This post is part of our series on hedge fund portfolio tracking. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.
Next up in our series is Mohnish Pabrai and his Pabrai Investment Fund. Yesterday we kicked off our series by examining the portfolio of Seth Klarman's hedge fund Baupost Group and today we're focused on another value oriented fund. Pabrai's Investment Funds had a rough 2008 but rebounded well in 2009. His PIF2 finished up 122.5%, PIF3 up 125%, and PIF4 up 118.8% as noted in our 2009 hedge fund performance numbers post. In the past, we've also posted up Pabrai's third quarter investor letter where you can read his insight.
Pabrai is unique in that he has structured his fund similarly to the early Warren Buffett partnerships. Typical hedge funds charge a flat 2% management fee on assets and then a 20% performance fee incentive on top of that. Pabrai on the other hand charges no management fee and then no incentive fee until the fund reaches 6%+. After that threshold is reached, they can then charge a 25% incentive fee. So, his interests are aligned with the fund as he does not make money until investors do. Pabrai will be speaking at the upcoming Value Investing Congress along with numerous other hedge fund managers and Market Folly readers can save 33% with discount code P10MF6.
The positions listed below were their long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.
Brand New Positions
Fairfax Financial (FRFHF): Increased by 17.2%
Cresud SACIFYA (CRESY): Increased by 5.3%
Potash (POT): Increased by 4.45%
Pinnacle Airlines (PNCL): Reduced by 4.9%
Berkshire Hathaway (BRK.B): Reduced by 1.54%
Harvest Natural Resources (HNR): Reduced by 1%
Removed Positions (Sold out completely):
Top 15 Holdings by percentage of assets reported on 13F filing
- Potash (POT): 11.46%
- Teck Cominco (TCK): 10.98%
- Harvest Natural Resources (HNR): 9.23%
- Brookfield Properties (BPO): 8.91%
- Fairfax Financial (FRFHF): 8.82%
- Cresud SACIFYA (CRESY): 7.73%
- Berkshire Hathaway (BRK.B): 6.56%
- Leucadia National (LUK): 5.87%
- Goldman Sachs (GS): 5.84%
- Horsehead Holding (ZINC): 5.40%
- Air Transport Services (ATSG): 4.44%
- Pinnacle Airlines (PNCL): 4.31%
- Capitalsource (CSE): 3.49%
- Terex (TEX): 3.28%
- Wells Fargo (WFC): 3.15%
As you can see, there's really not much turnover in Pabrai's portfolio and that is to be expected given his long-term investment timeframe and Buffett-esque value focus. The most notable activity in his portfolio would be the addition of Capitalsource (CSE) equity. As we detailed yesterday, Seth Klarman's Baupost Group is also fond of CSE.
Some other facts worth noting here: Mohnish Pabrai's top three holdings all represent natural resources and energy and represent a decent chunk of his portfolio. His investment in Harvest Natural Resources is a 16.9% stake in the company. Secondly, Pabrai's exposure to Pinnacle Airlines represents a 11.3% ownership stake in the company. However, that figure included a very small position in call options that were set to expire on January 15th, 2010 with an exercise price of $20 per share. Obviously, those options have already expired, but since this 13F filing details positions as of December 31st, 2009 we won't see what happened with those options until a future disclosure.
For more insight from Pabrai, check his investment ideas out at the upcoming Value Investing Congress with a 33% discount here (code P10MF6). Assets from the collective holdings reported to the SEC via 13F filing were $320.5 million this quarter compared to $322.9 million last quarter. Remember that these filings are not representative of the hedge fund's entire base of assets under management. Therefore, the figures above represent the percentage of their reported 13F assets, not their entire portfolio.
We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group so check back daily for our updates.