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 05/13/2014. 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 Q4 2013.
Pabrai's US long portfolio decreased over 15% from $544M to $464M this quarter: he harvested gains from a couple of positions (Bank of America & Citigroup). The 13F holdings in the fund increased from 6 to 8. The top-3 holdings (Horsehead Holdings, General Motors Warrants, and Bank of America) continue to represent about two-third of the assets. 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:
Berkshire Hathaway (NYSE:BRK.B) & General Motors (NYSE:GM): BRK.B & GM are very small 0.19% & 0.17% of the US long portfolio positions established this quarter. Both were sizable positions in the portfolio previously: GM was a huge ~18% of the portfolio stake as of Q4 2012 but was eliminated the next quarter to build a similarly large position in GM warrants. BRK.B was a ~14% of the US long portfolio stake as of Q4 2011 but was eliminated the next quarter. Pabrai is known to use BRK.B as an alternative to holding cash. The minor stake re-establishments this quarter indicate a mild bullish bias toward these businesses.Stake Disposals:
General Motors 2019 WTS (GM-WS-B): Pabrai started a 4.55% position in these warrants (CUSIP 37045V126, Yahoo Ticker GM-WTB) in Q4 2012. It was increased to a 20% stake in Q1 2013. Since then, the position had been kept steady although the last two quarters saw minor stake increases. Currently, it is his second-largest position at 22.27% 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 $17.28.
Pabrai had initiated a ~10% position in General Motors 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 lower - around $11.Stake Decreases:
Bank of America (NYSE:BAC): BAC is Pabrai's third largest position at 18.07% 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 but this quarter saw a one-third stake reduction at prices between $15.57 and $17.44. The stock currently trades at $15.03. Pabrai is starting to harvest long-term capital gains from this position.
Chesapeake Energy Corp (NYSE: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 position was marginally increased at prices between $16.50 and $22.58. The stock currently trades outside those ranges at around $30.04. This quarter saw a minor stake reduction. The position now accounts for just over 18% 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 (NYSE:C): Citigroup stake accounts for 14.56% 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 had been kept steady since. This quarter saw a ~9% trimming at prices between $46.34 and $55.20. The stock currently trades at around $47.42. Pabrai is opportunistically harvesting long-term gains from this position.Kept Steady:
Horsehead Holding (NASDAQ:ZINC): ZINC is Pabrai's largest stake at 22.95% of the US long portfolio. It 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% last quarter at prices between $12.19 and $16.53. The stock currently trades at around $16.53. Pabrai is very bullish on ZINC and he is sitting on large gains.
Goldman Sachs (NYSE: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. Last quarter saw a ~25% stake reduction at prices between $153 and $177. The stock currently trades at around $160 and accounts for 3.77% of the US long portfolio. The substantial stake reduction spanning several quarters indicates a bearish bias.
The spreadsheet below highlights Pabrai's US stock holdings as of Q1 2014:
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.