This article is part of a series that provide an ongoing analysis of the changes made to Mohnish Pabrai's US stock portfolio on a quarterly basis. This quarter Pabrai's US stock portfolio increased ~38% in size from ~$235.5M to ~$324.7M. The number of holdings in the portfolio fell from 13 to 8 this quarter. Pabrai has returned to running a heavily concentrated portfolio after adopting a "2-5-10" model (sometimes 2% - typically 5% - on the odd occasion 10%) of diversification in 2008. The fact that the three largest positions (each accounting for ~20% of the portfolio) are all in financials makes the concentration even more prominent.
Wells Fargo & Co (WFC): WFC, a large ~16% stake first purchased in 2009, was held steady until Q3 2011 when the position was tripled. It was increased further by 13.2% in Q4 2011. The position was eliminated this quarter when the price-per-share varied between $27.56 and $34.47. The bulk of the stake was purchased when the price-per-share varied between $22.88 and $29.38. It currently trades at $30.94. Pabrai modeled his portfolio around Warren Buffett's philosophies and has freely admitted to shadowing some of Buffett's trades as well. WFC was one such pick. But, although Buffett's position in WFC has increased, Pabrai chose to part ways with WFC. This reversal indicates a clear bearish bias.
The Direct TV (DTV): DTV, a 7.2% position established in Q4 2011 when the price-per-share varied between $40.60 and $47.87, was removed this quarter when the price-per-share varied between $42.18 and $49.49. The stock currently trades at $45.38. The short-term roundtrip for a significant position at flat price-ranges clearly reveals a bearish bias.
Berkshire Hathaway (BRK.B): BRK.B, a whopping 14.5% position, was disposed this quarter. Pabrai is known to hold BRK.B as a substitute for cash and the stake disposal specifies he found good values to invest in this quarter.
Brookfield Residential Properties (BRP): BRP, a very small (<1%) position first purchased in Q2 2011, was sent on its way this quarter. The stake was too minor to signify a bearish bias.
Cresud (CRESY): CRESY, a ~1.5% stake that was trimmed by over 70% in Q4 2011, was sold this quarter when the price-per-share varied between $11.3 and $13.5. The bulk of the position was established in 2009 when the price-per-share varied between $5 and $10. The stock currently trades at around $7.69; it plunged sharply in the last three months due to country-specific-risks following the nationalization announcement of YPF SA, the large Argentine oil major. The stake disposal indicates a clear bearish bias.
Citigroup (C): C, a huge ~20% position first purchased in Q4 2011 when the price-per-share varied between $23.11 and $34.16, was more than tripled this quarter when the price-per-share varied between $26.31 and $38.08. It currently trades in the low-end of that range at around $26. For investors attempting to follow Pabrai, Citi is a good option to consider.
Bank of America (BAC): Pabrai had been wavering on BAC over the last few quarters. He purchased seven million shares of BAC for a whopping 17% portfolio-stake in Q3 2011 only to trim it down to a 5% portfolio allocation in Q4 2011. The share price varied between $6.12 and $10.96 during Q3 2011 and $4.9 to $7.35 in Q4 2011. The bias was reversed this quarter with the purchase of ~5.4M shares, when the price-per-share varied between $5.56 and $9.93. The stock currently trades at around $7.
Goldman Sachs (GS): GS has been a presence in the portfolio since 2008, when it was a 6.7% stake. The position remained steady till Q2 2011, when it was doubled. The price-per-share varied between $130 and $160 then. The position was increased by ~20% in Q3 2011, only to be decreased by roughly the same amount in Q4 2011. During this quarter, the stake was increased by over 150% to make it an almost 20% portfolio stake. The price-per-share varied between $90.43 and $117.39 during the quarter. The stock currently trades at $95, well below where Pabrai could have bought the initial stake. For investors attempting to follow Pabrai, GS is a good option to consider.
Terex (TEX): TEX, a large 15.4% stake established in Q4 2011, when the price-per-share varied between $9.61 and $17.86, was trimmed marginally this quarter. The stock currently trades at around $16 after reaching a high-watermark of $26.41 in late February. TEX is a classic Pabrai pick, as historically he has favored smaller companies susceptible to wild price-swings.
CapitalSource Inc (CSE): CSE, a staple in the portfolio since 2009, was trimmed by ~22% last quarter and marginally again this quarter. The minor stake reduction this quarter does not signify a clear bias.
Horsehead Holding (ZINC): ZINC, a long-term holding since Q4 2008, when the price-per-share varied between $2.47 and $6, was trimmed marginally this quarter. It was increased by ~37% in Q4 2011 when the price-per-share varied between $6.47 and $9.52. The stock trades currently at around $8.75. Pabrai is a long-term bull on ZINC but the current price is well outside the range Pabrai could have bought the bulk of the stake. Investors attempting to follow Pabrai should wait for a better entry-point on this holding.
Potash (POT): POT, a very large ~11% stake, was held almost steady this quarter - just 3000 shares were sold. The position was established in Q3 2008 and doubled in Q3 2009 when the price-per-share varied between $28 and $70. The stock currently trades at around $39.
Pinnacle Airlines (PNCL): PNCL, a petite (<1%) stake, was reduced marginally this quarter. It is a long-term holding that has been in the portfolio since 2005. The small position size and the minor stake reduction do not signify a clear bias.
The spreadsheet below highlights changes to Pabrai's US stock holdings in Q1 2012:
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 2011.