Mohnish Pabrai had eight picks in his fund’s portfolio at the end of December with market caps above $1 billion. The weighted average return of these stocks was 13.9%, beating the S&P 500 ETF (SPY) which returned 0.9% for the same period. Pabrai is a Warren Buffett disciple famous for once having paid $650,100 to have lunch with Mr. Buffett at a New York steakhouse. Pabrai has made his own reputation in recent years as a value investor. His funds suffered in 2008 losing around 60%, but he led a remarkable turnaround with a 120% performance in 2009. Since then assets under management have grown to over $500 million.
It’s important to track hedge funds and major investors like Mr. Pabrai to take advantage of their best ideas without paying an arm and a leg. Our research has shown that, on average, hedge funds and billionaires aren’t very good at picking large-cap stocks, but extremely talented at picking underfollowed small-cap stocks. The 50 most popular large-cap stocks among hedge funds actually underperformed the S&P 500 Total Return Index by an average of 7 basis points per month between 1999 and 2012. Our back tests also revealed that the 15 most popular small-cap stocks among hedge funds beat the same S&P 500 Total Return Index by an average of 95 basis points per month. That’s an outperformance of almost a percentage point per month. We have been sharing the list of these top 15 small-cap stocks in real time since the end of August 2012. These stocks delivered an astonishing 134.1% gain through March 25th, vs. 54.2% gain for the S&P 500 ETF (SPY) (read the details here).
As previously stated Pabrai is a disciple of Warren Buffet and likes to make large concentrated bets like the Oracle of Omaha is known to do. In fact, the fund’s whole portfolio, according to the latest filing, only consists of 11 total holdings. In Pabrai’s fund, Fiat Chrysler Automobiles NV (NYSE:FCAU) tops the list as the largest holding as of December 31, 2014. It’s one of the two new positions according to the filing. The fund held 13.9 million shares of Fiat Chrysler Automobiles NV (NYSE:FCAU) at an investment of $161 million and representing a 29% position in the 13F portfolio. Pabrai is known to be a long term value investor, but we’re sure he certainly didn’t mind the 40% run up Fiat Chrysler Automobiles NV (NYSE:FCAU)’s stock had for the first quarter of 2015.
Google Inc (NASDAQ:GOOG) represents another new position in the investor’s equity portfolio. Pabrai added 69,000 class C shares valued $36.3 million, representing a 6.57% position in the 13F portfolio. We have seen a lot of activity in Google Inc (NASDAQ:GOOG) with Billionaire Lee Ainsley also initiating a position in the tech giant during the fourth quarter of 2014. Other funds that just added Google Inc (NASDAQ:GOOG) to their equity portfolios were Eli Cohen’s Crescent Park Management and Ryan Pedlow’s Two Creeks Capital Management. Google’s stock ended up 4.1% for the first quarter.
General Motors Company (NYSE:GM) was the other automobile holding in Mohnish Pabrai’s equity portfolio besides Fiat Chrysler. At the beginning of 2015 Pabrai held 5.9 million shares of General Motors Company (NYSE:GM) in form of Warrants with a value of almost $101 million and around 23,800 common shares. Pabrai added 1% to this position, which amassed 18.26% of the firm’s 13F portfolio at the end of last year. According to the filing, it’s the second largest position on the fund’s books. The shareholders of General Motors Company (NYSE:GM)’s stock reads like a list of investing all-stars. Warren Buffett’s Berkshire Hathaway tops the list, which also contains David Tepper’s Appaloosa Management, Steve Cohen’s Point72, and George Soros’ Soros Fund Management. GM’s stock gained 8.2% in the first quarter in 2015.
Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC) are two financial stocks Pabrai has been involved in for quite some time. At year-end 2014, Pabrai listed 1.269 million shares of Citigroup Inc (NYSE:C) at a value of $68.6 million. For Bank of America Corp (NYSE:BAC) the fund disclosed a 3.1 million share position valued at $56.2 million. The investors’s stakes in Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC) account for 12.4% and 10.18% of the 13F portfolio respectively. Citigroup stock lost 4.7% for the quarter, while Bank of America plunged 13.6%. In an interview with Barron’s magazine last year, Pabrai disclosed he did most of the buying in 2011. The thesis remains: both financials are massively undervalued. Notable names in Bank of America are Bruce Berkowitz’s Fairholme (Fairx) and Ken Fisher’s Fisher Asset Management. For Citigroup, we see Boykin Curry’s Eagle Capital Management followed again by Fisher Asset Management and Andreas Halvorsen’s Viking Global. Click here for more info on Citigroup as it was one of the top picks in the first quarter.
Disclosure: none
