I thoroughly enjoyed going back to the University of California, Irvine to give my 2nd annual UCI lecture entitled, “Few Bets. Big Bets. Infrequent Bets.”
I discussed five decisions by Warren Buffett and Charlie Munger made over a 20-year period (1968 – 1988) that moved the needle for Berkshire. I also delved into the intense difficulties that Charlie Munger faced along the way. No pain, no gain.
The presentation was followed by a rich Q&A on a diverse range of topics. Enjoy!
I very much enjoyed being back in the Googleplex to give my talk "Intensive Stock Research Can Be Injurious to Your Financial Health." My talk covered the impact of commitment and consistency biases on one’s ability to pick stocks. People tend to love the stocks they spend the most time on, and that can be quite harmful to their financial health. There are a few hacks that I’ve found useful to overcome the powerful effects of these biases, and I covered them in the talk as well.
Here is the link to the video:
I very much enjoyed speaking again with Steve Pomeranz for his “Great Investors” podcast series.
We discussed the fundamental traits of a value investor and the importance of focusing on individual companies and ignoring the market. I also gave my thoughts on the investing environment today and how it is similar to the period when I started Pabrai Funds in 1999. And we discussed Warren Buffett’s comments on Amazon and Google during the Berkshire Hathaway Annual Meeting this year and whether the FAANGS are overpriced.
It is a two-part podcast. The podcast and the transcript can be accessed at:
David Englander wrote an interesting piece in Barron’s about Seritage Growth Properties this past week.
Seritage has been part of Warren Buffett’s portfolio since 2015. I was interviewed for the article and I shared some comments on the future of Seritage and the potential impact of a Sears bankruptcy on Seritage.
If the above link asks you to log in and if you’re not a Barron’s subscriber, search for the title on google and click on the Barron’s link from there, that should give you access to the full article.
On December 22, 2016, I co-wrote an article in Forbes, "Move Over Small Dogs of The Dow, Here Come The Uber Cannibals" about an investment strategy called "The Uber Cannibals." with quant analyst Yingzhuo Zhao.
The progress report for 2017 and the updated Uber Cannibals portfolio for 2017-2018 is now on Forbes.com : https://www.forbes.com/sites/janetnovack/2017/04/06/new-stock-picks-for-the-uber-cannibals-investing-strategy/#60abf57542a6
I co-wrote an article with quant analyst Yingzhuo Zhao that ran in Forbes.com (December 22, 2016), entitled “Move Over Small Dogs of The Dow, Here Come The Uber Cannibals.” In it, we discussed the “Uber Cannibals” five stock portfolio, which selects five Uber Cannibal stocks in March/April of every year. We are now ready for the March/April 2017 picks.
As a recap, our algorithms selected these five cannibals for 2016-2017:
To keep it simple, I’m assuming that folks bought these stocks at the beginning of 2017. Thus, the Uber Cannibals track record starts from 1/3/2017. Let’s assume that on 1/3/2017, an investor, Ms. Sonia Patel, invested $100,000 from her IRA account at Interactive Brokers in the Uber Cannibals strategy, and equally weighted the five stocks. Her portfolio would have looked like the portfolio in the table below assuming that she bought all stocks at the highest prices they traded at that day (we ain’t givin’ Sonia no breaks!). She would have paid $5.90 in commissions assuming she’s chosen the “Fixed Pricing Structure” at Interactive Brokers.
Lowe’s and Marriott paid dividends totaling to about $169 in Q1 2017. Per our rules, Sonia reinvested these dividends back into the same businesses. The performance of the Uber Cannibals strategy compared with the Small Dogs of the Dow and the S&P 500 is shown below.
There is not much to say about the above numbers. Three months is too short a period to draw any conclusions, but we are doing well so far. As a reminder, in our backtests, between 1992 and 2016, the strategy returned an annualized 15.5% versus the S&P 500’s annualized return of 9.2%.
The Uber Cannibals have a quirk. We use year-end financials to pick the next set of Ubers for the coming years. And those aren’t available till late-March from our data providers. So, if one follows the Uber Cannibals strategy, one needs to tweak the portfolio annually during early April.
The New Kids on the Block
For the 2017-2018 period, our algorithms selected the following five Uber Cannibals:
Two of the original Uber Cannibals, Lowe’s and NVR will continue to be in Sonia’s portfolio for another year. And we have three new kids on the block.
The Forbes article discussed how NVR had bought back 75% of shares outstanding in the last two decades. Lowe’s is following in NVR and AutoZone’s footprints. Over the last thirteen years, Lowe’s has reduced its share count by a stunning 45%. Lowe’s share count has dropped by 30% in just the last five years. Like Home Depot, Lowe’s has an entrenched position in the home improvement superstore category. Not a business that’s easy for Amazon to disrupt. As home building gets back to historical norms of over a million new homes being built every year, Lowe’s has natural tailwinds as far out as the eye can see.
If you are a new investor to the Uber Cannibals, you can just equal weight these five stocks (i.e., invest the same amount of money in each of these five) and keep that portfolio until April 2018, when I’ll provide the 2018-19 portfolio on www.ChaiWithPabrai.com. If you invested in the Uber Cannibals at the beginning of the year like Sonia, then you would leave Lowe’s and NVR untouched, sell the other three and invest the proceeds equally among the three new kids. Then just set it and forget it for another year. Happy Cannibal Investing!
I very much enjoyed my fun conversation with Nitin Bajaj for The Industry Show. The interview was streamed live on Facebook, so it was great to answer some of the viewers’ questions live.
We discussed my childhood in India and the journey that led to my starting Pabrai Funds. We also reviewed the first investment I made for Pabrai Funds and some more recent investments, like Southwest Airlines.
Spencer Israel did a great job of putting together a few salient points from my conversation with Benzinga’s founder and CEO, Jason Raznick in this quick read:
I very much enjoyed my conversation on Benzinga’s PreMarket Prep show with Benzinga’s founder and CEO, Jason Raznick, and editor and producer, Spencer Israel.
We discussed my views on auto stocks and the favorable dynamics of the American auto industry today. We also chatted about the potential impact of self-driving vehicles on the industry in general.
Here is the link to the recording:
If you prefer to read, feel free to have a look at these two articles which summarize our conversation:
I co-wrote this article in Forbes on an investment strategy called the “Shamelessly Cloned Portfolio.”
The shameless portfolio comprises of five of the highest conviction ideas of 9 value managers whom we shamelessly clone. Like the Small Dogs of the Dow and Uber Cannibals, we set it and forget it. I will publish the list of the top Shameless Cloned Ideas for a particular year on my blog on January 1 each year.
For 2017, even though it’ll be a partial year, one can buy the 2017 picks anytime. After that, rebalancing should occur right after January 1.
The Shameless Portfolio for 2017 contains:
We’ve laid out all our algorithm rules below.
One can begin testing this strategy with a small portion of one’s networth and do it through a great broker like Interactive Brokers with commissions under $3/trade for small quantities. We hope you’ll join our merry band of shameless cloners.
You can view the article here:
I co-wrote the article with Fei Li, a talented quant at Dhandho Funds.
Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome.
Appendix: Shameless Cloning Portfolio Rules