This article is part of a series that provides an ongoing analysis of the changes made to Mohnish Pabrai's U.S. stock portfolio on a quarterly basis. It is based on Pabrai's regulatory 13F Form filed on 05/13/2013. Please visit our Tracking Stocks In Mohnish Pabrai's Investment Funds series for an idea on how his holdings have progressed over the years and our previous update highlighting the fund's moves during Q4 2012.
This quarter, Pabrai's U.S. long portfolio increased marginally from $332.75M to $339.57M. The increase is attributable to the performance of the holdings as most of them held up well during the quarter. The number of holdings in the portfolio remained steady at seven. Pabrai's original Q4 2012 13F filing had only six entries and the stake in General Motors (GM) Warrants was disclosed in an amendment filed earlier this month. The top 3 holdings continue to represent more than two-third of the assets. The largest holding by far is Bank of America (BAC) and that accounts for over a quarter of the total 13F portfolio value.
General Motors: GM was 18% of the U.S. long portfolio stake established in Q2 2012 when the price-per-share varied between $19.66 and $26.76. It was increased marginally in Q3 2012 to a 19% stake at prices between $18.80 and $24.80. Last quarter, the position was trimmed by 10% at prices between $23 and $29 and was eliminated this quarter at prices between $26.33 and $30.60. The stock currently trades at the high-point of that range at around $31. The stake elimination does not indicate a change in the bullish bias as the position was replaced with General Motors 2019 warrants (see below). The switch however clearly indicates that Pabrai considers the warrants as more of a value compared to the common stock.
Chesapeake Energy Corp (CHK): CHK was a 7.5% of the U.S. long portfolio stake established in Q2 2012 when the price-per-share varied between $13.55 and $23.31. It was increased substantially in Q3 2012, when the price-per-share varied between $16.82 and $20.52. In Q4 2012 and this quarter, the stake was marginally increased at prices between $16.50 and $22.50. The stock currently trades at around $20.50, within the price range Pabrai could have purchased the new stake at. The position currently accounts for 19.32% of the 13F portfolio value. Warren Buffett made some positive comments about the price of natural gas relative to oil during a CNBC interview in late February 2012. Pabrai started purchasing CHK soon after - he is known to follow Buffett's trades and this appears to be such a position. Also, Carl Icahn started a huge ~$1B position in CHK during Q2 2012. For investors attempting to follow Pabrai, CHK is a good option to consider.
General Motors 2019 WTS (GM-WS-B): Pabrai's original Q4 2012 report did not show a position in these warrants (CUSIP 37045V126) but an amendment earlier this month showed that he had initiated a 4.55% position. Pabrai had simultaneously reduced his long position in GM common stock by roughly that amount as well. The pattern continued this quarter as the common stock was eliminated and a similarly sized position was built in these warrants. The warrants have a strike price of $18.33 and expire on July 10, 2019. They currently trade at around $14. The stake increase indicates a clear bullish bias.
Citigroup (C): Citigroup is a large position accounting for 20.32% of the U.S. long portfolio. The position was first established in Q4 2011 when the price-per-share varied between $23.11 and $34.16. In Q1 2012, the stake was tripled at prices between $26.31 and $38.08. This quarter, the position was reduced by ~14% at prices between $39.56 and $47.60. The stock currently trades at $48.92. The position still accounts for 20.32% of the long portfolio. The minor stake reduction does not indicate a clear bias.
Goldman Sachs (GS): GS was a ~20% of the portfolio stake that was reduced by over 60% to an 8.27% stake in Q3 2012 when the price-per-share varied between $93.16 and $121.36. GS stake was first established in 2008 at much higher prices. In Q2 2012, the stake was increased by over 150% when the price-per-share varied between $90.43 and $117.39. The stake was reduced marginally last quarter at prices between $113 and $130. It was further reduced by another 28% to a 6.15% position this quarter at prices between $128 and $159. The stock currently trades at around $150. The stake reduction indicates a bearish bias.
The other two large positions were kept steady this quarter:
Bank of America: BAC is by far Pabrai's largest position at 26.91% of the U.S. long portfolio. Pabrai established the position in Q3 2011 with the purchase of seven million shares for a 17% portfolio-stake at prices between $6.06 and $11.09. There was a quick about-turn the following quarter, as the position was trimmed to a 5% portfolio allocation at prices between $4.98 and $7.35. In Q1 2012, ~5.4M additional shares were purchased at prices between $5.56 and $9.93. Since then, the stake has been held steady. The stock currently trades at close to $13. The very large position indicates a clear bullish bias. But it is trading well outside the price-range of Pabrai's stake acquisition and so investors attempting to follow Pabrai should wait for a better entry point.
Horsehead Holding (ZINC): The ZINC position was established in Q4 2008 when the price-per-share varied between $2.47 and $6. The position was increased by around 14% in Q3 2012 at prices between $8.38 and $10.16 and was kept steady in the last two quarters. The stock currently trades outside the range at $11.31. Pabrai is very bullish on ZINC but investors attempting to follow Pabrai should wait for a better entry-point.
The spreadsheet below highlights changes to Pabrai's U.S. stock holdings in Q1 2013: