Mohnish Pabrai Is Sticking To These Stocks and It’s Working Out Great

At the Detroit Auto Show in January, Fiat Chrysler’s CEO Sergio Marchionne said that the company has no plans to break up or to sell individual brands to China and is expecting its Jeep brand to double its net profit. Marchionne also said that he had recommended the spin off of Magneti Marelly, a maker of components for lighting, engines, electronics, suspension and exhausts by the end of this year, and confirmed the targets for 2018, which include erasing all debt and adding up to $6 billion in net cash.

In addition, it is considered that Fiat Chrysler Automobiles NV (NYSE:FCAU) stands to benefit the most if the Trump administration relaxes the fuel-economy rules set in place by the former administration, the main reason being that it is not as committed as GM and Ford on developing electric vehicles.

On the second spot in Dalal Street’s portfolio is Alphabet Inc (NASDAQ:GOOG), in which the fund owns 45,828 shares, down by 30% over the quarter, worth $47.95 million. Alphabet Inc (NASDAQ:GOOG) is another winner in Pabrai’s portfolio, as the stock gained 35.60% in 2017, helped by better-than-expected EPS and revenue figures posted for the first three quarters and quarterly revenue growth above 20% year-on-year. Alphabet Inc (NASDAQ:GOOG) offers investors the opportunity to invest in a very financially-sound company, with a leading position in its core business, but it also allows investors to benefit from the future potential of its Other Bets division that includes Nest, Google Fiber, venture capital investments and the X division that develops breakthrough technology like self-driving cars.

In AerCap Holdings N.V. (NYSE:AER), Pabrai’s fund amassed a $42.49 million stake that contains 807,721 shares, down by 22% on the year. The stock of the aircraft leasing company appreciated by 26.40% during 2017 amid strong financial results. AerCap Holdings N.V. (NYSE:AER) also has a strong buyback program, under which it has repurchased 30% of its shares since 2015 and to which it has recently added $200 million expected to be used by June 2018. The company sees good demand for aircraft and expects the growth trend to continue this year.

Dalal Street also owns 398,138 shares of Ferrari N.V. (NYSE:RACE) worth $41.81 million. The fund has held shares of Ferrari N.V. (NYSE:RACE) since it was spun off from Fiat Chrysler and went public in January 2016 and saw the stock surge by over 200% since the IPO. In 2017, Ferrari N.V. (NYSE:RACE) reached 1.0 billion ($1.24 billion) in adjusted EBITDA two years ahead of the IPO plan. The company is targeting 2.0 billion euro in adjusted EBITDA and 1.2 billion euro in industrial free cash flow by 2022.

Southwest Airlines Co (NYSE:LUV) is the last holding in Dalal Street’s equity portfolio and is also the most recently added, in a manner of speaking; it initiated a stake in the company during the third quarter of 2016. Heading into 2018, Dalal Street held 300,975 shares worth $12.70 million. The stock of the US airline operator has appreciated by 30% last year, but it has declined by nearly 11% since the beginning of 2018 despite the company reporting a solid fourth quarter and posting a record load factor for January. Southwest Airlines Co (NYSE:LUV) posted EPS of $0.77, in line with estimates, while revenue of $5.27 billion beat the consensus estimate by $20 million, capping the 45th straight year of profitability. In 2018, Southwest Airlines Co (NYSE:LUV) expects to further expand its margins and continue fleet modernization.

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