Mohnish Pabrai Portfolio, Shareholdings & Investments

Introduction:

Deriving inspiration from professionals has always been among the first steps in learning anything new. This is especially true when starting an investment journey and taking a guide to diversification and consistent investing from top, seasoned investors. 

Mohnish Pabrai, a value investor and Managing Partner at Pabrai Investment Funds, is well-known for his disciplined stock picking. His focused portfolio strategy has attracted attention from experienced and new investors alike. 

This blog explores Pabrai’s current holdings, investment philosophy, and reasons behind his stock choices in detail. 

Who is Mohnish Pabrai?

Mohnish Pabrai, a well-known value investor, is famous for his investment firm, Pabrai Investment Funds, and his bestselling book, “The Dhandho Investor.” He is widely recognized for his profound respect for Warren Buffett and Charlie Munger. He famously participated in and won a charity lunch with Buffett, from which he gained priceless insights. 

Born in Mumbai, India, in 1964, Mohnish Pabrai moved to the USA to study software engineering but later shifted to international marketing, which broadened his understanding of global business dynamics. He has always viewed every experience as an opportunity to learn and grow. 

In 1991, Pabrai launched TransTech Inc., an IT consulting firm, which he sold in 2000 for $20 million to Kurt Salmon Associates. In 1999, he started Pabrai Investment Funds to focus on undervalued stocks, akin to Warren Buffett’s investment approach with the Buffett Partnership. The fund quickly gained traction, establishing Pabrai as a significant figure in the stock market. To date, it has delivered a remarkable 517% return.

Mohnish Pabrai Portfolio Holdings:

Stock	Quantity held	Value of shares (Rs. in Cr.)	Holding a percentage in the company	Change from the previous quarter	Dividend yield (%)
Edelweiss Financial Services Limited	48093986	332.14	5.09	-2.56	2.17
Sunteck Realty Limited	3164000	167.19	2.16	-4.52	0.28
Rain Industries Limited(holding below 1%)	–	–	–	–	0.6

(Source- Moneycontrol– data as of the quarter ending March 2024)

Apart from these two companies from the real estate and finance sectors, Mohnish Pabrai also holds stocks from the US stock market. The holdings as of February 2024 are as follows-

Company	Number of shares	Value ($1000)	Weightage in the portfolio (%)
Alpha Metallurgical Resources Inc	404,357	133910.97	62.08
CONSOL Energy Inc	366,007	30656.75	14.21
Warrior Met Coal Inc	470,763	28575.31	13.25
Arch Resources Inc	140,308	22560.12	10.46

(Source- GuruFocus)

Mohnish Pabrai Portfolio Analysis:

Mohnish Pabrai has a concentrated portfolio of 2 active stocks following the principle of value investing. The Rs.238.6 Cr. stake in Rain Industries Limited, one of the petroleum coke and coal tar pitch-producing giants, was reduced by 4.35% in the quarter ending December 2023, after which the stock was deemed inactive. 

Mohnish Pabrai’s Networth:

Mohnish Pabrai’s net worth has seen an overall downtrend since the significant drop of 86% in 2016. After recovering, it again dropped by 25% in 2021, and as of the quarter ending March 2024, his net worth is Rs.495.54 crores. The reasons for the downtrend have been as follows-

• Investment Concentration and Market Volatility – Pabrai’s strategy focuses on a few stocks. This approach yields high returns but also exposes him to significant market volatility.
• Sector-Specific Problems – Economic downturns and market shifts have negatively impacted sectors like automotive and finance, affecting his portfolio value.
• Global Economic Downturns – The pandemic caused market disruptions, impacting the valuation of his holdings and reducing his net worth.

Mohnish Pabrai’s investment philosophy- the “Dhandho” strategy:

Mohnish Pabrai’s investment philosophy is firmly rooted in value investing principles. He focuses on undervalued companies with strong competitive edges, reliable management teams, and plenty of safety margins. He draws heavy inspiration from Warren Buffett, whom he sees as his mentor. Moreover, he focuses on firms with capable leadership and a consistent history of returns on invested capital, making his strategy a valuable tool for any investor.

Pabrai’s “Dhandho” investing strategy revolves around the concept of “Dhandho,” borrowed from Gujarati, meaning “endeavors that create wealth.” It is a practical approach to investing and provides equity market guidance. His book on the same philosophy, ‘The Dhandho Investor’, advocates for investing in businesses with a low risk of permanent capital loss while offering promising potential gains. His book highlights the following-

• Invest in established businesses with a proven track record.
• Acquire shares in stable businesses with minimal volatility.
• Look for companies or industries that have strong competitive advantages.
• Buy businesses at prices significantly below their intrinsic value to ensure a margin of safety.
• Understand clear exit strategies and selling when the price reflects a substantial profit margin.

What does the investment process look like for Mohnish Pabrai’s Portfolio?

1. Mohnish Pabrai’s investment process starts by identifying businesses trading well below their intrinsic worth using numbers and qualitative assessments.
2. Key to his approach is evaluating a company’s competitive edge or “economic moat” – factors like strong branding, unique tech, or customer loyalty that sustain profitability. Pabrai insists on capable management adept at allocating capital and enhancing shareholder value.
3. He looks for a large margin of safety, insisting on stocks significantly discounted from their true value to cushion against risks. This strategy guards against permanent losses
4. Rather than diversifying broadly, Pabrai opts for a focused portfolio of a few stocks he deeply understands and trusts. This concentrated approach reflects his confidence in their long-term potential.
5. He’s patient, holding onto investments for extended periods to capitalize on their growth potential despite short-term market fluctuations. However, Pabrai remains vigilant, monitoring each company’s performance and adjusting his holdings if their circumstances change or the initial investment rationale no longer holds.

Conclusion:

Mohnish Pabrai’s investment journey shows how sticking to value-based investing pays off. He learned from Warren Buffett’s principles and made them his own.