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Mike Price
Mike Price

Superinvestor Review: Mohnish Pabrai

I've decided to, hopefully, go over the holdings of some superinvestors in the next few months to try to find some good opportunities.

I'll start with the superinvestor I'm most familiar with - Mohnish Pabrai.

I'll be using the data on his holdings from Guru Focus and go over the invetsments he is currently adding to or has not changed his position in. I may try to do post-mortem reverse engineering with the investments he has reduced or sold-out of later on.

Berkshire Hathaway (BRK-A) (BRK-B)

I believe he sees this as the safest possible stock he could buy. But, becuase of some comments he made - about how he would sell this immediately if he could find a better opportunity - I do not believe he still thinks this is a compelling opportunity for future return. At his meeting he talked about 'placeholders' safe stocks that are discounted and/or pay a big dividend with basically no downside that have a better return then cash for when he can't find a better investment.

He wrote it up on ValueInvestorclub, here.

Currently Pabrai Funds has 6.29% of its assets in Berkshire Hathaway - as it will be with all of the stocks discussed here, this number is high because he does not have to report his cash position in filings.

FreightCar America (RAIL)

RAIL was first mentioned to me by Joe Koster a few weeks ago when I mentioned I was looking for ideas.

RAIL quickly looks like something that would interest Pabrai. After one-minute on Morningstar I see a P/E under five, P/S under .5, ROE almost at 90% (!), good margins at 14%, high growth and >$55 million more in cash than short-term debt. Now my question is why the heck is it still undervalued?

Joe recommended the Valueinvestorclub write-up. The first thing I see here is 80% market share which almost made me open another tab to go to Scottrade right now.

Currently this looks like a good way for Pabrai to get on the railroad bandwagon that Buffett started while maintaining his GARP style.

Pabrai has .4% invested in RAIL, but is likely buying more as you read this.

Delta Financial (DFC)

I don't have much experience with financials, but recommend this thread from the Motley Fool for some analysis of his buy.

Here is the VIC write-up.

DFC currently represents 9.66% of Pabrai Funds.

Cryptologic (CRYP)

Cryptologic is an Internet gaming stock that is trading very low because of recent legislation that takes away it US business, and because it missed earnings last quarter. However only 30% of its business was done in the US.

Pabrai wrote-up Cryptologic for VIC, and its easy to see throughout the article its low-risk and high uncertainty.

Cryptologic is next on my list for research and it will be interesting to reverse-engineer a company Pabrai loves, especially since they missed his guide for earnings in the last quarter.

Pabrai has 10.92% in CRYP.

Harvest Natural Resources (HNR)

Another hard stock with a great thread on Motley Fool.

HNR is a great company with focused management, that would probably be trading at a premium if it were not in Venezuela.

Pabrai Funds has 12.14% in HNR, but has made several buys recently.


This is a magic formula stock trading at less than 5x earnings - and less than a third of sales - with an ROE of ~70%.

ABX is a cargo airline with 99 planes, it also has hubs where it sorts packages, etc. It does most of this for DHL.

This looks kind of boring until you see the headline on how its profit fell 47% because of less business with DHL, the company said that Asian business should bring its profit back to normal, and normalized earnings could make this already cheap stock look a lot cheaper.

Pabrai has 8.9% in ABX.

Fairfax Financial (FFH)

I don't have a lot of experience with insurance companies, but know of the debate among value investors on this company.

Prem Watsa was called the Warren Buffett of the north by a journalist and this was part of the reasoning behind Chanos - who shorted Moody's and said that Buffett is wrong on it, so it may not be a stretch to call him kind of loony - saying it was worth $0.

Pabrai wrote-it-up and I'd also recommend MSN BRK Board posts on it.

He's held it for a while and has 13% in it.

Ipsco (IPS)

Ipsco is his biggest position at 18.35%, probably due to the fact that it's up almost 300% in less than two years.

Ipsco is a North American Steel Maker, that I would not doubt Pabrai starts selling in the coming months to make room for more RAIL... but those are just my thoughts it may not have reached 90% of his estimate intrinsic value yet.

Pinnacle (PNCL)

Pinnacle - a magic formula stock, surprisingly; Pabrai has bought a number of these recently... - is a regional airline that gets all of its revenue from Northwest, which means it would conceivably not have any revenue if Northwest killed their contract, this is what's depressing the price.

But, it wouldn't fall very far right now it has cash of $348 million and a market cap of $407 million.

Northwest renewing the contract and the north of 100% ROE that PNCL has made with it would provide a catalyst for a large price jump, but it would not drop an extreme amount if the contract is not renewed - classic Pabrai low risk, high uncertainty.

Pabrai has 9% of the funds in PNCL.

I would recommend Pabrai's write-ups to understand how he analyzes companies. I would also extremely recommend his new book, The Dhandho Investor: The Low - Risk Value Method to High Returns.

Orginally Published at Mike Price's investment blog: http://mikesnewsletterinvesting.blogspot.com/

About the author:

Mike Price
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 3.0/5 (13 votes)


Gad - 10 years ago    Report SPAM
RAIL has 80% of the coal rail car market, NOT the entire rail car market. This is a very critical distintiction.

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