Mohnish Pabrai is an entrepreneur who later switched to money management. His best investment ever was the $650,100 he paid for lunch with Warren Buffett. We don’t remember anybody who got this much publicity for a pricey lunch. Mohnish Pabrai doesn’t hide the fact that he is trying to monkey Warren Buffett’s investment style. He is clearly a value investor following the footsteps of great value investors like Warren Buffett and Joel Greenblatt. He even set up the fee structure of his hedge fund the same way Warren Buffett did more than 50 years ago (see Warren Buffett‘s stock picks). He doesn’t charge any management fees and takes 25% of returns that are greater than a 6% threshold.
Mohnish Pabrai was very popular prior to 2008. His funds lost around 60% in 2008 sending a clear signal about the risks of his investment style. His funds aren’t really “hedged funds”. They seem to have very limited downside protection, if any at all. Warren Buffett had better downside protection 50 years ago. Pabrai’s fee structure isn’t as investor friendly as Warren Buffett’s was because of Pabrai’s seemingly high beta.
Mohnish Pabrai had a complete reversal in performance in 2009, returning around 120%. He says he’s using a checklist now in order to avoid past mistakes. He strongly recommends Atul Gawande’s Checklist Manifesto. Triple digit returns helped him to get more funds flowing in. Currently Pabrai has more than $500 million in assets under management (AUM). You can learn about Mohnish Pabrai’s investment philosophy by reading his two books: Mosaic: Perspectives on Investing, and The Dhandho Investor: The Low – Risk Value Method to High Returns.
Mohnish Pabrai added two new stocks into his portfolio during the third quarter of 2010: Posco (PKX) and Teck Resources Limited (TCK). Here are the 10 biggest positions in his nearly $300 Million 13F portfolio:
|NAME OF ISSUER||(X$1000)|
|Potash Corp. ( POT)||47766|
|Harvest Nat Res Inc. (HNR)||39316|
|Brookfield Properties (BPO)||36734|
|Cresud S A C I F Y A (CRESY)||27579|
|Air Transport Services Group, Inc. (ATSG)||22941|
|Leucadia National Corp. (LUK)||17706|
|Goldman Sachs Group Inc. (GS)||16029|
|CapitalSource Inc. (CSE)||15022|
|International Coal Group, Inc. (ICO)||13526|
|Horsehead Hldg Corp. (ZINC)||13408|
Incidentally, Potash Corp is also Daniel Loeb’s largest position.
During the third quarter Mohnish Pabrai completely sold Fairfax Financial Holdings (FRFHF.PK). He also reduced Harvest Nat Res Inc. (HNR) holdings by 16%, Air Transport Services Group, Inc. (ATSG) by 10.5%, and Berkshire Hathaway (BRK-A) by 8%. He increased Terex Corp (TEX) holdings by 5%, Wells Fargo & Co. (WFC) by 3%, and International Coal Group, Inc. (ICO) by 2%. Mohnish Pabrai has a lower turnover compared to other equity hedge fund managers.