Sean O'Grady

About Pinnacle Airlines, and Concentrated Risk

I started following PNCL not only because Mr. Pabrai owned it but also because it was rated five stars by Morningstar (in early 2008) and appeared on the 'Endeavor List' at Merrill Lynch (also early 2008).

PNCL has shown me the importance of what Buffett calls a solid competitive advantage or a 'moat'. Further, in the absence of a 'moat', a very wide margin of safety is absolutely necessary when investing in companies like PNCL. I'm not saying that PNCL is a bad company. It is, however, a small company relying on bigger companies who are sensitive to a number of factors out of their control.

Mohnish Pabrai is a talented individual, but, I have to admit, I do not think I could sleep well if I purchased too many of his picks. However, having researched PNCL a bit, the stock may indeed be trading at a very large discount to intrinsic value which I estimated at about $13. It may be a great entry point for someone with a strong tolerance for uncertainty.