This article is part of a series that provides an ongoing analysis of the changes made to Mohnish Pabrai's US stock portfolio on a quarterly basis. It is based on Pabrai's regulatory 13F Form filed on 02/13/2014. 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 Q3 2013.
Pabrai's US long portfolio increased over 18% from $459.68M to $543.92M this quarter: The 13F holdings in the fund remained the same as last quarter although position sizes changed on four of his six holdings. The top-3 holdings continue to represent about two-third of the assets. General Motors 2019 warrants and Bank of America common stock are his two largest positions and they together account for just over ~45% of the entire portfolio. To learn about his distinct investing style and philosophy, check-out his "The Dhandho Investor: The Low - Risk Value Method to High Returns" and other works.New Stakes:
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 following two quarters. The stake was increased by around 150% in Q2 2013 at prices between $9.50 and $11.78 and by another 12.5% this quarter at prices between $12.19 and $16.53. The stock currently trades at around $15.18. Pabrai is very bullish on ZINC.
General Motors 2019 WTS (GM-WS-B): Pabrai started a 4.55% position in these warrants (CUSIP 37045V126) in Q4 2012. It was increased to a 20% stake in Q1 2013. Since then, the position has been kept steady although this quarter saw a minor stake increase. Currently, it is his largest position at 25.20% of the US long portfolio. The warrants have a strike price of $18.33 and expire on July 10, 2019. They currently trade at around $26.45.
Pabrai had initiated a ~10% position in General Motors (GM) common 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 these warrants, presumably going for the leverage (higher risk-reward).
The activity represents a clear bullish bias but Pabrai's cost-basis is much lower.Stake Decreases:
Bank of America (BAC): BAC is Pabrai's second largest position at 21.19% of the US 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 had been held steady although this quarter saw minor trimming at prices between $13.69 and $15.88. The stock currently trades well outside his purchase price ranges at $16.75. 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.
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 in Q1 2013 at prices between $128 and $159 and had since been kept steady. This quarter saw a ~25% stake reduction at prices between $153 and $177. The stock currently trades at around $163 and accounts for 3.48% of the US long portfolio. The substantial stake reduction indicates a bearish bias.Kept Steady:
Chesapeake Energy Corp (CHK): CHK was a 7.5% of the US 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. Since then, the stake was marginally increased at prices between $16.50 and $22.58. The stock currently trades outside those ranges at around $24.75. The position now accounts for just over 16% of the 13F portfolio value. Other super investors who have initiated substantial 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 above his cost-basis.
Citigroup (C): Citigroup position accounts for ~15% of the US 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. In Q1 2013, the position was reduced by ~14% at prices between $39.56 and $47.60 and has been kept steady since. The stock currently trades at around $50.
The spreadsheet below highlights Pabrai's US stock holdings as of Q4 2013: