Mohnish Pabrai Portfolio: Top 3 Stocks

The calendar year 2023 so far has been a bumpy ride for Indian equities.

First, the rout in Adani group stocks dampened investor sentiment which made investors question whether India is at a war.

Second, US Federal Reserve chairman Jerome Powell's latest indication that the terminal rate could be higher than anticipated has made global equity investors nervous. This could mean more pain for equity markets.

Making money in these volatile times is a challenging task.

Fortunately, to outperform the market in these challenging times, a strategy of imitating financial gurus' portfolios is becoming increasingly popular.

The primary idea behind this strategy is to look at the buying and selling activity of the big names in the stock market.

These investing gurus have a successful track record of beating market-like returns and a knack for identifying multibagger stocks. One such guru is Mohnish Pabrai.

Mohnish Pabrai is an Indian American value investor known for spending US$ 650,000 to have lunch with his mentor Warren Buffett.

His investment preference includes low-risk high stocks in a well-established business with minimal downside and sound management.

As per the latest corporate shareholdings filed, Mohnish Pabrai publicly holds three stocks with a net worth of over Rs 11.6 bn.

Please note the source of holdings listed below is from Ace Equity, and it may or may not be a complete list of holdings.

#1 Rain Industries

The first stock on this list is Rain Industries.

Mohnish Pabrai holds an 8.82% stake in the company, or 29 m shares in total as of December 2022, according to the shareholding pattern of Rain industries.

Considering the company's current market price of Rs 162.8 as of 10 March 2023, Mohnish Pabrai's total value in Rain Industries stood at Rs 4.8 billion (bn).

His rationale for buying into the counter?

• In the years that we have owned Rain, I have seen Jagan Reddy (Rain's Managing Director and 40+% shareholder) make one smart decision after another. In fact, I have never seen Jagan make even one dumb decision. He has made very large capital allocation calls over the last 12+ years and they have been flawless. It is a remarkable record. He is a dream manager.

He invested in Rain industries back in 2015. Here's how Pabrai's holding in Rain Industries has varied in recent years.

Quarter Ending	No of Shares	Stake (%)
Mar-21	29,343,458	8.72
Jun-21	14,639,748	4.35
Sep-21	18,855,206	5.6
Dec-21	25,626,173	7.62
Mar-22	26,449,473	7.86
Jun-22	28,224,219	8.39
Sep-22	29,680,000	8.82
Dec-22	29,680,000	8.82

Data Source: BSE

Pabrai was first attracted to Rain Industries because the stock was cheap. He later declared that it was trading at a price to earnings (PE) multiple of 1, putting it in that rare bucket of super cheap value stocks.

Since he bought Rain Industries, the share price has zoomed 422%.

Sadly, Rain Industries is known for its underperformance. Shares of the company are trading down by 57% over the past five years.

Also, in October 2022, Rain Industries' wholly owned subsidiary, Rain Carbon, announced the temporary closure of its European unit. The company is currently mulling other energy-related plans for other European production units.

For the December 2022 quarter, it reported a 35.5% YoY rise in revenue to Rs 54.6 bn. Its net profit for the quarter came in at Rs 895.2 m, up 192.3% from December 2021 quarter.

The rise in revenue was mainly driven by market quotations, higher volumes on account of the timing of shipments and increased raw material prices and operating costs.

Going forward, it plans to increase its reach in the international market and diversify its portfolio in other raw materials.

#2 Edelweiss Financial services

The second company on this list is Edelweiss Financial Services.

According to the latest shareholding pattern of Edelweiss Financial Services, Mohnish Pabrai holds a 6.72% stake or 63 m shares of the total equity.

Considering the company's current market price of Rs 58.2 as of 10 March 2023, Mohnish Pabrai's total value in Edelweiss Financial services stands at Rs 3.7 bn.

Here's how Pabrai 's holding in Edelweiss Financial Services has varied since March 2019.

Quarter Ending	No of Shares	stake (%)
Mar-19	10,752,000	1.15
Jun-19	10,752,000	1.15
Sep-19	12,724,000	1.36
Dec-19	10,430,793	1.12
Mar-20	13,106,000	1.4
Jun-20	13,106,000	1.4
Sep-20	38,405,159	4.11
Dec-20	61,374,866	6.56
Mar-21	56,131,124	6
Jun-21	45,789,000	4.89
Sep-21	58,703,028	6.26
Dec-21	60,606,000	6.43
Mar-22	60,606,000	6.43
Jun-22	60,606,000	6.43
Sep-22	60,606,000	6.43
Dec-22	63,379,028	6.72

Data Source: BSE

The value of his stake came down drastically when NBFC stocks sank like stones during the IL&FS liquidity crisis in 2019.

After his investment in the company, the shares have eroded over 60% of his investment.

He has increased his stake from 1.2% in March 2019 to 6.72% in December 2022.

Even after falling profit, his bet in the company can be explained as he is known to grab stocks when they are quoting at rock-bottom valuations.

For the December 2022 quarter, Edelweiss Financial services reported 13.5% YoY growth in the revenue at Rs 21.4 bn, while net profit rose by 42.7% to Rs 1 bn.

This profit growth was due to an increase in net interest income.

For the financial year 2023, the company is planning to ram up the revenue of the firm by increasing the investment quality of the firm.

#3 Sunteck Realty

The third stock on this list is Sunteck Realty.

Mohnish Pabrai holds a 6.68% stake in the company or 9.8 million (m) shares of Sunteck Realty as of December 2022, according to the shareholding pattern of Sunteck Realty.

Considering the company's current market price of Rs 304.3 as of 10 March 2023, Mohnish Pabrai's total value in Sunteck Realty comes to around Rs 2.9 bn.

Here's how his holding has varied since March 2017.

Quarter Ending	No of Shares	stake (%)
Mar-17	1,074,221	1.71
Jun-17	1,074,221	1.71
Sep-17	3,382,850	2.69
Dec-17	12,187,985	8.33
Mar-18	10,218,013	8.35
Jun-18	12,324,458	8.42
Sep-18	12,441,508	8.5
Dec-18	12,470,471	8.52
Mar-19	12,470,471	8.52
Jun-19	12,470,471	8.52
Sep-19	12,470,471	8.52
Dec-19	12,470,471	8.52
Mar-20	12,470,471	8.52
Jun-20	12,470,471	8.52
Sep-20	12,470,471	8.52
Dec-20	13,347,509	9.12
Mar-21	13,169,067	8.99
Jun-21	9,781,736	6.68
Sep-21	9,781,736	6.68
Dec-21	9,781,736	6.68
Mar-22	9,781,736	6.68
Jun-22	9,781,736	6.68
Sep-22	9,781,736	6.68
Dec-22	9,781,736	6.68

Data Source: BSE

Since his investment in December 2021, shares of the company have rallied over 118%.

He has increased his stake from 1.7% in March 2019 to 6.68% in December 2022.

This can be due to real estate cycle picking uptrend since 2016, until the end of the first wave of the pandemic.

The pandemic was in fact a savior for this ailing real estate industry. It led to a paradigm shift in home buyers' attitudes and reinstated the importance of owning homes.

For the December 2022 quarter, it reported a 30.3% YoY decline in revenue to Rs 893.3 m. Its net profit for the quarter came in at Rs 111.1 m, down 81.4% YoY, due to rising interest rates.

This is because the interest rise has also increased the interest rates on housing loans, making them costlier for the borrower, reducing the affordability of purchasing the house, and creating a liquidity crunch in the market.

For the upcoming quarters, the company is planning to launch the towers at Sunteck OneWorld and 4th Avenue SunteckCity.

However, the sector is also set to benefit from government initiatives of Housing for All, the introduction of RERA to increase transparency and instil home buyers' confidence.

For more details about the company, you can have a look at Sunteck Realty's fact sheet.

So, there you go. These were the three shares held by Mohnish Pabrai as per the shareholding data filed with the exchanges.

Recently we also wrote to you about Vijay Kedia Portfolio top 5 stocks and Mukul Agrawal Portfolio: Top 5 stocks.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...