In this article we present the list of Mohnish Pabrai’s 10 Biggest Investments in 10 Years. Click to skip our detailed analysis of Mohnish Pabrai’s background and investing history and jump right to Mohnish Pabrai’s 5 Biggest Investments in 10 Years.
Micron Technology, Inc. (NASDAQ:MU), General Motors Company (NYSE:GM), and Bank of America Corporation (NYSE:BAC) are a few of the stocks that Mohnish Pabrai has built substantial stakes in over the last ten years, with those companies delivering varied performance in the years since.
Mohnish Pabrai is the founder of Pabrai Investment Funds, and one of the most successful value investors in the world, with a net worth estimated at $1.8 billion as of May 2022. He is an unabashed admirer and copycat of Warren Buffett, having paid just over $650,000 to have lunch with the legendary investor back in 2007, which he later said was worth every penny.
While Pabrai doesn’t have the track record outstanding returns that Buffett has, he is by no means a slouch when it comes to successful value investing. From his fund’s inception in 1999, it has delivered 25% annualized returns, easily beating the market most years and massively outperforming it on several occasions, including 2009, when his fund returned 120%.
One of the key philosophies that Pabrai sticks to is to find extremely undervalued companies that could deliver returns of up to 5x over the course of a few years and then wait. As he told Forbes in 2013, he has no interest in stocks that look 10% undervalued. He bets on only the most obvious investments he can find and has said that if he can find a couple of great investment ideas every year, he’s more than happy.
Rather than just single stocks, Pabrai has frequently focused on a few stocks at a time within specific sectors. He bet heavily on finance stocks in the early 2010’s before shifting his focus to consumer discretionary stocks (namely automakers) through the latter half of the decade. He then shifted heavily into tech stocks, before his latest shift out of tech and into the materials sector.
As evidenced by his current 13F portfolio, Pabrai is not an easy investor to emulate for those focused on stocks that trade on the major U.S. exchanges. He currently has just two 13F holdings, both of which were just added to his portfolio during the second quarter. Instead, the bulk of his focus is on emerging markets, where he believes there are far more highly undervalued stocks for him to unearth.
However, given his highly concentrated 13F portfolio, it is quite easy to emulate just his U.S. stock picks, assuming you’re willing to display the patience that Pabrai knows is extremely challenging, but also vital to being a successful value investor.
That said, emulating Pabrai’s stock picks and holding on to them for several years may not be a winning strategy, as evidenced by the long-term performance of his ten biggest holdings from the past decade, which we’ll look at below. Rather, Insider Monkey has found that it’s far more lucrative to emulate the consensus stock picks of a select group of top performing hedge funds each quarter.
Note that the stock performance figures of Pabrai’s top stock picks listed below are not indicative of Pabrai’s personal returns on these stocks, many of which he sold out of years ago. Rather, it’s to judge the long-term performance of stocks that he once deemed highly undervalued and likely to deliver massive returns in the coming years. In many cases, those returns never materialized.
Our Methodology
The following data is gathered from Pabrai Investment Funds’ 13F filings with the SEC dating back to the third quarter of 2013. We follow hedge funds like Pabrai Investment Funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2023 reporting period.
Mohnish Pabrai’s 10 Biggest Investments in 10 Years
10. Alphabet Inc. (NASDAQ:GOOG)
Value of Pabrai Investment Funds’ 13F Position: $63.5 million (Q3 2017)
Stock Performance Since Q3 2017: +155%
Number of Hedge Fund Shareholders (Q1 2023): 155 (GOOG), 204 (GOOGL)
Bank of America Corporation (NYSE:BAC), Micron Technology, Inc. (NASDAQ:MU), and General Motors Company (NYSE:GM) are three of Mohnish Pabrai’s biggest investments in 10 years, though none of them have performed as well as Alphabet Inc. (NASDAQ:GOOG) in recent years, which has been one of Pabrai’s top performing stock picks since he built a $63.5 million position in the company in the third quarter of 2017, the tenth-largest position he’s held in a stock over the past ten years. GOOG shares have gained 155% since Q3 2017, though Pabrai sold off his stake in Alphabet in the first quarter of 2018, personally missing out on most of those gains.
Alphabet Inc. (NASDAQ:GOOG) has been focusing heavily on its AI capabilities dating back to just before Pabrai’s largest position in the company, which should quell any concerns about AI chatbots overthrowing its advertising dominance. Those fears have gone unrealized thus far, as Google search and advertising revenue both rose during Q2. Those investments are poised to pay off further in the years to come as Alphabet integrates AI capabilities into its search engine and other products.
Alphabet Inc. (NASDAQ:GOOG) has been a top performer for the Weitz Partners III Opportunity Fund this year, as outlined in the fund’s Q2 2023 investor letter:
“The year-to-date’s top contributors Microsoft Corp. (MSFT) and Google parent Alphabet Inc. (NASDAQ:GOOG) (also a top quarterly contributor) have generated an enormous volume of AI-centric headlines. Both are at the vanguard of introducing AI-powered technologies into consumer-facing products, most notably their respective search engine. We trimmed several of the year’s winners on strength, including Meta, Microsoft, Alphabet, CoStar Group, Inc. (CSGP), and CarMax.”
9. POSCO Holdings Inc. (NYSE:PKX)
Value of Pabrai Investment Funds’ 13F Position: $72.8 million (Q2 2014)
Stock Performance Since Q2 2014: +44.7%
Number of Hedge Fund Shareholders (Q1 2023): 6
Mohnish Pabrai unloaded his stake in POSCO Holdings Inc. (NYSE:PKX) in the final quarter of 2015 after several years of owning PKX shares. His stake in the company reached its peak (dating back to Q3 2013) in the second quarter of 2014, being valued at $72.8 million. The stock has gained a modest 44.7% in the nine years since, or about 5% per year on average.
While POSCO Holdings Inc. (NYSE:PKX)’s returns have been underwhelming, especially up until its recent rally, investors and analysts are intrigued by the company’s proposed shift away from being a pure play steelmaker. Posco plans to invest more than $90 billion over the next seven years into renewable energy technologies like batteries and hydrogen fuel cells, as well as further investments into its core business.
The investment will surge Posco’s annual capital spending by about 75% on average over the next seven years, which will challenge POSCO Holdings Inc. (NYSE:PKX)’s bottom line and almost certainly require the company to raise money and/or take on a major debt burden. There are also questions about the company’s bullish lithium price expectations by 2030, with the company forecasting lithium at $30,000 per ton, while UBS forecasts lithium to sell for $22,500 per ton.
8. GrafTech International Ltd. (NYSE:EAF)
Value of Pabrai Investment Funds’ 13F Position: $73.6 million (Q3 2019)
Stock Performance Since Q3 2019: -66.4%
Number of Hedge Fund Shareholders (Q1 2023): 14
Pabrai’s opened a position in GrafTech International Ltd. (NYSE:EAF) during the second quarter of 2019 and raised it by 35% during the following quarter, during which it reached $73.6 million in value. He began unloaded the position in Q4 of that year and had sold out of it completely by the first quarter of 2020. GrafTech has been one of the worst performers that Pabrai latched onto, losing two-thirds of its value since the third quarter of 2019.
GrafTech International Ltd. (NYSE:EAF) has grappled with both slowing demand for its graphite electrodes in recent quarters, as well as the temporary shutdown of its production facility in Mexico last year. The company’s Monterrey operations, which account for about 25% of GrafTech’s total production capacity, are back in business, but demand is likely to remain sluggish throughout 2023. As the largest supplier of graphite electrodes, GrafTech is well positioned longer-term to capitalize on the steel industry’s pivot to electric arc steel furnaces.
The Black Bear Value Fund was bullish on GrafTech International Ltd. (NYSE:EAF)’s future top-line and margin growth in its Q2 2022 investor letter:
“GrafTech manufactures graphite electrodes in North America and Europe. The electrodes are necessary to produce electric arc furnace steel, a more environmental process than blast furnace production. EAF benefits from a global push to decarbonize steelmaking which is driving new capacity in electric arc steelmaking. EAF can self-source their main input, pet-needle coke, through their Seadrift subsidiary. Pet-needle coke is increasingly going to be in short supply as it is an important input commodity for electric vehicle battery production. Owning your own input commodity is a strategic advantage as others cannot guarantee production nor guarantee a profit on an order.
EAF is in a unique position. Their product helps steelmakers emit less greenhouse gases which helps drive the topline. They can guarantee their product as they know 2/3 of their capacity can be covered by Seadrift. The market is worried about recession which could result in some short-term pain to the industry. Another area of concern are long-term-agreements (LTA’s) which are starting to roll off. Bears are concerned that as the business shifts to the spot market, the margins will decline. I will concede that historical margins are unlikely to be repeated but it seems likely new LTA’s will be signed.
Recall our earlier discussion on scarcity. Their competitors DO NOT have control of their input costs…this advantage will become more pronounced as pet needle coke becomes scarcer as EV production ramps up. That should lead to higher top-line prices and healthy margins for EAF. I conservatively think we own this business at 11-16% FCF yield and presume no new long-term contracts are signed. In time new LTA’s will be signed and the business should achieve a more appropriate valuation.”
7. Citigroup Inc. (NYSE:C)
Value of Pabrai Investment Funds’ 13F Position: $81.3 million (Q4 2013)
Stock Performance Since Q4 2013: -15.5%
Number of Hedge Fund Shareholders (Q1 2023): 81
Financial institutions were a favorite investment of Mohnish Pabrai’s for nearly a decade, up until the beginning of 2015. Citigroup Inc. (NYSE:C) was added to his portfolio in the final quarter of 2011 and occupied a prominent place in it until the end of 2014. He unloaded the majority of his Citi position in the first quarter of 2015 and finished the job the following quarter. Citigroup’s shares have fallen by 15.5% in the nearly ten years since Pabrai held an $81.3 million position in the company in the final quarter of 2013.
Citigroup Inc. (NYSE:C) has been undertaking a broad transformation initiative since early 2021 that includes divesting some of the investment bank’s smaller and less profitable operations, particularly its overseas consumer banks, with the goal of simplifying its corporate structure and making the company more attractive to investors.
Citigroup Inc. (NYSE:C) currently trades at a P/E of just 6.36x. By comparison, Citi shares were trading at a P/E of 11.3x on June 30 2015, by which point Pabrai had sold off his position. While the shares are relatively cheap historically, it’s also true that Citigroup has been underperforming some of its rivals like Bank of America Corporation (NYSE:BAC). In the first quarter, Citi’s ROE was just 9.5%, while its ROTCE was 10.9%, well off Bank of America’s 12.5% and 17.4% figures respectively.
6. Seritage Growth Properties (NYSE:SRG)
Value of Pabrai Investment Funds’ 13F Position: $87.1 million (Q2 2021)
Stock Performance Since Q2 2021: -52.6%
Number of Hedge Fund Shareholders (Q1 2023): 18
Seritage Growth Properties (NYSE:SRG) appears to be another disappointing investment for Mohnish Pabrai, and also stands as one of his most recent investments. He held on to a small stake in the retail REIT up until the first quarter of this year, though the bulk of his former position was sold off in the first quarter of 2020, during which SRG shares cratered from $40 to $8. They rebounded to as much as $23 a year later but are back down to less than $9 today.
Seritage Growth Properties (NYSE:SRG) is currently in the process of liquidating its assets, which the company believed could amount to between $18.50 and $29.00 per share being distributed to shareholders. However, with real estate valuations having since fallen, it looks more likely that Seritage will come up short of its lowest estimate, which has dragged down the stock. Seritage anticipates selling over 80 of its remaining assets this year, of which more than half have already been sold despite the challenging market conditions.
O’keefe Stevens Advisory took a deep dive into some of what went wrong with Seritage Growth Properties (NYSE:SRG) in its Q3 2022 investor letter:
“Seritage Growth Properties (NYSE:SRG) – A good idea on paper, hard to execute in practice. When we made our initial purchase in 2018, we thought the idea of repurposing existing Sears and Kmart properties at below-market rents into modern spaces, enabling the company to charge multiples of the prior rent, made sense. Increasing rents from $5 to $20 PSF with a 10-11% ROI seemed like a nobrainer. The return profile made sense, and applying moderate leverage to stabilized properties improved end economics. Multiple changes at the management level and a $1.44B loan from Berkshire with a 7% interest rate and covenants (yes, those still exist) made this an impossible endeavor. We thought partnering with Eddie Lampert would align our interests and prove an intelligent decision, given the capital and brain power he has put into this situation.
On paper, selling non-core assets and using the proceeds to fund Capex plans and ongoing corporate expenses makes sense. The problem is the number of properties the company needed to sell for this business model to work. Every year that went by materially lowered the company’s value as the interest expense proved to be a heavy burden. The company essentially turned into a death spiral where they were merely selling properties to meet the interest expense and having little remaining for the core part of the business plan. Compiling all this with the lockdowns in 2020 and 2021 and the supply chain mess still being worked through has further delayed this turnaround.
Today the company is much smaller. Seritage once owned 253 properties totaling 39m SF compared to today, where they own161 properties and 19m SF. During this time, they only paid down $100m of the term loan. The turnaround has taken too long, and the company has put itself up for sale. Again, on paper, this seems like a good idea; however, going through a sale of this proportion will take a long time in a calm environment. The rise in interest rates, tight credit markets, and equity market volatility make this a monumental task. I suspect the number of buyers for these properties, which was once small to begin with, is down to a handful. A critical issue with the SRG portfolio is that the assets are spread out across the country. One player is not going to purchase all these assets. Real Estate Developers and owners tend to concentrate their efforts on a single region (excluding the global players such as Blackstone, Simon, and other private equity groups). Seritage may be able to sell some nearby properties as a package but would likely take a discount to FV, or it has to sell each property one by one…(Click here to read the full text)
See where General Motors Company (NYSE:GM), Bank of America Corporation (NYSE:BAC), and Micron Technology, Inc. (NASDAQ:MU) rank among Mohnish Pabrai’s biggest investments over the past decade by clicking the link below.
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Disclosure: None. Mohnish Pabrai’s 10 Biggest Investments in 10 Years is originally published at Insider Monkey.
