Mohnish Pabrai is one of the best value managers in the world. He has a solid track record and the knowledge and skills to manage a highly concentrated portfolio. He takes his mentor's ideas, Warren Buffett´s, and expands them to create better risk/adjusted portfolios. He shows that a value approach relies on three skills:
(a) Think about, research and understand a business extremely well;
(b) Determine whether a company in that industry is worth buying based on this research.
(c) Develop the temperament to buy only when the company sells at a discount to its intrinsic value.
In his books and letters he discusses the important topic of the art of selling or when exactly to get out of an investment. Different from Buffett, Pabrai sells an investment as soon as it gets to a fair value. He does not have the vision of holding them forever, as Buffett does with his main holdings.
Pabrai is a value investor. He invests primarily in smaller companies, those with a market cap in the half billion dollar range, that are out of favour. He tends to run concentrated portfolio with 10-20 names.
I searched for stocks in his portfolio that are either trading in low P/E ratios or I think are undervalued considering the hard asset value they hold in their portfolios.
Brookfield Office Properties (BPO) is a real estate operating company with an impressive collection of prime office towers located in central business districts of the U.S., Canada, and Australia. It also has operations in London.
For the quarter, on a year-over-year basis, revenue and EBITDA increased 52% and 66%, respectively, driven by portfolio acquisitions. Internal growth was slightly negative, down 0.7%. Despite this mix results, year to date the firm is tracking near underlying expectations of slightly positive internal growth for 2011.
With a P/E of just 4 and a portfolio of quality assets, BPO is a stock my office will research deeper.
Brookfield Infrastructure Partners (BIP) is a unique, publicly traded partnership with a diverse collection of global assets that has been expertly managed since its inception.
Earlier this month, Brookfield Infrastructure reported second quarter results which were extremely solid. Funds from Operations (FFO) doubled for the three month and six month periods between 2010 and 2011, and on a per-unit basis, FFO increased 33% over the three month period compared to last year, and 41% over the six month period compared to last year. Per-unit FFO is currently $0.65 per quarter.
Brookfield Infrastructure has a distribution policy where it expects to pay out 60-70% of FFO per year in distributions, and have long-since estimated that the distribution will grow 3-7% per year over the long term.
Like BPO, Brookfield Infrastructure trades with a P/E of just 6. The assets it holds and the low valuation makes me interested in study this company.
Air Transport Services Group Inc. (ATSG) provides air cargo transportation and hub services within the United States and to Canada and Puerto Rico. The Company also provides aircraft leasing, airport ground services, fuel management, specialized transportation management, and air charter brokerage services.
This company has provided great returns below $4, but it still provides great value at 14x trailing and 5x forward P/E, .7x PEG, .4x P/S, and 3.5x EV/EBITDA. The Market cap was of $288.32M. Price is at $4.50; TTM Diluted EPS is at $0.34 and MRQ Book Value Per Share at $4.92.
ATSG is interesting but considering Pabrai reduced the position in the last quarters I am not excited as BPO and BIP.
Wells Fargo & Company (WFC) is a diversified financial services company providing banking, insurance, investments, mortgage, leasing, credit cards, and consumer finance. The Company operates through physical stores, the Internet and other distribution channels across North America and elsewhere internationally. With the purchase of Wachovia, Wells Fargo has become a nationwide bank.
Competitive advantages in banking come through sustained low costs and consistent execution of strategy. WFC is expected to rank among the best in terms of revenue growth as the merger with Wachovia represents a significant opportunity.
The stock sells at a cheap price to tangible book considering historical trends. WFC is the best managed U.S. bank and prices below $25 represent buy opportunities.
Pabrai got very interested in WFC as soon as the market was on panic and correction mode. I think WFC is one of the best banks to get US financial exposure and offers superb management, great sponsoriship and undervalued shares.
Cresud (CRESY) is an Argentinean agricultural land development company, and its primary activities include the acquisition, development, and sale of land. The company is also a producer of agricultural commodities, such as crops, beef, and milk. Its operations are mostly in Argentina, and it is currently expanding into Brazil, Bolivia and Paraguay.
Cresud has a huge inside ownership (40%) plus a good dividend yield (2.5%) plus quality hard assets such as farmland and real estate businesses both in Argentina and Brazil.
Its value is anchored in real assets which are attractive locally and globally.