Mohnish Pabrai blog

[rranjan]

Not bad:

 

http://www.valuewalk.com/2018/01/pabrai-funds-returns/

 

I wonder how close this gets him to his 26% goal?

 

By the way, does anyone have his letter they'd share?

 

OMG, how can they write such a shoddy article!  It says from oct 2003-2018 the s&p500 returned 250% cumulative. Which makes the funds 310% look great over the same period. I punched in the number and that sounds about right. BUT the S&P500 TR returned 340%, comon, you cannot compare a fund against an index without dividends.

 

I think the debate had been going on for a while that Pabrai's funds have not beaten the markets if you strip out those years when it was a $2M fund.  And it sure as heck seems like to me that more likely than not, his fund will lag the S&P500 tr in the future.

 

I mean the fund is like VIX on drugs.  The 3 highest years when the index was up, he trounced the index. The 3 lowest years for the index he lagged.  I think he forgot the meaning of the word hedge.

 

The basic premise of Buffett & Munger's beliefs is that volatility is not the same thing as risk. 

 

I think the first time Pabrai got trounced in 2008, you could have equated the volatility with risk, because there was significant exposure to correlated risks in financials.  The second time the fund suffered, I don't think you could make the same correlation...it was just undervalued and he took a hit with one stock.

 

So while the opinion always seems to still be out on Pabrai, I would not be surprised to see him out of the fund business in less than 10 years.  At that point, his own personal stake would have climbed from the present $120M or so to $350M-500M.  He may just decide that he wants to travel the lecture circuit and manage his own money. 

 

Nothing Pabrai said to me...but after 25 years of results, those that think you are an asshole and a fraud will still think that!

 

Cheers!

 

Is there any difference between 120M and 360M if you take account of his lifestyle? I don't think it makes any difference.

[shalab]

You are saying he should close his fund now  ;D. Seriously, I think he should invest in PDH (equity injection) and then retire.

 

Not bad:

 

http://www.valuewalk.com/2018/01/pabrai-funds-returns/

 

I wonder how close this gets him to his 26% goal?

 

By the way, does anyone have his letter they'd share?

 

OMG, how can they write such a shoddy article!  It says from oct 2003-2018 the s&p500 returned 250% cumulative. Which makes the funds 310% look great over the same period. I punched in the number and that sounds about right. BUT the S&P500 TR returned 340%, comon, you cannot compare a fund against an index without dividends.

 

I think the debate had been going on for a while that Pabrai's funds have not beaten the markets if you strip out those years when it was a $2M fund.  And it sure as heck seems like to me that more likely than not, his fund will lag the S&P500 tr in the future.

 

I mean the fund is like VIX on drugs.  The 3 highest years when the index was up, he trounced the index. The 3 lowest years for the index he lagged.  I think he forgot the meaning of the word hedge.

 

The basic premise of Buffett & Munger's beliefs is that volatility is not the same thing as risk. 

 

I think the first time Pabrai got trounced in 2008, you could have equated the volatility with risk, because there was significant exposure to correlated risks in financials.  The second time the fund suffered, I don't think you could make the same correlation...it was just undervalued and he took a hit with one stock.

 

So while the opinion always seems to still be out on Pabrai, I would not be surprised to see him out of the fund business in less than 10 years.  At that point, his own personal stake would have climbed from the present $120M or so to $350M-500M.  He may just decide that he wants to travel the lecture circuit and manage his own money. 

 

Nothing Pabrai said to me...but after 25 years of results, those that think you are an asshole and a fraud will still think that!

 

Cheers!

 

Is there any difference between 120M and 360M if you take account of his lifestyle? I don't think it makes any difference.

[Parsad]

Not bad:

 

http://www.valuewalk.com/2018/01/pabrai-funds-returns/

 

I wonder how close this gets him to his 26% goal?

 

By the way, does anyone have his letter they'd share?

 

OMG, how can they write such a shoddy article!  It says from oct 2003-2018 the s&p500 returned 250% cumulative. Which makes the funds 310% look great over the same period. I punched in the number and that sounds about right. BUT the S&P500 TR returned 340%, comon, you cannot compare a fund against an index without dividends.

 

I think the debate had been going on for a while that Pabrai's funds have not beaten the markets if you strip out those years when it was a $2M fund.  And it sure as heck seems like to me that more likely than not, his fund will lag the S&P500 tr in the future.

 

I mean the fund is like VIX on drugs.  The 3 highest years when the index was up, he trounced the index. The 3 lowest years for the index he lagged.  I think he forgot the meaning of the word hedge.

 

The basic premise of Buffett & Munger's beliefs is that volatility is not the same thing as risk. 

 

I think the first time Pabrai got trounced in 2008, you could have equated the volatility with risk, because there was significant exposure to correlated risks in financials.  The second time the fund suffered, I don't think you could make the same correlation...it was just undervalued and he took a hit with one stock.

 

So while the opinion always seems to still be out on Pabrai, I would not be surprised to see him out of the fund business in less than 10 years.  At that point, his own personal stake would have climbed from the present $120M or so to $350M-500M.  He may just decide that he wants to travel the lecture circuit and manage his own money. 

 

Nothing Pabrai said to me...but after 25 years of results, those that think you are an asshole and a fraud will still think that!

 

Cheers!

 

Is there any difference between 120M and 360M if you take account of his lifestyle? I don't think it makes any difference.

 

I was just being facetious.  Mohnish is not the type to retire, and he likes to face challenges head on, so it's unlikely he'll close Pabrai Funds permanently.

 

Plus pulling in the type of quarterly fees he is getting now that he's back at his high watermark is pretty good incentive to keep going a while longer!  ;D  Cheers!

[oddballstocks]

The criticism on the returns minus the first years is warranted.  Him trumpeting those returns is slimy.

 

That said I applaud him for two reasons:

 

1) The Japan net-nets trade.  He mentioned this in a video in 2011, I did it, it paid for the down payment on the house I'm in now.  He gave up quickly, but the trade worked for those who stuck with it.

2) He gave some talk on marketing.  The guy is a VERY good marketer, can probably sell ice to eskimos.  I purchased the books he mentioned.  That launched me on a journey to learn marketing and sales.  And that's still paying dividends years later.  Arguably it could be the best thing for me because it got me to dive into the business process more.  I turned a hobby into a real business. 

 

Parsad.  He should take your advice.  Shut down, enjoy investing on his own.  I don't know how any of you have investors, seems like the biggest pain in the world.  Why deal with that hassle?  They never seem happy. 

 

[Parsad]

"The criticism on the returns minus the first years is warranted.  Him trumpeting those returns is slimy."

 

Being selective creates its own issues.  At least what Mohnish is presenting are the bald facts from day one...not sure how anyone can argue with that.  If he takes the lumps on the bad years, then he should get the benefit of the doubt on the good years.  Cheers!

[netnet]

interestingly enough, it looks as if Pabrai's automated 'free lunch' portfolio, as recounted in Forbes

https://www.forbes.com/sites/janetnovack/2017/12/15/the-free-lunch-15-stock-portfolio/#533416406b38

beat his own portfolio (after fees) in back testing.

[oddballstocks]

"The criticism on the returns minus the first years is warranted.  Him trumpeting those returns is slimy."

 

Being selective creates its own issues.  At least what Mohnish is presenting are the bald facts from day one...not sure how anyone can argue with that.  If he takes the lumps on the bad years, then he should get the benefit of the doubt on the good years.  Cheers!

 

I think the issue is you couldn't invest in that portfolio as an outside investor.  It was his own capital.

 

This is no different from the fund managers who disappear when returns are bad and reappear when returns are good.  I have a slew of letters where selective years are missing.  To Pabrai's credit he does include everything.  There is one lauded value investor who just suddenly stopped including a really bad year.  Stuff like that is terrible.  So what, we have good and bad years, but don't try to hide it. 

[Parsad]

"The criticism on the returns minus the first years is warranted.  Him trumpeting those returns is slimy."

 

Being selective creates its own issues.  At least what Mohnish is presenting are the bald facts from day one...not sure how anyone can argue with that.  If he takes the lumps on the bad years, then he should get the benefit of the doubt on the good years.  Cheers!

 

I think the issue is you couldn't invest in that portfolio as an outside investor.  It was his own capital.

 

This is no different from the fund managers who disappear when returns are bad and reappear when returns are good.  I have a slew of letters where selective years are missing.  To Pabrai's credit he does include everything.  There is one lauded value investor who just suddenly stopped including a really bad year.  Stuff like that is terrible.  So what, we have good and bad years, but don't try to hide it.

 

I agree with you that alot of crap is passed off as results and investment manager memories are very selective.

 

But in Pabrai's case, you could easily argue that PIF3 has similar long-term results as PIF2 (which amalgamated with PIF1), and PIF3 didn't benefit from that first year.  Do we now negate the results in PIF3?

 

And even if people are put off by Pabrai's showmanship and marketing, you have to give credit where it's due in terms of sticking with his methodology after two periods where most hedge fund managers would have bailed or started a new fund...after only one such event.  This guy stuck with it twice now!

 

Cheers!

[investmd]

PIF3 returned 109% in 2017! The fund doesn't hold a single N.American based company! Wow.

 

As shown very nicely in a recent post by Recemize analyzing top Value Investors, the best of the best money managers can average 15%/yr over long periods of time. Pabrai is not at his goal 25% return/yr, but he is at 15%/yr. Select company.

 

 

"The criticism on the returns minus the first years is warranted.  Him trumpeting those returns is slimy."

 

Being selective creates its own issues.  At least what Mohnish is presenting are the bald facts from day one...not sure how anyone can argue with that.  If he takes the lumps on the bad years, then he should get the benefit of the doubt on the good years.  Cheers!

 

I think the issue is you couldn't invest in that portfolio as an outside investor.  It was his own capital.

 

This is no different from the fund managers who disappear when returns are bad and reappear when returns are good.  I have a slew of letters where selective years are missing.  To Pabrai's credit he does include everything.  There is one lauded value investor who just suddenly stopped including a really bad year.  Stuff like that is terrible.  So what, we have good and bad years, but don't try to hide it.

 

I agree with you that alot of crap is passed off as results and investment manager memories are very selective.

 

But in Pabrai's case, you could easily argue that PIF3 has similar long-term results as PIF2 (which amalgamated with PIF1), and PIF3 didn't benefit from that first year.  Do we now negate the results in PIF3?

 

And even if people are put off by Pabrai's showmanship and marketing, you have to give credit where it's due in terms of sticking with his methodology after two periods where most hedge fund managers would have bailed or started a new fund...after only one such event.  This guy stuck with it twice now!

 

Cheers!

[Compounder]

I purchased the books he mentioned.  That launched me on a journey to learn marketing and sales.  And that's still paying dividends years later.  Arguably it could be the best thing for me because it got me to dive into the business process more.  I turned a hobby into a real business. 

 

 

What were the books he mentioned please? Cheers.

[rukawa]

New article from Pabrai on spinoffs: https://www.forbes.com/sites/janetnovack/2017/11/21/spin-gold-from-spinoffs-a-portfolio-of-5-castoffs-trounces-the-sp-500/#70df6d483e44

 

I wonder how much performance from spinoffs is due to them being smaller cap. I would guess like at least 3-4% of the outperformance.

[CorpRaider]

I didn't think small caps have outperformed, at least as a factor, basically, since the paper identifying the proposed factor was published.

[randomep]

 

Does anybody have updated Pabrai funds results for 2018?

 

thanks

[Tim Eriksen]

 

Does anybody have updated Pabrai funds results for 2018?

 

thanks

 

I don't think they are out yet.  The nine month results someone passed on to me were not good.  PIF2 -26.4%, PIF 3 -32.8% and PIF4 -10.5%.  Rain Industries continued to fall in Q4 from 166 to 134.  It is currently at 116.75. 

[randomep]

 

Does anybody have updated Pabrai funds results for 2018?

 

thanks

 

I don't think they are out yet.  The nine month results someone passed on to me were not good.  PIF2 -26.4%, PIF 3 -32.8% and PIF4 -10.5%.  Rain Industries continued to fall in Q4 from 166 to 134.  It is currently at 116.75.

 

Well can you (or anyone else) please post them results as soon as them become available?

 

I am investigating whether this and other hedge funds are magnifying returns both on the upside and downside. So far it seems to be so for Pabrai's funds.

 

 

[investmd]

Randomep, I'm not clear what you mean by "magnifying results" ? Are you concerned that results are falsified? both on upside and downside? To what purpose? Surely, you don't mean to cheat investors?

Jehangir

 

 

 

Does anybody have updated Pabrai funds results for 2018?

 

thanks

 

I don't think they are out yet.  The nine month results someone passed on to me were not good.  PIF2 -26.4%, PIF 3 -32.8% and PIF4 -10.5%.  Rain Industries continued to fall in Q4 from 166 to 134.  It is currently at 116.75.

 

Well can you (or anyone else) please post them results as soon as them become available?

 

I am investigating whether this and other hedge funds are magnifying returns both on the upside and downside. So far it seems to be so for Pabrai's funds.

[SHDL]

I think what randomep means is "high beta" (to use the technical term).  The idea is, if, for example, the market does +10%, -5%, +3%, +4% over 4 years and you do +30%, -15%, +9%, +12% then your portfolio has a beta of 3 which is considered "high" - your portfolio is basically "amplifying" the market's return by a factor of 3 both on the upside and on the downside.

 

Finance academics used to (I don’t know if they still do) teach this notion that such portfolios aren’t adding any value because they’re just taking more risk. That’s ridiculous IMO but anyway.

[randomep]

 

Finance academics used to (I don’t know if they still do) teach this notion that such portfolios aren’t adding any value because they’re just taking more risk. That’s ridiculous IMO but anyway.

 

yaya, that's what I meant.... btw why is the above statement ridiculous

[SHDL]

 

Finance academics used to (I don’t know if they still do) teach this notion that such portfolios aren’t adding any value because they’re just taking more risk. That’s ridiculous IMO but anyway.

 

yaya, that's what I meant.... btw why is the above statement ridiculous

 

Great. :)

 

As to why I don't see high beta portfolios as worthless:

 

Well, for one thing, if the S&P does 10% per year on average over a few decades and in the meantime I do 20% per year on average by running a high beta portfolio, I’m inclined to think that I’ve done pretty well for myself.  Yes I may have experienced greater volatility in the interim but so what?  This is my portfolio and I don’t see volatility as a problem, in fact I actually like it because it creates nice opportunities to add more funds to the portfolio from time to time. 

 

Also, another way of looking at this is, let’s say I want to construct a portfolio with beta=2 from scratch.  Can I do it for free?  Of course not.  Sure, I could buy the SPY with leverage but leverage costs money — especially if I want to make it non-recourse.  Not to mention the huge blow up risk I’d be taking by doing so. 

[Jurgis]

 

Finance academics used to (I don’t know if they still do) teach this notion that such portfolios aren’t adding any value because they’re just taking more risk. That’s ridiculous IMO but anyway.

 

yaya, that's what I meant.... btw why is the above statement ridiculous

 

Great. :)

 

As to why I don't see high beta portfolios as worthless:

 

Well, for one thing, if the S&P does 10% per year on average over a few decades and in the meantime I do 20% per year on average by running a high beta portfolio, I’m inclined to think that I’ve done pretty well for myself.  Yes I may have experienced greater volatility in the interim but so what?  This is my portfolio and I don’t see volatility as a problem, in fact I actually like it because it creates nice opportunities to add more funds to the portfolio from time to time. 

 

Also, another way of looking at this is, let’s say I want to construct a portfolio with beta=2 from scratch.  Can I do it for free?  Of course not.  Sure, I could buy the SPY with leverage but leverage costs money — especially if I want to make it non-recourse.  Not to mention the huge blow up risk I’d be taking by doing so.

 

But beta by itself is worthless, yes? You want high alpha. You are fine with tolerating high beta perhaps, but saying that high beta is somehow better than low beta is also not true. You could have high beta and zero or negative alpha. And you don't want that.

[SHDL]

But beta by itself is worthless, yes? You want high alpha. You are fine with tolerating high beta perhaps, but saying that high beta is somehow better than low beta is also not true. You could have high beta and zero or negative alpha. And you don't want that.

 

There’s some trickiness here. 

 

For example if you take the S&P’s annual excess returns over the last 5 years and just multiply them by 2, you have the excess returns of a hypothetical portfolio with alpha=0 and beta=2.  And that portfolio would have nicely outperformed the S&P despite the fact that it has no alpha.

 

That being said, you’re right that high beta is not always better than low beta.  Obviously you only want high beta when the market is going up.  8)

[Jurgis]

But beta by itself is worthless, yes? You want high alpha. You are fine with tolerating high beta perhaps, but saying that high beta is somehow better than low beta is also not true. You could have high beta and zero or negative alpha. And you don't want that.

 

There’s some trickiness here. 

 

For example if you take the S&P’s annual returns over the last 5 years and just multiply them by 2, you have the returns of a hypothetical portfolio with alpha=0 and beta=2.  And that portfolio nicely outperformed the S&P despite the fact that it has no alpha.

 

That being said, you’re right that high beta is not always better than low beta.  Obviously you only want high beta when the market is going up.  8)

 

Ah, yes, nevermind you are right, I did not think about what you call "trickiness".  8)

[Tim Eriksen]

 

Does anybody have updated Pabrai funds results for 2018?

 

thanks

 

I don't think they are out yet.  The nine month results someone passed on to me were not good.  PIF2 -26.4%, PIF 3 -32.8% and PIF4 -10.5%.  Rain Industries continued to fall in Q4 from 166 to 134.  It is currently at 116.75.

 

For 2018: PIF2 -35.3%.  PIF3 -41.9%.  PIF4 -22.8%. 

 

PIF2 Annualized return since October 2000 is 12.3%.  S&P500 is 5.1%.

PIF3 Annualized return since February 2002 is 10.2%  S&P500 is 7.0%

PIF4 Annualized return since October 2003 is 7.8%  S&P500 is 8.4%. 

[stahleyp]

Dang. I'm not necessarily trying to bash Pabrai here (especially since he might return like 80% this year or something) but over 15 years he's under performed before taxes - at least PIF4. I'd imagine that PIF2 and PIF3 have a similar stories. The only out performance it looks like is when every other value manager also outperformed in the 2000-2007 range. But, he's way richer than I am so who am I to say anything.

 

He's not anywhere close to his "compound by 26%" mantra.

[Tim Eriksen]

For 2019 first half: PIF2 3.8%.  PIF3 2.2%.  PIF4 14.6%.  S&P 500 was 18.5%, NASDAQ 21.3%.

 

PIF2 Annualized return since October 2000 is 12.2%.  S&P 500 is 6.0%, NASDAQ 5.3%.

PIF3 Annualized return since February 2002 is 10.0%  S&P 500 is 7.8%, NASDAQ 9.7%

PIF4 Annualized return since October 2003 is 8.5%  S&P 500 is 9.3%, NASDAQ 11.3%.

 

quote from the letter "These last twenty years have been filled with tremendous learning and fun. I have taken plenty of arrows in the back. Made a zillion mistakes. I can honestly say that today I am at the top of my game. I am the best I have ever been as an investor."