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Monish Pabrai established Pabrai Investment Funds in 1999. Pabrai is a value investor with high regards for Warren Buffett. He admits that he is trying to monkey Warren Buffett’s investment style. The structure of his fund is similar to Buffett’s Partnerships: he does not charge management fees and incentive fees until the fund gains greater than a 6% threshold.

Pabrai sold out two of its largest positions during the second quarter: International Coal Group Inc (NYSE:ICO), and Terex Corp New (NYSE:TEX). ICO was acquired by Arch Coal Inc (NYSE:ACI) in June for $14.60 per share in an all-cash transaction. ACI suffered a loss of 32% since the end of June and TEX also suffered a huge loss of 48%. Other hedge fund managers are not so lucky. For example, Alan Fournier of Pennant Capital Management invested $137 Million in TEX (check out Fournier’s top stock picks).

Here are Pabrai’s top stock positions at the end of June:

Company

Ticker

Value (x1000)

Activity

Return Since June

POTASH CORP

POT

56697

0%

3%

BROOKFIELD PROPERTIES CORP

BPO

45487

0%

-14%

BROOKFIELD INFRASTRUC PARTNER

BIP

44332

0%

7%

GOLDMAN SACHS GROUP INC

GS

30722

108%

-19%

CRESUD S A C I F Y A

CRESY

20891

0%

-14%

CAPITALSOURCE INC

CSE

18145

0%

-5%

HORSEHEAD HOLDING CORP

ZINC

18082

0%

-26%

WELLS FARGO & CO NEW

WFC

10506

0%

-13%

PINNACLE AIRLINES CORP

PNCL

9016

0%

-24%

AIR TRANSPORT SERV GR

ATSG

8466

-13%

-24%

POSCO

PKX

7680

10%

-14%

BROOKFIELD RES PROP

BRP

2396

New

-26%

HARVEST NATURAL RESOURCES

HNR

788

New

0%

BERKSHIRE HATHAWAY

BRK.B

764

199%

-10%

INTL COAL GROUP

ICO

 

Sold Out

N/A

TEREX CORP NEW

TEX

 

Sold Out

-48%

The large positions of Pabrai performed better than the S&P 500 index since the end of second quarter. Though they lost 8.7% during the past two months, they still outperform the market by 2 percentage points.

The good performance of Pabrai since the end of last quarter is mainly due to the performance of several of the fund’s larger holdings. Pabrai’s largest positions include Potash Corp, Brookfield Properties Corp., and Brookfield Infrastructure. Among these three top holdings, POT and BIP have positive returns since the end of June. The returns of these two stocks are also the highest among the top 14 positions of Pabrai. On a weighted average basis, top three positions outperform the market by 9 percentage points. Tetrem Capital Management also has large position in POT (check out Tetrem’s top stock picks).

Pabrai did not make many big changes in its top stock lists. One of its few large changes is the big increase in its holdings of Goldman Sachs. Pabrai increased his GS holdings by 108% to $31 Million. However, GS lost 19%, 8 percentage points higher than the loss of the market. Like Pabrai, several other hedge funds, such as 3G Capital, also have large positions in GS (check out 3G’s top stock picks). Warren Buffett also made a large investment in GS after Lehman’s bankruptcy. Pabrai also had a large position in another Warren Buffett favorite: Wells Fargo. This was Pabrai’s eighth largest position and the stock lost 13% since June. Warren Buffett had nearly $10 billion in WFC at the end of June (see Warren Buffett’s top stock picks).

We like Monish Pabrai and his stock picks for his hedge fund. His top stock picks performed better than the market during the past two months. We believe investors may be able to beat the market over the long term by imitating Monish Pabrai's top stock picks.

Source: Mohnish Pabrai's Top Stock Picks