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 08/12/2013. 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 Q1 2013.
Pabrai's U.S. long portfolio increased over 24% from $339.57M to $421.26M this quarter: The fund had significant inflows but some of the increase was also due to the performance of the holdings - General Motors (GM) warrants had a stellar performance returning almost 40%. Most of the new money went into increasing his holdings in Horsehead Holding Corporation (ZINC). The top-3 holdings continue to represent about two-third of the assets. The General Motors warrants is the largest position as the large outperformance this quarter resulted in the stake increasing marginally over the Bank of America (BAC) position, which was the largest position last quarter. The two positions account for ~23% of the entire portfolio each.
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 the last three quarters, the stake was marginally increased at prices between $16.50 and $22.58. The stock currently trades outside that range at around $25. The position now accounts for close to 20% of the 13F portfolio value. Other super investors who have initiated substantial new stakes in CHK include Carl Icahn who started a huge ~$1B position in Q2 2012 and Bruce Berkowitz who started a 1% position in Q1 2013. Also, Warren Buffett made some positive comments about the price of natural gas relative to oil during a CNBC interview in late February 2012 and Pabrai started building his stake soon after. Pabrai is bullish on CHK but it is trading well outside his cost-basis.
Horsehead Holding: 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 following two quarters. The position was increased by around 150% this quarter at prices between $9.50 and $11.78. The stock currently trades just outside that range at around $12. Pabrai is very bullish on ZINC. For investors attempting to follow Pabrai, ZINC is a good option to consider.
The other four positions were kept steady this quarter:
General Motors 2019 WTS (GM-WS-B): Pabrai started this position (CUSIP 37045V126) in Q4 2012 as a 4.55% stake but was increased to a 20% position last quarter. He had initiated ~10% position in General Motors stock in Q2 2012 at prices between $20 and $27 but over the following quarters that stake was eliminated while building an even larger position in the warrants. The warrants have a strike price of $18.33 and expire on July 10, 2019. They currently trade at around $18.69. The stake represents a clear bullish bias but Pabrai's cost-basis is much lower.
Bank of America: BAC is Pabrai's second largest position at 22.90% 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 well outside his purchase price ranges at $14.41. 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.
Citigroup (C): Citigroup position accounts for 17.76% 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. Last quarter, the position was reduced by ~14% at prices between $39.56 and $47.60 and was kept steady this quarter. The stock currently trades at around $51.
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 position was reduced marginally in Q4 2012 at prices between $113 and $130. It was further reduced by another 28% to a 6.15% position last quarter at prices between $128 and $159 and kept steady this quarter. The stock currently trades at around $162 and accounts for ~5% of the U.S. long portfolio. The small position does not indicate a clear bias.
The spreadsheet below highlights changes to Pabrai's U.S. stock holdings in Q2 2013: