Dhandho Holdings!

[Guest]

I think folks turned on him due to ZINC. They did what he said (follow gurus) and got burned. Personally, I think it's a little grey that he talks about "compounding at 26%" in video presentations or on his blog...yet doesn't come anywhere close to that.  I don't see how anyone can't say that part is at least a little misleading.

[racemize]

I think it is a lot of things.  What I personally find confusing is how much everyone likes to bash performance--almost every famous value investor's (and a ton of non-famous one's too) record sucks right now. If everyone were doing hunky dory and Pabrai was lagging, ok, but they are all in the tank.

[CorpRaider]

Yeah and also most of the value tilted indexes and even the academic factor (I believe) have been sucking wind. 

[investmd]

I think folks turned on him due to ZINC. They did what he said (follow gurus) and got burned. Personally, I think it's a little grey that he talks about "compounding at 26%" in video presentations or on his blog...yet doesn't come anywhere close to that.  I don't see how anyone can't say that part is at least a little misleading.

 

Regarding being misleading, isn't the 26% compounding his goal? It's good to aim for something tangible. He has NOT achieved it, but could it still not be a goal?

[augustabound]

I think folks turned on him due to ZINC. They did what he said (follow gurus) and got burned. Personally, I think it's a little grey that he talks about "compounding at 26%" in video presentations or on his blog...yet doesn't come anywhere close to that.  I don't see how anyone can't say that part is at least a little misleading.

 

Regarding being misleading, isn't the 26% compounding his goal? It's good to aim for something tangible. He has NOT achieved it, but could it still not be a goal?

 

Yes.

 

Pabrai set out to play what he called a “30 year game“. Specifically,  he decided he wanted to compound his $1 million at 26% per year for 30 years (he chose that number because that’s about what Buffett was doing and 26% per year doubles every 3 years).

 

(From basehitinvesting.com blog)

http://basehitinvesting.com/mohnish-pabrai-lecture-at-columbia-university-my-notes/

[Vish_ram]

It is not just Zinc, it is CRYP, HNR, Delta financial ... the list goes on and on. If I spend 10 minutes, I can come up with dozen stocks that he touched and went to literally 0.

 

What irks me is that, he is like the mouse that has learnt to roar like a lion (Buffett) and has no killing to show for it. He constantly cites Buffett, quotes compounding. He has a Madoff like Chutzpah given his track record.

 

He is exploiting the flaw in which compounding is measured. You setup few funds with small amounts, and take infinite risks in first two years. Some will collapse. Some will return triple digits. You close the collapsed funds. Then highlight the early triple digit returning funds to investors and start gathering funds. You underperform major indices when you add new $. But with the way compounding is shown (the growth of $1 since inception), you still show admirable returns. You then go out and keep marketing showing the incredible returns of the first $1 that walked in.

 

No one remembers the closed funds. You can underperform major indices for 30 years, but still the first $1 compounding will show outperformance. Foolish investors are too dumb to realize that. Then you go out and give talks about compounding of that first $1.

[abyli]

It is not just Zinc, it is CRYP, HNR, Delta financial ... the list goes on and on. If I spend 10 minutes, I can come up with dozen stocks that he touched and went to literally 0.

 

What irks me is that, he is like the mouse that has learnt to roar like a lion (Buffett) and has no killing to show for it. He constantly cites Buffett, quotes compounding. He has a Madoff like Chutzpah given his track record.

 

He is exploiting the flaw in which compounding is measured. You setup few funds with small amounts, and take infinite risks in first two years. Some will collapse. Some will return triple digits. You close the collapsed funds. Then highlight the early triple digit returning funds to investors and start gathering funds. You underperform major indices when you add new $. But with the way compounding is shown (the growth of $1 since inception), you still show admirable returns. You then go out and keep marketing showing the incredible returns of the first $1 that walked in.

 

No one remembers the closed funds. You can underperform major indices for 30 years, but still the first $1 compounding will show outperformance. Foolish investors are too dumb to realize that. Then you go out and give talks about compounding of that first $1.

 

Nice summary!

[tylerdurden]

I just watched his latest Google talk last week. It seems he now admits he might not be able to get the desired returns from GM investment. A couple of months ago he was the biggest promoter of auto stocks on Barron's. Of course anyone can change his mind but if you are constantly in "marketing" mode when you change views suddenly, it looks a little bit insincere to me. Also investing in warrants is not an easy path. What if China slows significantly next year because of this deleveraging thing going on there? What happens to GM warrants? Well, he was promoting investing into warrants big time in that article too :-)

 

I am not a big fan of Guy Spier either but at the least he seems to have more consistency. He sticks with investments much longer like SRG and banks etc. Mohnish had one strike with ZINC recently so of course he will go nuts about another strike because of a potential Sears bankruptcy... Being a fund manager and a salesman at the same time is tough business...

[Guest longinvestor]

It is not just Zinc, it is CRYP, HNR, Delta financial ... the list goes on and on. If I spend 10 minutes, I can come up with dozen stocks that he touched and went to literally 0.

 

What irks me is that, he is like the mouse that has learnt to roar like a lion (Buffett) and has no killing to show for it. He constantly cites Buffett, quotes compounding. He has a Madoff like Chutzpah given his track record.

 

He is exploiting the flaw in which compounding is measured. You setup few funds with small amounts, and take infinite risks in first two years. Some will collapse. Some will return triple digits. You close the collapsed funds. Then highlight the early triple digit returning funds to investors and start gathering funds. You underperform major indices when you add new $. But with the way compounding is shown (the growth of $1 since inception), you still show admirable returns. You then go out and keep marketing showing the incredible returns of the first $1 that walked in.

 

No one remembers the closed funds. You can underperform major indices for 30 years, but still the first $1 compounding will show outperformance. Foolish investors are too dumb to realize that. Then you go out and give talks about compounding of that first $1.

 

Nice summary!

 

+1.  No particular bone to pick with Pabrai but he's the archetype of the helpers Buffett talks about. More marketing versus investing skills. Also this idea of "what's wrong with having very high goals?". Yeah right, try telling your potential investors that you aim to beat the index by modest amounts. Even they are eating crow. I remember distinctly Longleaf stating their goal of index+10%.

 

So, my money saving tip I've developed is not put any money with those who state a large outperformance goal.

[racemize]

This is actually not a nice summary.  I'd like to see the dozen stocks.  I think you missed Budget bonds, which he didn't invest in, but got most of the ones and then claimed it was just the beginning.

 

Also, he's never closed a fund, so it is rather disingenuous to solely describe him and then mentioning closed funds.

 

I also refer to my previous post on this topic, which does not seem to be recognized:

Ok, so the theme seems to currently be that Pabrai's returns aren't any good since he got a lot of money.  Let's examine that a little bit.

 

In 2003 he had 50 million AUM.

In 2004 he had 145 million AUM. 

 

I'd say at least one of those years starts counting as "a lot of money".

 

Here are the rolling 5 year statistics for Pif2 from that point on:

60% of rolling 5 year returns are greater than the S&P 500 from 2003

55.6% of rolling 5 year returns are greater than the S&P 500 from 2004

 

Interestingly, there are only 4 rolling 5 year periods that are negative, and 3 of them are in the last 3 years.  So, I think it is pretty clear that this underperformance that everyone is referring to is just from the last few years, just like most other value funds out there.

 

The Pif3 returns are fairly similar.  Pif4, for some reason, just kind of sucks.  It has performed worse than the other funds in the same periods fairly consistently.

 

As I mentioned earlier, all the big value guys are sucking right now.  Why single him out so hard?

 

Also, he's not the same as the "helpers" Buffett is talking about--Buffett singles out 2/20 and fund of funds.  Pabrai is 25% over 6%, just like Buffett was, and has not paid himself for years at a time.

 

I sincerely hope you guys never screw up and have someone judge you as harshly as you are doing Pabrai right now...

[skanjete]

Apparently sentiment about other investors is as volatile as general market sentiment...

 

Maybe it's time to look a little closer at Pabrai's investments?

[Vish_ram]

This is actually not a nice summary.  I'd like to see the dozen stocks.  I think you missed Budget bonds, which he didn't invest in, but got most of the ones and then claimed it was just the beginning.

 

Also, he's never closed a fund, so it is rather disingenuous to solely describe him and then mentioning closed funds.

 

I also refer to my previous post on this topic, which does not seem to be recognized:

Ok, so the theme seems to currently be that Pabrai's returns aren't any good since he got a lot of money.  Let's examine that a little bit.

 

In 2003 he had 50 million AUM.

In 2004 he had 145 million AUM. 

 

I'd say at least one of those years starts counting as "a lot of money".

 

Here are the rolling 5 year statistics for Pif2 from that point on:

60% of rolling 5 year returns are greater than the S&P 500 from 2003

55.6% of rolling 5 year returns are greater than the S&P 500 from 2004

 

Interestingly, there are only 4 rolling 5 year periods that are negative, and 3 of them are in the last 3 years.  So, I think it is pretty clear that this underperformance that everyone is referring to is just from the last few years, just like most other value funds out there.

 

The Pif3 returns are fairly similar.  Pif4, for some reason, just kind of sucks.  It has performed worse than the other funds in the same periods fairly consistently.

 

As I mentioned earlier, all the big value guys are sucking right now.  Why single him out so hard?

 

Also, he's not the same as the "helpers" Buffett is talking about--Buffett singles out 2/20 and fund of funds.  Pabrai is 25% over 6%, just like Buffett was, and has not paid himself for years at a time.

 

I sincerely hope you guys never screw up and have someone judge you as harshly as you are doing Pabrai right now...

 

 

The dozen:

 

Delta financial

HNR

CRYP

Pinnacle airlines

Horsehead (zinc)

Compucredit

Universal alloy

Lear

International coal

Big drops - bioscript (chronimed), Sears holdings, Cresud

 

[shalab]

That includes folks like Watsa also - he still says in his annual letters that the goal is to get 15 percent annualized return. This hasn't been the case since 2010. No one seems to question that - if Buffett did it, there would have been many critical articles about him in this board and the general press.

 

 

It is not just Zinc, it is CRYP, HNR, Delta financial ... the list goes on and on. If I spend 10 minutes, I can come up with dozen stocks that he touched and went to literally 0.

 

What irks me is that, he is like the mouse that has learnt to roar like a lion (Buffett) and has no killing to show for it. He constantly cites Buffett, quotes compounding. He has a Madoff like Chutzpah given his track record.

 

He is exploiting the flaw in which compounding is measured. You setup few funds with small amounts, and take infinite risks in first two years. Some will collapse. Some will return triple digits. You close the collapsed funds. Then highlight the early triple digit returning funds to investors and start gathering funds. You underperform major indices when you add new $. But with the way compounding is shown (the growth of $1 since inception), you still show admirable returns. You then go out and keep marketing showing the incredible returns of the first $1 that walked in.

 

No one remembers the closed funds. You can underperform major indices for 30 years, but still the first $1 compounding will show outperformance. Foolish investors are too dumb to realize that. Then you go out and give talks about compounding of that first $1.

 

Nice summary!

 

+1.  No particular bone to pick with Pabrai but he's the archetype of the helpers Buffett talks about. More marketing versus investing skills. Also this idea of "what's wrong with having very high goals?". Yeah right, try telling your potential investors that you aim to beat the index by modest amounts. Even they are eating crow. I remember distinctly Longleaf stating their goal of index+10%.

 

So, my money saving tip I've developed is not put any money with those who state a large outperformance goal.

[Vish_ram]

Having an aspirational goal is not a bad idea. You send a message that you are striving to do better.

 

No one wakes up aspiring to be a mediocre student. You aim for A+, work hard. It is a slippery slope when that goal becomes a subtle marketing message to lure in people. It becomes downright unethical when long term record is your retuns on first $1 that walked in.

[racemize]

Ok, so let's look at those.

 

Companies that actually went bust while he held it:

1) Delta financial - yes went bust

2) Pinnacle airlines - yes went bust

3) Horsehead (zinc) - yes went bust

 

Companies that had big drops while he held it:

4) Compucredit - 70% loss during GFC

5) Sears holdings - 60% loss during GFC

6) bioscript (chronimed) - 50% loss

7) CRYP - it appears that he exited this at $20 after buying at $30, and it got bought out later

 

Companies that he actually made money on:

8) HNR - he exited with a gain

9) Universal alloy - he had a 132% gain on this stock

10) Lear - described as a "home run" in his letters

11) International coal - 138% gain

12) Cresud - made 118% over 3 years

 

 

So, is your criteria any stock he's ever owned that ever had a big drop?  In that case, you've missed a ton, which isn't that surprising since he has a predilection for leveraged cyclical companies.

[crastogi]

Having an aspirational goal is not a bad idea. You send a message that you are striving to do better.

 

No one wakes up aspiring to be a mediocre student. You aim for A+, work hard. It is a slippery slope when that goal becomes a subtle marketing message to lure in people. It becomes downright unethical when long term record is your retuns on first $1 that walked in.

 

Granted Pabrai's return have not been that great lately.  But unlike majority of the investment products, he does not get paid for assets under management.  He has to clear 6% and high water mark.  So he really does not have that much incentive do asset gathering.  In fact, i thought he was closed to investors. 

 

Everybody markets to some degree.  A good investor should have a good nose for marketing messages, else we will have a hard time buying individual stocks. 

 

What I like about Pabrai is that at least he is candid about admitting his mistakes and he occasionally does post mortems on some of them.  We all can learn from that.  Most managers never talk at length about their mistakes

[tylerdurden]

Ok, so let's look at those.

 

Companies that actually went bust while he held it:

1) Delta financial - yes went bust

2) Pinnacle airlines - yes went bust

3) Horsehead (zinc) - yes went bust

 

Companies that had big drops while he held it:

4) Compucredit - 70% loss during GFC

5) Sears holdings - 60% loss during GFC

6) bioscript (chronimed) - 50% loss

7) CRYP - it appears that he exited this at $20 after buying at $30, and it got bought out later

 

Companies that he actually made money on:

8) HNR - he exited with a gain

9) Universal alloy - he had a 132% gain on this stock

10) Lear - described as a "home run" in his letters

11) International coal - 138% gain

12) Cresud - made 118% over 3 years

 

 

So, is your criteria any stock he's ever owned that ever had a big drop?  In that case, you've missed a ton, which isn't that surprising since he has a predilection for leveraged cyclical companies.

 

There will be winners and losers for any investor for sure and I am not really interested about his returns at all. My only objection about the guy is he doesn't have any consistency at all in terms of what he preaches and what he does in real life. One day auto stocks are invincible, a couple of month later GM warrants are held as a cash replacement only. (How smart is holding a warrant position as cash, i'll leave that to his investors!). He says he will wait 3 years at least to understand whether his idea worked or not and goes in and out positions all the time. Anyways for some people this might be considered as being insincere, deceitful etc etc. He should perhaps sit on his ass and focus on his investments rather than talk as much as he does or wait he needs more funds so he can make more moneyyyy right....

[racemize]

He should perhaps sit on his ass and focus on his investments rather than talk as much as he does or wait he needs more funds so he can make more moneyyyy right....

 

His funds are all closed to new investors.

[tylerdurden]

He should perhaps sit on his ass and focus on his investments rather than talk as much as he does or wait he needs more funds so he can make more moneyyyy right....

 

His funds are all closed to new investors.

 

That doesn't mean he won't open them in the future.

[Guest longinvestor]

Having an aspirational goal is not a bad idea. You send a message that you are striving to do better.

 

No one wakes up aspiring to be a mediocre student. You aim for A+, work hard. It is a slippery slope when that goal becomes a subtle marketing message to lure in people. It becomes downright unethical when long term record is your retuns on first $1 that walked in.

 

Agreed but numerical goals such as those outlandish ones  thrown out by helpers well crosses the marketing-to-lying line. How about statements such as "A third invested in double in 3, another third in 5 ...

 

An A+ is the same as beating the index by 1 or 2 percent over 15 years. Anything more than that is a filter for me.

[Vish_ram]

He should perhaps sit on his ass and focus on his investments rather than talk as much as he does or wait he needs more funds so he can make more moneyyyy right....

 

His funds are all closed to new investors.

 

That doesn't mean he won't open them in the future.

 

 

The funds are frequently opened and closed. Again, it is a marketing ploy. Guess who also played hard to get. You create an atmosphere that feels exclusive, above hoi-polloi, ignoring the crowd, you feel special. You feel like part of a rarified group.

 

Also when you say we are closed, you are sending a subtle message to existing ones. If you exit, you may not come back. Last year it was a different tune. There were frequent mentions about how our assets are trading at a fraction of what they are worth (you wont find any fund manager who'll say our portfolio will triple in value in few years). If you exit, you will miss the ride... There are lots of psychological mind games. Bottom line is, buyer beware. A mouse having (paying to have) lunch with a lion doesn't become a lion. 

[tylerdurden]

He should perhaps sit on his ass and focus on his investments rather than talk as much as he does or wait he needs more funds so he can make more moneyyyy right....

 

His funds are all closed to new investors.

 

That doesn't mean he won't open them in the future.

 

 

The funds are frequently opened and closed. Again, it is a marketing ploy. Guess who also played hard to get. You create an atmosphere that feels exclusive, above hoi-polloi, ignoring the crowd, you feel special. You feel like part of a rarified group.

 

Also when you say we are closed, you are sending a subtle message to existing ones. If you exit, you may not come back. Last year it was a different tune. There were frequent mentions about how our assets are trading at a fraction of what they are worth (you wont find any fund manager who'll say our portfolio will triple in value in few years). If you exit, you will miss the ride... There are lots of psychological mind games. Bottom line is, buyer beware. A mouse having (paying to have) lunch with a lion doesn't become a lion.

 

+1

I have to agree with this. I also wonder how much of a cash holdings he has. To me any value investor should have some significant cash holdings since you can't predict the time of market crashes. I have a feeling that next crises he will go through the same experience that he had in 2008, like many other to be fair to him...

[Parsad]

This is actually not a nice summary.  I'd like to see the dozen stocks.  I think you missed Budget bonds, which he didn't invest in, but got most of the ones and then claimed it was just the beginning.

 

Also, he's never closed a fund, so it is rather disingenuous to solely describe him and then mentioning closed funds.

 

I also refer to my previous post on this topic, which does not seem to be recognized:

Ok, so the theme seems to currently be that Pabrai's returns aren't any good since he got a lot of money.  Let's examine that a little bit.

 

In 2003 he had 50 million AUM.

In 2004 he had 145 million AUM. 

 

I'd say at least one of those years starts counting as "a lot of money".

 

Here are the rolling 5 year statistics for Pif2 from that point on:

60% of rolling 5 year returns are greater than the S&P 500 from 2003

55.6% of rolling 5 year returns are greater than the S&P 500 from 2004

 

Interestingly, there are only 4 rolling 5 year periods that are negative, and 3 of them are in the last 3 years.  So, I think it is pretty clear that this underperformance that everyone is referring to is just from the last few years, just like most other value funds out there.

 

The Pif3 returns are fairly similar.  Pif4, for some reason, just kind of sucks.  It has performed worse than the other funds in the same periods fairly consistently.

 

As I mentioned earlier, all the big value guys are sucking right now.  Why single him out so hard?

 

Also, he's not the same as the "helpers" Buffett is talking about--Buffett singles out 2/20 and fund of funds.  Pabrai is 25% over 6%, just like Buffett was, and has not paid himself for years at a time.

 

I sincerely hope you guys never screw up and have someone judge you as harshly as you are doing Pabrai right now...

 

+1!  As I mentioned in a post when Mohnish was hitting bottom and people were piling on him...this board, just like any other, is a reverse indicator of the future.  Since that time, his funds are up around 100%.

 

Yeah, he hasn't performed as well as he would like for his investors, but he's only human.  Anyone who invested with him from day one is doing as well or better than the S&P500 TR to date, with PIF2 and PIF3 outperforming by about 4% annualized and PIF4 essentially breaking even.

 

His interests are aligned with partners, he's had massive redemptions at the bottom on two occasions, and continues to fight and claw his way back up.  Yeah, he's a cloner and his ideas may turn with what books he's reading, but he still uses the same fundamentals in analyzing the investments.

 

His fund is volatile, but his results have actually been pretty good as a manager, and he only makes money when partners make money.  Aren't there alot more (like 95%) managers more deserving of such scorn than Mohnish?

 

How many young fund managers has he helped?  How many investors has he helped by freely sharing his knowledge...and you know who you are...you don't invest with him, but love stealing his ideas and eating his hor d'oeurves!  How many presentations and speeches has he done...like he's not busy enough?  How many kids has he put through Dakshana into the IIT's?

 

There's alot more to like about Pabrai, than not like, that's for sure!  And who has the balls at his age to wear spandex when cycling (recurring joke by me)! 

 

Cheers!

[Guest]

Sanj,

 

any insight as to why he doesn't want his letters to go public?

[crastogi]

This is actually not a nice summary.  I'd like to see the dozen stocks.  I think you missed Budget bonds, which he didn't invest in, but got most of the ones and then claimed it was just the beginning.

 

Also, he's never closed a fund, so it is rather disingenuous to solely describe him and then mentioning closed funds.

 

I also refer to my previous post on this topic, which does not seem to be recognized:

Ok, so the theme seems to currently be that Pabrai's returns aren't any good since he got a lot of money.  Let's examine that a little bit.

 

In 2003 he had 50 million AUM.

In 2004 he had 145 million AUM. 

 

I'd say at least one of those years starts counting as "a lot of money".

 

Here are the rolling 5 year statistics for Pif2 from that point on:

60% of rolling 5 year returns are greater than the S&P 500 from 2003

55.6% of rolling 5 year returns are greater than the S&P 500 from 2004

 

Interestingly, there are only 4 rolling 5 year periods that are negative, and 3 of them are in the last 3 years.  So, I think it is pretty clear that this underperformance that everyone is referring to is just from the last few years, just like most other value funds out there.

 

The Pif3 returns are fairly similar.  Pif4, for some reason, just kind of sucks.  It has performed worse than the other funds in the same periods fairly consistently.

 

As I mentioned earlier, all the big value guys are sucking right now.  Why single him out so hard?

 

Also, he's not the same as the "helpers" Buffett is talking about--Buffett singles out 2/20 and fund of funds.  Pabrai is 25% over 6%, just like Buffett was, and has not paid himself for years at a time.

 

I sincerely hope you guys never screw up and have someone judge you as harshly as you are doing Pabrai right now...

 

+1!  As I mentioned in a post when Mohnish was hitting bottom and people were piling on him...this board, just like any other, is a reverse indicator of the future.  Since that time, his funds are up around 100%.

 

Yeah, he hasn't performed as well as he would like for his investors, but he's only human.  Anyone who invested with him from day one is doing as well or better than the S&P500 TR to date, with PIF2 and PIF3 outperforming by about 4% annualized and PIF4 essentially breaking even.

 

His interests are aligned with partners, he's had massive redemptions at the bottom on two occasions, and continues to fight and claw his way back up.  Yeah, he's a cloner and his ideas may turn with what books he's reading, but he still uses the same fundamentals in analyzing the investments.

 

His fund is volatile, but his results have actually been pretty good as a manager, and he only makes money when partners make money.  Aren't there alot more (like 95%) managers more deserving of such scorn than Mohnish?

 

How many young fund managers has he helped?  How many investors has he helped by freely sharing his knowledge...and you know who you are...you don't invest with him, but love stealing his ideas and eating his hor d'oeurves!  How many presentations and speeches has he done...like he's not busy enough?  How many kids has he put through Dakshana into the IIT's?

 

There's alot more to like about Pabrai, than not like, that's for sure!  And who has the balls at his age to wear spandex when cycling (recurring joke by me)! 

 

Cheers!

 

+1...  there is lot to appreciate in how he lives his life for sure.