|
In late December 2016, I co-wrote an article on Forbes.com that introduced the "Uber Cannibals," a 5-stock investing strategy that invests in businesses aggressively buying back their own stock. This is a "set it and forget it for one year" strategy that rebalances every April when 5 companies are selected for the portfolio for the upcoming year. The Uber Cannibals is also part of the broader 15-stock Free Lunch Portfolio, which also invests in Shamelessly Cloned ideas and Spawners that are updated annually in December.
We are now ready for the April 2021 Uber Cannibal picks. Recap of 2020 Uber Cannibals: As a recap, in my 3/31/17 blog post, we met Ms. Sonia Patel, who had embarked on her Uber Cannibals compounding journey with $100,000 from her IRA account at Interactive Brokers. Sonia invested in the first 5 Uber Cannibals on 1/3/17, and then rebalanced her portfolio every year in April. The 2020 Uber Cannibals were:
As of 3/30/21, Sonia's $100k was worth $154,116 (after trading costs), up 10.7% annualized since inception. If Sonia had instead invested in the S&P 500 over that period, she would be up 16.6% annualized and her portfolio would be worth $191,838. During the COVID-driven market sell off in the first three months of 2020, Sonia's portfolio was down 40.8%, while the S&P 500 was down 18%. She kept the faith and hung on. From April 1, 2020 through today, Sonia's portfolio is up 73%, vs. 55.8% for the S&P 500. The Uber Cannibals 5-stock portfolio is far more concentrated than the indices and will be more volatile. The Uber Cannibals strategy makes sense if you intend to follow it for at least a decade or two (or longer). Sonia's in it for the long-run.
All five Uber Cannibals paid dividends. As per our rules, Sonia reinvested those dividends back into the same businesses.
Please note, the Uber Cannibals performance includes trading costs and assumes that stocks are bought at the high price of the day and sold at low price of the day, whereas S&P 500 and Small Dogs of the Dow performance does not include trading costs and assumes that stocks are bought at last close. Below is the 12-month return of the 2020 Uber Cannibals:
The New 2021 Uber Cannibals:
A key lesson I learned in 2020 was to hold on to great compounders and cannibals (unless they get egregiously overvalued). I discussed this in more detail at a Manual of Ideas session earlier this year. Moving forward, at the April rebalance, we will assess the new Uber Cannibal picks that the algorithms recommend we swap into the portfolio. However, we will only make changes if the new businesses improve the overall quality of the portfolio. Otherwise, we will stay long and strong. Here are the 2021 Uber Cannibals:
Sell Globe Life from the 2020 Uber Cannibals and invest the proceeds in Jack in the Box. If you are a new investor to the Uber Cannibals, you can just equal weight the five stocks (i.e., invest the same amount of money in each of these five) and keep that portfolio until April 2022, when I'll provide the 2022 portfolio on www.ChaiWithPabrai.com. Happy Cannibal Investing! If you invested in the Uber Cannibals in April 2020 in a taxable account, try to sell after 366 days, to realize long term gains. Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome.
20 Comments
I very much enjoyed my Q&A session with with MBA Students at Georgetown University. I discussed my journey that led to my starting Pabrai Funds, importance of holding onto a compounder, and the art of selling. Enjoy! https://www.youtube.com/watch?v=V_djW_RGPGA&t=400s  I very much enjoyed my Q&A session with the members of The Babson College Fund (Babson College Students). We discussed the importance of temperamental control in investing and finding long-term compounders.
Enjoy! https://www.youtube.com/watch?v=Brt_KOcPrUE&t=727s |
Mohnish PabraiMohnish Pabrai is the founder and Managing Partner of the Archives
October 2022
Categories |
RSS Feed