Tracking Mohnish Pabrai's Portfolio - Q4 2015 Update

|
Includes: BRK.A, BRK.B, FCAU, GM, GOOG, GOOGL, NXEO, PKX, ZINCQ
by: John Vincent

Summary

Mohnish Pabrai’s US long portfolio increased marginally from $377M to $379M this quarter.

His largest three positions are Fiat Chrysler Automobiles, General Motors 2019 Warrants, and Alphabet Inc. and they together account for ~90% of the entire portfolio.

Pabrai Funds dropped POSCO while adding Berkshire Hathaway during the quarter.

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 02/12/2016. 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 2015.

Pabrai's US long portfolio increased marginally from $377M to $379M this quarter. The number of holdings remained steady at 6: a fairly large position in POSCO was eliminated while adding Berkshire Hathaway. The portfolio continues to be very concentrated with the top three holdings (Fiat Chrysler Automobiles, General Motors Warrants, and Alphabet Inc.) accounting for 90.47% of the entire portfolio. The 13F portfolio assets are down almost one-third for 2015.

To learn about Mohnish Pabrai's distinct investing style and philosophy, check out his book "The Dhandho Investor: The Low - Risk Value Method to High Returns" and other works.

New Stakes:

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B): BRK.B is a 3.03% of the US long portfolio stake established this quarter at prices between $130 and $139. The stock currently trades below the low end of that range at $128.

Note: BRK.B has seen several previous roundtrips in the portfolio. The last major such activity occurred during 2011-12: 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.

Stake Disposals:

POSCO (NYSE:PKX): PKX was a 9.12% stake as of last quarter. It was eliminated this quarter at prices between $34 and $42. The original position was purchased in Q2 2014 at prices between $70 and $77. Two-thirds of that was sold in Q4 2014 at prices between $63.51 and $75.90. The stake was rebuilt in Q1 2015: ~225% increase at prices between $54.66 and $66. The stock is now at $37.72. Pabrai realized significant losses on this position.

Note: Mohnish Pabrai had a position (albeit smaller) in PKX in 2010 and that was disposed of in Q3 2011 at prices between $76 and $111.

Stake Increases:

None.

Stake Decreases:

Fiat Chrysler Automobiles (NYSE:FCAU): FCAU is Pabrai's largest individual stock position at a whopping ~50.89% of the US long portfolio. It was established in Q4 2014 at prices between $5.68 and $8.81 and the stock currently trades at $6.11. On October 13, 2014 Fiat Chrysler had an IPO on the New York Stock Exchange and Pabrai established the position soon after.

Note: Fiat Chrysler Automobiles spun-off Ferrari last month. The spinoff accounted for slightly more than one-third the combined business. The prices quoted above are adjusted for that spinoff. First day of trading post spinoff was Jan 4, 2016. FCAU shares closed at $13.99 EOY and started trading at ~$9 post spinoff.

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% portfolio stake in Q1 2013. Since then, the position had been kept relatively steady. Currently, it is his second-largest position at 25.73% of the US long portfolio. The warrants have a strike price of $18.33 and expire on July 10, 2019. They currently trade at $10.10. Pabrai's cost-basis is at around $11.

Note: Pabrai had initiated a ~10% position in General Motors (NYSE:GM) common stock in Q2 2012 at prices between $20 and $27 but that stake was quickly eliminated while building the position in these warrants - apparently going for the ~2x leverage (higher risk-reward).

WL Ross Holding (NASDAQ:WLRH) (WLRHU): WLRH is a 3.07% of the US long portfolio position. The original stake was a minute 0.14% position established in Q3 2014 at prices between $9.60 and $9.95. It was increased substantially in the following two quarters at prices between $9.88 and $10.35. Since then, the position had been kept relatively steady. This quarter saw a ~36% reduction at prices between $9.93 and $10.47. The stock currently trades at $9.96.

NOTE: WL Ross Holding led by Wilbur Ross is a "blank check" company that had an IPO in June 2014. The Special-Purpose Acquisition Company ("SPAC") issued units (WLRHU) which included one share and one warrant (WLRHW) to buy half a share at $5.75 (five-year expiry after the date of the first business combination by the "SPAC"). On August 4, 2014, WL Ross Holding announced that holders of the units could elect to separately trade the common stock and the warrants. The size of Pabrai's position in the units (WLRHU) is roughly four-times his position in the common.

Kept Steady:

Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG is a 13.85% of the US long portfolio position established in Q4 2014 at prices between $495 and $577. The stock currently trades well outside that range at $682. It returned a whopping 45% for 2015 and is down ~10% YTD.

Horsehead Holding (NASDAQ:ZINC) (OTCPK:ZINCQ): ZINCQ is a 3.43% of the US long portfolio position. The original stake is from Q4 2008 when it was established at prices between $2.47 and $6. The position was increased by around 150% in Q2 2013 at prices between $9.50 and $11.78. There were a few other minor purchases in the interim as well. The stock crashed this year and currently trades in the OTC market at ~12c. Pabrai was sitting on large gains on ZINCQ as of Q2 2015 but the precipitous drop in the share price has resulted in losses.

Note 1: A regulatory 13G/A filing on January 27, 2016 showed Pabrai owning 1.09M shares (1.92% of the business): the stake reduction happened at prices below 46c.

Note 2: The size of this position per the regulatory Form 4 ownership filing does not tally with the figure in the 13F report. Per Form 4, they owned 8.3M shares when the selling commenced on January 19, 2016. This is compared to 6.3M shares in the 13F.

The spreadsheet below highlights Pabrai's US stock holdings as of Q4 2015:

Click to enlarge

Disclosure: I am/we are long GM.

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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.