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Mohnish Pabrai Makes Big Bets on Riskier Banks: BAC, C, GS
Posted by: gurufocus (IP Logged)
Date: May 17, 2012 01:34PM

We have just updated the portfolio of Mohnish Pabrai. He is betting heavily on riskier banks, and his portfolio looks a lot like Bruce Berkowitz’s. His largest positions are now Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS). These three banks are now more than 60% of his portfolio.

It is not clear why he did not buy AIG, which is the largest holding of Berkowitz.

At the same time he bought banks that seem risky, he sold out positions that look relatively safe: Berkshire Hathaway (BRK.A)(BRK.B), Wells Fargo (WFC) and Cresud (CRESY).

One can certainly argue that these banks are not risky; they are just volatile. Their stock prices are sure much more volatile than the stocks of Berkshire and Wells. They are indeed more risky because their business quality and financial strength are much worse than that of Berkshire and Wells. The only explanation to why Mohnish Pabrai is almost all in with them is he thinks that the economy, the housing market and the banking sector will recover soon. During recoveries the stocks of lower quality companies run up much higher than high quality companies because they are more beaten down during recessions.

The only problem is what if the recovery takes longer than expected? What if the “second leg” of the recession comes? If that happens, we can easily see the prices of those banks cut in half again.

One can also argue that Mohnish is a long-term investor and he is thinking of a much longer term. Being a fund manager investing other people’s money, your investment time span is only as long as that of your clients who are tired of seeing their account balances shrink. Didn’t Bruce Berkowitz learn that the hard way last year?

Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS) may be great bets if you are investing your own money and you are a REAL long-term investor. For those who manage other people’s money, the trip is going to be much tougher.

Didn’t Mohnish say heads I win, tails…

Here is the complete portfolio of Mohnish Pabrai.




Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
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Rating: 2.3/5 (21 votes)



Re Mohnish Pabrai Makes Big Bets on Riskier Banks BAC C GS
Posted by: sjzhao2003 (IP Logged)
Date: May 17, 2012 02:10PM

These banks are not risky, they just have higher volatility.



Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
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Rating: 5.0/5 (1 vote)



Re Mohnish Pabrai Makes Big Bets on Riskier Banks BAC C GS
Posted by: AlbertaSunwapta (IP Logged)
Date: May 17, 2012 10:07PM

^ I like that. However, we're talking banks so I suspect volatility does correlate somewhat with "risk", and not the academic volatility=risk kind but the permanent loss of capital kind of risk.



Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
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Rating: 0.0/5 (0 votes)



Re Mohnish Pabrai Makes Big Bets on Riskier Banks BAC C GS
Posted by: superguru (IP Logged)
Date: May 17, 2012 11:47PM

Thats quite odd. I thought he made a rule of not investing more than 5% in one position.



Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
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Rating: 0.0/5 (0 votes)



Re Mohnish Pabrai Makes Big Bets on Riskier Banks BAC C GS
Posted by: Cogitator99 (IP Logged)
Date: May 18, 2012 04:33AM

Rules are made to be broken, apparently.

He'll get very rich very quick if he's right.

Next Seth Klarman or next Bill Miller? Lol.



Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
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Rating: 0.0/5 (0 votes)



Re Mohnish Pabrai Makes Big Bets on Riskier Banks BAC C GS
Posted by: vuasu (IP Logged)
Date: January 5, 2013 11:46PM

Looks like he's getting very rich very quick.



Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
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Rating: 0.0/5 (0 votes)



Re Mohnish Pabrai Makes Big Bets on Riskier Banks BAC C GS
Posted by: vgm (IP Logged)
Date: January 6, 2013 05:09AM

It's implausible to call GS a "risky" bank. And it could reasonably be argued that overt risk has been largely defused for BAC and C, though they may still be volatile. But volatility is the friend of the value investor, to paraphrase Buffett.

I think Pabrai is still developing his investing style and his "rules" get modified as his experience grows. Assuming he bought BAC and C anywhere near their nadir, he could shoot the lights out with them over the medium to long term.

Long BAC, C.



Guru Discussed: Mohnish Pabrai: Current Portfolio, Stock Picks
Stocks Discussed: BAC, C, GS, WFC, BRK.A,
Rate this post:

Rating: 0.0/5 (0 votes)





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