest Small-Cap Stock You Don't Know

NEW YORK (TheStreet) -- First, I must add my voice crying out to the stock market pantheon. In the immortal words of the late Louis Rukeyser, "Won't one of the market gods give us a good buying opportunity with a good, old-fashioned, orderly correction?"

Now that I've gotten that out of the way, let me introduce today's "mystery company," Biglari Holdings ( BH), which I affectionately call Big Larry. It reminds me of a man I worked with when I was just a teen. He was 5 feet, 4 inches tall but, boy, could he play the roles of men twice his size.

We called him Big Larry because he could hold down more jobs and have his fingers in more pies than an overachieving octopus. That's the way I see BH, which reports its first-quarter 2013 earnings on Monday at a yet undisclosed time.

Big Larry's stunningly simplistic Web site is a must-read for all interested parties.

On the home page it states with laconic clarity, "Biglari Holdings is a diversified holding company. All major operating, investment and capital allocation decisions are made for the company and its subsidiaries by Sardar Biglari, chairman and chief executive officer."

Talk about straight, direct and to the point. Mr. Biglari (aka Big Larry) must have been the one to see the opportunities in the restaurant business. That's why he started buying chains including Steak n Shake, a classic American brand serving premium burgers and milk shakes, and Western Sizzlin, which offers signature steak dishes and other classic American menu items.

He also jumped into other eat-out concepts such as Great American Steak & Buffet and Wood Grill Buffet consisting of hot and cold buffet-style dining. During the past year Big Larry bought large blocks of shares of Cracker Barrel Old Country Store ( CBRL).

CBRL pays a $2-per-share dividend. As of the end of 2012, BH and its CEO owned nearly 20% of the outstanding shares of Cracker Barrel. That means CEO "Big Larry" and his company will be raking in nearly $9 million in dividends in 2013 alone. As you can see from the chart below, Big Larry has seen some nice unrealized capital gains as well over the past year with CBRL.

CBRL Chart CBRL data by YCharts

Holy owned holdings! Big Larry's shares of CBRL are up almost 31% in 2013 so far. CBRL announces its earnings for the first quarter of 2013 on May 20. Big Larry and the other major holders will be listening with great anticipation.

Another of Big Larry's top holdings is a little property and casualty insurance company called Unico American ( UNAM). As of the end of 2012, Biglari Holdings was the top institutional holder of UNAM shares, owning over 505,000 shares or roughly 9.5% of the outstanding stock.

This means Big Larry owns around $6.4 million of UNAM, which pays a tidy $1-per-share annual dividend. So the dividend alone with UNAM brings Big Larry over a half million dollars in dividends -- plus UNAM rallied almost 17% in 2013 before pulling back in the past month or two.

So, you see, Big Larry, the CEO, likes to create what he calls "rivers of cash." If you read, and you just have to do so, Big Larry's 2012 annual letter to shareholders, you'll learn his version of "The Genesis Story". It will thoroughly acquaint you with the BH origins and why it's been working like a well-oiled machine at making "rivers of cash" flow its way.

Below is a five-year chart of BH and some supporting fundamentals that help illustrate why the stock has been an enormous winner for shareholders.

BH Chart BH data by YCharts

Since the end of 2008 the shares of BH have more than quadrupled, with remarkable revenue growth and an enviable Ebitda-EPS margin. When it reports on Monday analysts will be expecting a consensus estimated EPS growth (year-over-year) of over 17%. Sales growth and revenue are anticipated to also rise, by an undisclosed amount.

Again, I encourage you to read Big Larry's 2012 letter to shareholders. Mr. Biglari spells out the details of the holdings of BH, how much income and revenue each one is expected to bring in, and his entire investment philosophy.

It is no wonder that many have compared BH to Warren Buffett's Berkshire Hathaway ( BRK.B). Not only is BH a diversified holding company like Berkshire with easy-to-understand businesses in niche sectors, but Big Larry, as reflected in his letter to his shareholders (see below) reminds one of Buffett.

Big Larry, the chairman of the board, wrote the following on Dec. 7, 2012: "My entrepreneurial odyssey of business creation ab initio has rested on a basic principle: to generate cash and then to parlay that cash into more cash-producing businesses. Our ideas may be in accord with those of a different era think Warren Buffett and quite often contrary to current corporate conventions. Irrespective of our nonconformity, we will do what we believe is right. We allow our long-range results to be the ultimate arbiter of our actions."

Talk about getting a basket of great performing companies and outstanding, visionary leadership all in one stock! Biglari Holdings is selling for over $400 a share for many good reasons, and it's no wonder the consensus one-year target estimate for the shares is $500.

Before considering shares of BH pay close attention to Monday's earnings report and do lots of careful diligence. Maybe we will get lucky and an overdue market pull-back orchestrated by the gods of Wall Street will let us buy shares on sale. If so, be ready, and carpe diem.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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