In the middle of May, I reported that Mohnish Pabrai (Trades, Portfolio)'s Pabrai Investments had added an interesting new holding to its portfolio. The fund had bought 168,842 shares in the Chinese e-commerce giant Alibaba Group Holding Ltd. (BABA, Financial) during the quarter.
This information was based on the firm's 13F report. Any asset manager with more than $100 million of assets under management has to file these reports detailing their holdings of U.S. securities at the end of each calendar quarter.
However, I should note these reports only offer a snapshot of holdings. They also only include U.S. equity holdings.
As such, there's a bit of a gap in the figures. Pabrai Investments manages between $600 million to $700 million in assets for clients. Of this total, only $278 million was recorded on the 13F.
Where's the rest? The answer is non-U.S. holdings. Citing a lack of opportunities in America, Pabrai has recently been investing more and more in regions such as Turkey and India. He is fishing where the fish are.
Fishing in China
It seems that he also sees value in China. After buying Alibaba in the first quarter, the value investor has continued to grow his holding. The only change to Pabrai Investments' U.S. portfolio in the second quarter was a nearly 100,000-share addition to the Alibaba holding, according to the 13F.
As I noted when I covered the holding in May, Pabrai's decision to buy the Chinese company was not unexpected. A few weeks before, the Daily Journal (DJCO, Financial), where Charlie Munger (Trades, Portfolio) sits as chairman and portfolio manager, announced it had added Alibaba to its portfolio, the first portfolio change in years.
Pabrai and Munger have been friends for years, and the former has said several times in the past that Munger is his mentor. He has also advocated using the "cloning" approach to find investment ideas.
In a recent book called "Richer, Wiser, Happier," which chronicles the journey of more than 40 of the world's super investors and was written by William Green, the author calls Pabrai "the most relentless cloner I've ever encountered." Green also says that Pabrai has "taken the art of appropriation to such an extreme that, paradoxically, it seems oddly original."
I don't have any proof that Pabrai copied the holding from Munger, but all evidence points to this conclusion. What's more, it seems that Munger may have gotten the idea himself from another investor, Li Lu (Trades, Portfolio).
China specialist
Li, the founder of Himalaya Capital Management, is a Chinese-born American investor and hedge fund manager, and he is a specialist in Chinese companies. Having been an active investor in China for decades, Li is likely to know the region better than any of his U.S.-based peers.
Therefore, he is likely to have the best insight into Chinese equities.
Li's Himalaya reported a holding in Alibaba on its 13F in the first quarter of 2020 before it disappeared in the second quarter. However, as noted above, 13Fs only detail U.S. equity holdings. Alibaba listed in Hong Kong in the fourth quarter of 2019.
As such, it could be the case that Li sold his New York-listed stock and bought back the Hong Kong-listed equity. If he were worried about U.S.-China relations, this would have been a sensible move. Although, there is no evidence to prove this is the case.
Munger may have followed Li into Alibaba because they are both good friends and have taken part in several interviews together. Munger has even invested some of his family funds in Li's funds.
Guy Spier's Aquamarine Capital also joined Pabrai and Munger to buy Alibaba last quarter as well, according to its 13F. Spier and Pabrai are close friends and joined forces to bid on a lunch with Warren Buffett (Trades, Portfolio) several years ago.
This network of investors includes some of the most successful investors of all time. It's never sensible to follow 13F filings blindly, but the fact that all of the big-name investors outlined above like one stock is something worth noting.
