Below we present the list of Mohnish Pabrai’s 5 Biggest Investments in 10 Years. For our methodology and a more comprehensive list please see Mohnish Pabrai’s 10 Biggest Investments in 10 Years.
5. Chesapeake Energy Corporation (NASDAQ:CHK)
Value of Pabrai Investment Funds’ 13F Position: $88.7 million (Q4 2013)
Stock Performance Since Q4 2013: +200%
Number of Hedge Fund Shareholders (Q1 2023): 60
Mohnish Pabrai had built a large stake in natural gas producer Chesapeake Energy Corporation (NASDAQ:CHK) by the end of 2013 but sold out of it during 2014. It wasn’t until Chesapeake emerged from bankruptcy protection in 2021 that the stock started to take off, doubling in value from then until the present and having tripled in value since Pabrai built his largest position in it.
Rising natural gas prices have been a major boon for Chesapeake Energy Corporation (NASDAQ:CHK) in recent years, driving the company’s cash flow higher. Thanks to its low leverage, Chesapeake is able to return much of that free cash flow to shareholders in the form of dividends (including variable dividend payouts) and buybacks. Chesapeake’s dividend currently yields over 7% and should natural gas prices continue to rise into 2024 and beyond, those dividend payouts will rise even further alongside them.
Carillon Tower Advisers laid out Chesapeake Energy Corporation (NASDAQ:CHK)’s return to prominence in its Q3 2022 investor letter:
“Chesapeake Energy Corporation (NASDAQ:CHK), a natural gas exploration and production company, emerged from bankruptcy with little fanfare in 2021, despite having rid itself of its debt burden and onerous pipeline contracts. The company was able to make two large acquisitions at very reasonable prices within its core producing areas, allowing for scale and cost savings. Then in 2022, natural gas prices began to rise well above expectations, increasing the value of Chesapeake’s large natural gas resources and production and contributing to its outperformance.”
4. Bank of America Corporation (NYSE:BAC)
Value of Pabrai Investment Funds’ 13F Position: $115 million (Q4 2013)
Stock Performance Since Q4 2013: +98.3%
Number of Hedge Fund Shareholders (Q1 2023): 95
Pabrai added a large stake in BAC to his 13F portfolio in the third quarter of 2011 and the company was his top stock pick for several quarters over the following three years. As noted earlier, Pabrai began trimming his positions in financial stocks in 2015, with Bank of America Corporation (NYSE:BAC) being sold off in the first quarter of that year.
Bank of America Corporation (NYSE:BAC) is enjoying a strong run of success on the back of the rebounding U.S. economy, posting double digit top and bottom line growth in the second quarter. Net interest income was particularly strong, growing by 14% during the quarter as Bank of America added another 157,000 checking accounts to its books. The company also announced a dividend raise of 9%, pushing its yield above 3%, or more than double the average yield of the companies in the S&P 500.
Oakmark Equity and Income Fund cited Bank of America Corporation (NYSE:BAC) as one of its biggest recent detractors in the fund’s Q2 2023 investor letter:
“Two financial industry companies led the six-month detractors’ list, however. Charles Schwab and Bank of America Corporation (NYSE:BAC) both reported material mark-to-market unrealized losses in their marketable securities holdings, an outcome of the increase in interest rates early in the year.”
3. General Motors Company (NYSE:GM)
Value of Pabrai Investment Funds’ 13F Position: $137 million (Q4 2013)
Stock Performance Since Q4 2013: -13.9%
Number of Hedge Fund Shareholders (Q1 2023): 75
General Motors Company (NYSE:GM) was another top stock pick of Pabrai’s throughout much of 2013-2017 before he unloaded the position in the third quarter of 2017. GM is another one of his picks that has delivered less than stellar returns over the years, losing 13.9% of its value since the end of 2013.
General Motors Company (NYSE:GM) shares are also down by about 14% in the last year alone, despite relatively strong results. Over the trailing twelve month period (through June 30) GM has grown revenue by 31% compared to the prior 12-month period, while its gross margin has expanded by 22% and EPS by 36%. Despite that, the stock trades at a price/sales ratio of just 0.32x, near a ten-year low and down from 0.46x a year earlier, while its P/E ratio has shrunk to 4.9x from 7.1x.
Diamond Hill took a stake in General Motors Company (NYSE:GM) in the second half of 2022 and explained why in its Q3 2022 investor letter:
“Most recently, we initiated a position in General Motors Company (NYSE:GM), one of the largest automakers in the United States. Over the past several years, GM has taken steps necessary to focus the company on the most profitable segments and move into position to compete in an electrified and autonomous world. With the recent rise in interest rates there was a meaningful selloff in the auto industry, which presented us an attractive entry point to a name we know well.”
2. Micron Technology, Inc. (NASDAQ:MU)
Value of Pabrai Investment Funds’ 13F Position: $170 million (Q4 2021)
Stock Performance Since Q4 2021: -26.7%
Number of Hedge Fund Shareholders (Q1 2023): 73
Mohnish Pabrai sold off his stake in Micron Technology, Inc. (NASDAQ:MU) during the second quarter of this year following 13 straight quarters of the company ranking as his top stock pick. Micron has delivered underwhelming returns since Pabrai’s stake in the company peaked during the final quarter of 2021, with the stock losing 26.7% of its value since.
Micron Technology, Inc. (NASDAQ:MU) has been stung by slowing demand and falling prices for its memory chips as PC and smartphone sales have declined. In its Q3 of FY 2023, revenue sank by 57% to $3.75 billion, leading to a loss of $1.43 per share. The longer-term outlook looks more promising for the company however, particularly as it relates to the AI memory market. Micron is already a leader in the space and is currently working on a new HBM solution that could lay waste to the competition.
LRT Capital Management was surprised by the market reaction to Micron Technology, Inc. (NASDAQ:MU)’s September 2022 guidance update, as it discussed in its Q3 2022 investor letter:
“Anecdotally, stocks are beginning to react positively to what is prima facie bad news. For example, Micron Technology, Inc. (NASDAQ:MU), the maker of memory chips reported earnings and provided updated guidance on September 29th. The guidance was well below what the company said previously and suggested the company may not make any money at all in Q1 next year. Yet, the stock went up, on the news, suggesting investors have priced in a lot of bad news already.
1. Stellantis N.V. (NYSE:STLA)
Value of Pabrai Investment Funds’ 13F Position: $269 million (Q1 2018)
Stock Performance Since Q1 2018: -10.3%
Number of Hedge Fund Shareholders (Q1 2023): 27
Topping the list of Pabrai’s biggest investments in 10 years is Stellantis N.V. (NYSE:STLA), which was formed in 2021 through a merger between Fiat Chrysler and Peugeot. The former company, which traded under the ticker FCAU, was Pabrai’s top stock pick throughout much of 2014-2019, with his holding in the company peaking at $269 million in value in the first quarter of 2018, just under $100 million more than his next largest investment over the past decade.
Stellantis N.V. (NYSE:STLA) has been highly successful since its 2021 formation, growing revenue by 15% during that time. The European automaker’s earnings have shot up even faster, growing by 25%, which has in turn allowed the company to raise its dividend payments by 29% in the last year alone, pushing the stock’s yield to 8%. Despite the outperformance, the market has remained fairly tepid towards the company, which is making its valuation very attractive, as STLA shares trade at just over 3x earnings right now.
Miller Value Partners Income Strategy shared some of the reasons behind why it took a long position in Stellantis N.V. (NYSE:STLA) in its Q2 2023 investor letter:
“We initiated a starter position in Stellantis N.V. (NYSE:STLA), which makes Jeep, Dodge and Fiat cars. The company has a nearly 8% dividend yield with enough net cash (cash minus debt) on the balance sheet to cover the dividend for almost five years. The company trades at 1.7x operating profits, which means the market is already expecting a likely drop in cash flow. Still, the shares appear to be worth meaningfully more than where they trade, and management is heavily aligned with stockholders with a 14% stake. They share our view that the valuation is compelling, as the company plans on repurchasing ~3% of shares outstanding this year.”
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