Mohnish Pabrai was widely known for his entrepreneurial activities, but he later switched to funds management, where he has registered enormous success over the years. He founded Dalal Street, a hedge fund, through which he manages money for investors. Mohnish Pabrai tries to employ Warren Buffett’s investment approach and his fund also has a fee structure and there is no management fees levied on investments, taking only 25% of returns. Started only with $1 million in assets under management in 1999, the fund has an equity portfolio of $535.88 million at the end of March, down by $16.53 million from the fourth quarter of 2014. In this article, we consider its top picks for the first quarter, namely, Fiat Chrysler Automobiles NV (NYSE:FCAU), General Motors Company (NYSE:GM), HORSEHEAD HOLDING CORP. (NASDAQ:ZINC), POSCO (ADR) (NYSE:PKX), and Google Inc (NASDAQ:GOOG).
Mohnish Pabrai is just one of more than 700 hedge funds that we have in our database, whose equity portfolios we collate quarterly as part of our small-cap strategy. Even though most smaller investors believe that tracking 13F filings is a fruitless endeavor because they are filed with a delay of a maximum of 45 days after the end of a calendar quarter, the results of our research prove that is not the case. To be on the safe side, we used a delay of 60 days in our back tests that involved 13F filings between 1999 and 2012 and we still managed to gain an annual alpha in the double digits. Moreover, since the official launch of our strategy in August 2012, our small-cap strategy has obtained returns of more than 144%, beating the S&P 500 Total Return Index by greater than 84 percentage points (see the details).
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Fiat Chrysler Automobiles NV (NYSE:FCAU) represents Pabrai’s largest position, which contains 13.80 million shares valued at $225.08 million. The Italian-American company, which ranks on the seventh spot among global automakers, is currently facing a recall problem that is likely to affect up to 3,900 Fiat 500e vehicles manufactured between 2013 through 2015. The vehicles are reported to have a problem with the control units. This was not the first time that Fiat Chrysler Automobiles NV (NYSE:FCAU) has recalled this vehicle, having done so twice this year over software malfunction. For the first quarter of 2015, the company posted EPS of $0.05, missing the estimates by $0.02. A couple of days ago, Barclays reiterated their ‘Overweight’ rating on the stock. Analysts expect that the automaker will post earnings per share of $0.87 for the current fiscal year. Other shareholders of Fiat Chrysler include Cliff Asness‘ AQR Capital Management and Ken Heebner’s Capital Growth Management, owning 8.72 million shares and 6.38 million shares respectively.