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Anyone have feedback from 9 Sep Pabrai/Dhandho Orange County, CA meeting?


MrB
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Yes, Mohnish talked about alot of things.  You will always learn something and he's very entertaining.

 

- Only about 12% of the fund is now in US stocks. 

- Essentially he is out of GM.  I think he uses the word "mistake" too liberally in relation to his investments. 

- He called GM a mistake, even though it was essentially slightly better than a double. 

- Management didn't realize the full value of the underlying assets, unlike Sergio at Fiat...called Sergio one of the best executives of the last generation/decade.

- Dhandho will be liquidated and cash distributed over the next three years or less.

- Deal for Stonetrust is essentially done...cost $30M and put in $30M, but made $19M in investment gains in the last year.

- Doesn't want anything to do with insurance ever again...he's putting the toothpaste back in the tube!

- Expects about 50% of the cash to be distributed this year and then gradually distribute the rest of the assets over the next couple of years.

- Investors will be left with a stub in the GP for the fund business (not Pabrai Funds...dream on)...I would be happy to buy anyone's stub if they desire to sell!

- Just killing it in the fund...up something like 20%+ in July and August

- Will receive his first incentive fee in 10.25 years...somewhere around $13M!

- For all you guys who talk shit about Mohnish, you have to admit that his fund structure and the way he's run it is more than partner-friendly...how many other managers would have continued running a fund, eating costs of about $800-900K a year, and not get paid for over 10 years!

- Mohnish talked about a ton of other stuff, including answering a bunch of questions from the audience...I can't remember some of it because Ajay was talking to me over and over about the near-comeback by Nebraska!  ;D

 

Always a good meeting!  Cheers!

 

 

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- For all you guys who talk shit about Mohnish, you have to admit that his fund structure and the way he's run it is more than partner-friendly...how many other managers would have continued running a fund, eating costs of about $800-900K a year, and not get paid for over 10 years!

 

 

Hear! Hear!

 

 

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Why was the cost of running a fund $800,000 a year? Is that normal?

 

Sorry, he said it was around $5M at the meeting, so that should say $450,000 per year.  But you have office rent, salaries, benefits, insurance, GP accounting, GP tax returns, GP legal, supplies, internet, phone, cell phones, etc.  Those expenses don't come out of the fund in Mohnish's fund, mine or many others...those are carried by the GP.  Cheers!

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Thanks Sanj. Half a million a year is still a lot of money to come out of someone's pocket. I admire that about him. How many people work for him? Pardon my ignorance but I thought he was more or less one guy and maybe some interns.

 

Pabrai Funds has 5 part-time staff...so just say they make $30,000-$40,000 each, plus rent is probably $15,000-20,000 per month...you're already around $325K-$375K.  Add in the other stuff, and it's actually probably low.  Cheers!

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I would love to hear his post-mortem on GM.  As I understand it, most of his GM position was in the B Warrants, so perhaps with theta decay working against him he decided now was a good time to sell.  Or perhaps he sold purely because he viewed his investment as a "mistake".  I don't see how both GM was a mistake and Fiat was a success. 

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15k-20k for rent? How fancy of an office is he in?

 

He has 5 staff plus himself...you need a small boardroom...small kitchen...storage/filing space...Dhandho staff as well.  Even if he only uses 2,500-3,000 sq ft, multiplied by probably somewhere around $45-60 per square foot in Irvine.  I probably estimated a little on the high side with the $15-20K quote.  Cheers!

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Let me start with I am not a Pabrai hater or anything but doesn't the below somewhat indicate performance hasn't been too stellar until relatively recently:

 

- Will receive his first incentive fee in 10.25 years...somewhere around $13M!

 

Not trying to be harsh just figure he wouldn't wait 10 years for an incentive fee unless there was a reason.

 

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I am really surprised he got out of the Insurance business. I guess the float isn't as sweet as he thought it would be.

 

If you're not already a good insurance operator, it's probably a lot harder to get in than it might seem from the outside. Heavily regulated and very competitive industry. In other words, there's no such thing as a free lunch: You pay for that float one way or another (through hard-won expertise or through a crappy combined ratio that might not show up for years).

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