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. This quarter Pabrai's US long portfolio decreased by ~25% in size from over $320M to just over $240M. The number of holdings in the portfolio fell from 8 to 6 this quarter after it had already been brought down from 13 to 8 in the last quarter. Pabrai is running a heavily concentrated portfolio with the top-3 holdings representing two-third of the assets. The largest holding is Bank of America (BAC) and that accounts for a quarter of the total 13F assets.
Chesapeake Energy Corp (CHK): CHK is a 7.5% of the US long portfolio stake established this quarter when the price-per-share varied between $13.55 and $23.31. CHK is a major player in the natural gas exploration and production areas in the US. Warren Buffett recently had some good things to say about the price of natural gas relative to oil. Pabrai is known to follow Buffett and this is most likely such a position. The stock currently trades around $19 which is well over the lowest price Pabrai could have purchased it at. Investors attempting to follow Pabrai should wait for a better entry point.
General Motors (GM): GM is a fairly large 18% of the US long portfolio stake established this quarter when the price-per-share varied between $19.66 and $26.76. The stock currently trades in the low-end of that range at around $20. For anyone attempting to follow Pabrai's trades, GM is a good option to consider.
CapitalSource Inc. (CSE): CSE was a relatively small 4% of the US long portfolio stake as of Q1 2012 that was eliminated this quarter when the price-per-share varied between $6.02 and $6.84. The stock currently trades around $7. The position was established in 2009 but had since been trimmed. Compared to the rest of Pabrai's highly concentrated portfolio, the stake in CSE was minor and so the stake elimination does not signify a clear bearish bias.
Pinnacle Airlines Corporation [PNCLQ]: PNCLQ was a petite (<1%) stake that was in the portfolio since 2005 but was finally eliminated this quarter. Pabrai realized large losses on this position as the company filed for Chapter 11 bankruptcy. His latest Form 4 report indicating sales of Pinnacle was filed on 4/10/2012 and the price realized was $0.70. After that transaction he still held 777,868 shares for which he probably realized much lower prices as the stock plunged even lower to well under $0.10 per share soon after.
Potash Corporation (POT): POT was an 11% stake that was first established in Q3 2008. It was doubled in Q3 2009 when the price-per-share varied between $28 and $70. The stake was eliminated this quarter when the price-per-share varied between $37.44 and $46.75. The stock currently trades at around $43. The stake elimination indicates a bearish bias.
Terex Corporation (TEX): TEX was a large 15.4% stake established in Q4 2011 when the price-per-share varied between $9.61 and $17.86. It was trimmed marginally last quarter and eliminated this quarter at a price-per-share between $15.65 and $24.85. The stock currently trades at around $21, well off the high-watermark of $26.41 reached in late February. Pabrai tends to profit from playing the wild price-swings of smaller companies tethered to the macro environment and TEX is a classic example of such a pick.
The other four large positions were held steady during the quarter although most of them decreased significantly in value:
Bank of America: BAC is by far his largest position at over 25% of the US long portfolio. Pabrai established the position in Q3 2011 with the purchase of seven million shares for a 17% portfolio-stake only to trim it down to a 5% portfolio allocation in Q4 2011. Another ~5.4M shares were purchased last quarter when the price-per-share varied between $5.56 and $9.93. The stock currently trades at around $7.70. The very large position indicates a clear bullish bias.
Goldman Sachs (GS) & Citigroup (C): GS & C are similarly sized positions accounting for ~20% of the portfolio each. GS stake was first established in 2008 at much higher prices and the C stake was established in Q4 2011 when the price-per-share varied between $23.11 and $34.16. Last quarter, the GS stake was increased by over 150% when the price-per-share varied between $90.43 and $117.39. C stake was tripled last quarter at prices between $26.31 and $38.08. The stocks are currently trading at the low-end of the ranges Pabrai could have purchased them at. For investors attempting to follow Pabrai, C and GS are very good options to consider.
Horsehead Holding (ZINC): The ZINC position was established in Q4 2008 when the price-per-share varied between $2.47 and $6. The stock currently trades at around $9.10. Pabrai is bullish on ZINC but investors attempting to follow Pabrai should wait for a better entry-point.
The spreadsheet below highlights changes to Pabrai's US stock holdings in Q2 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 Q1 2012.