Warren Buffett is one of the top investors in the world and many might rightfully argue that he is the best investor in the world. Therefore, because of his success, it’s not surprising that he is one of the most studied and emulated investors alive and many people around the globe are trying to copy his investment style, strategies, and even his stock picks. However, because Buffett invests a lot of money in a diversified portfolio of stocks, there aren’t many investors that can allocate the same capital to own Buffett’s holdings, even in much smaller fractions. Moreover, because many of Buffett’s positions have been held over a long period of time, the attractiveness of many of his sock picks is gone.
Luckily, there are other great investors who copy Buffett’s style and provide us with plenty of opportunities to mimic their stock picks. One of them is Mohnish Pabrai, who is using the same value investing style that Buffett does and even paid $650,100 for a lunch with Buffett. Pabrai doesn’t hide the fact that he is copying Buffett, although his funds didn’t have a lot of downside protection as was evidenced in 2008, when they lost 60%. Nevertheless, in a bull market, Pabrai is making a lot of money and he has said that he is using a checklist to avoid past mistakes. In 2009 his funds returned 120% and a similar performance has extended to the present.
At Insider Monkey, we assess a fund’s performance using only the stocks it discloses in quarterly 13F filings with the Securities and Exchange Commission and focus on companies with market caps above $1.0 billion. This allows us to identify the best stocks to emulate under our small-cap strategy, which uses a proprietary methodology to identify the best small-cap stocks (with market value between $1.0 and $5.0 billion) that the best-performing investors are collectively bullish on. This approach has helped us beat the market by around 20 percentage points since the strategy was launched in May 2014 (see more details here). We share the stocks from our strategy in quarterly newsletters and we also have a monthly activist newsletter that analyzes one activist fund each month and identifies the best ways to imitate that fund.
Pabrai’s Dalal Street fund is relatively small, with an equity portfolio of $385.83 million and only five positions as disclosed in the latest 13F filing. During the first three quarters of 2017, Pabrai’s stock picks posted a weighted average return of 43%, while over the 12-month period ended September 2017, the holdings returned 94.9%. Let’s take a look at the five stocks in Dalal Street’s 13F portfolio.
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Fiat Chrysler Automobiles NV (NYSE:FCAU) is by far the largest holding in Dalal Street’s equity portfolio. At the end of December, the fund held 13.11 million shares of the company worth $233.87 million, which represents over 60% of the total equity portfolio value. The fund significantly benefitted from Fiat Chrysler Automobiles NV (NYSE:FCAU)’s stock 95% growth in 2017. By comparison, General Motors Company (NYSE:GM)’s stock gained 16% and Ford Motor Company (NYSE:F)’s share price inched up by 4%. Fiat Chrysler Automobiles NV (NYSE:FCAU) has been focusing on its margins and profitability lately, while at the same time investing heavily in reviving its Alfa Romeo brand and expanding Maserati brand, as well as expanding the Jeep brand internationally. Moreover, last year was marked by speculations that Fiat Chrysler might break itself up or that Chinese automaker Great Wall Motor Co and South Korea’s Hyndai Motor Co might be interested in pursuing acquisitions. However, the company has put these rumors to rest recently.
