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In December 2017, I co-authored an article in Forbes about The “Free Lunch” Portfolio, which combines the power of Uber Cannibals, Shameless Cloning and Spinoffs. As a recap, our algorithms selected these 15 companies for 2018: Uber Cannibals
Shameless Cloning
Spinoffs
The Free Lunch portfolio was down 17% in 2018, vs. -2.9% for the S&P 500. Our backtests show that the Free Lunch Portfolio outperforms the S&P 500 over a 17+ year period (17.1% annualized for the Free Lunch vs. 5.4% for the S&P 500), but it does not do so every year. In fact, the Free Lunch Portfolio underperformed in 6 out of the 17 years we tested. Keep the faith and do not overreact to short-term negative performance. This is a long-term “set it and forget it” strategy. We don’t recommend putting more than 10-20% of your nest egg into this strategy. And we think it only makes sense if you follow it for a decade, or two, or longer. Ideally, you would use this strategy in your IRA, so you wouldn’t have to worry about realized gains. The New 2019 Free Lunch Portfolio We are now ready to rebalance the Free Lunch Portfolio for 2019. Here are the constituents for the upcoming year: Uber Cannibals
Shameless Cloning
Spinoffs
If you are a new investor to the Free Lunch Portfolio, you can just equal weight these 15 stocks (i.e., invest the same amount of money in each of these 15) in early January 2019. If you invested in the Free Lunch Portfolio at the beginning of 2018 and rebalanced the Uber Cannibals in April 2018 when we published the New Uber Cannibals, then you would sell all of the 2018 Spinoffs and Shameless Cloning companies except for Micron, and invest the proceeds equally among the 9 new kids. You can do this in early January 2019 (or now if you’re investing in a taxable account and you’d like to capture losses for 2018). As a reminder, the Uber Cannibals get published for rebalancing every April, while the Spinoffs and Shameless Cloning ideas rebalance in January. When we publish the new Uber Cannibals in April 2019, sell the Ubers that are no longer on the new list and invest the proceeds equally across the new Uber Cannibal picks. Then in January 2020, you’ll rebalance the Spinoffs and Shameless Cloning ideas. Enjoy! Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome. 
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I enjoyed being interviewed by ET Now at their office in Mumbai with Guy Spier. We discussed the recent decline in the Indian stock market and housing finance companies, and the problems associated with investing in levered financial institutions. We also discussed why it is important to concentrate on the value of the business and not its stock price. And we did this over some delicious Chai and Vada Pav! Enjoy! https://www.youtube.com/watch?time_continue=17&v=OTvzQR9KKT8  I very much enjoyed this joint Q&A session that Kamal Khetan, Managing Director of Sunteck Realty Ltd., and I had with Dakshana Scholars at Dakshana Valley on Oct. 21, 2018. We discussed the motivations behind establishing the Dakshana Foundation and the importance of learning from your failures in life. The Q&A session is in Hindi. Enjoy! https://www.youtube.com/watch?v=NrDLcZHkf3I&t=6s  I enjoyed giving this talk on “The Ten Commandments of Investment Management” at the 8th Morningstar Investment Conference in Mumbai. The talk is followed by a Q&A session where we discussed my takeaways from lunch with Warren Buffett, a fair management fee structure and the Dakshana foundation. https://www.youtube.com/watch?v=qqbbCZzBZbA&feature=youtu.be  I very much enjoyed my chat with Nigel D’Souza on CNBC – TV18. We discussed why it’s important for an investor to simply focus on the businesses and drown out other noise in the market. We also covered my approach to investing in Mumbai real estate and other opportunities in India. Enjoy! It is a two-part interview: Part1: https://www.youtube.com/watch?v=rP5Wow-Xpgw Part2: https://www.youtube.com/watch?v=Ke6GCMixqMc  I very much enjoyed giving my talk on “The Ten Commandments of Investment Management” to Prof. Arvind Navaratnam’s class on Value Investing at the Carroll School of Management (Boston College). It was my 8th year in a row! The talk is followed by a Q&A session where we discussed investing in India, a fair management fee structure, 2008 financial crisis and Sergio Marchionne. https://youtu.be/9tGjXPhnp-s Enjoy! Here is an Economic Times article on the talk: https://economictimes.indiatimes.com/markets/stocks/news/pabrais-10-commandments-for-becoming-a-successful-investor/articleshow/67123851.cms  I very much enjoyed being interviewed by The Economic Times on the sidelines of the Motilal Oswal Annual Global Investor Conference in Mumbai. We discussed a range of topics including P/E of 1 stocks, cloning and my investment checklist. Enjoy! https://economictimes.indiatimes.com/markets/expert-view/volatility-is-the-friend-of-a-long-term-investor-mohnish-pabrai/articleshow/65570377.cms  I recently gave the “Trust vs. Truth” talk to the Class of 2019 Dakshana Scholars at JNV Bundi (Rajasthan, India) on June 2, 2018. These scholars will take the IIT entrance exams in 2019. The majority are likely to be accepted by the IITs. We explored the variables Buffett believes are key to success in life (integrity, intelligence, and energy), Marcus Aurelius’ Stoicism and the importance of adversity, and the motivations behind establishing the Dakshana Foundation. Enjoy! https://www.youtube.com/watch?v=j72nRsSPIi0&feature=youtu.be  I very much enjoyed speaking to Rohilesh Singh, founder and CEO of Populis, for the Leadership Show. We talked about the importance of giving back (in time and resources), the Dakshana Foundation, how to invest in profitable businesses and the importance of checklists in investing. Enjoy! http://www.populis.com.au/single-post/2018/06/21/CLEVER-INVESTOR-AND-GIVER-Rohilesh-X-Mohnish-Pabrai https://www.youtube.com/watch?v=m53ukJMuO78  I very much enjoyed my chat with Kevin Harris from SumZero published on Forbes.com. We covered a range of topics including checklists, a fair management fee structure, and the importance of doing your own investment research. Enjoy! https://www.forbes.com/sites/kevinharris/2018/06/25/mohnish-pabrais-advice-for-value-investors/#60ce25d122ed  |
Mohnish PabraiMohnish Pabrai is the founder and Managing Partner of the Archives
December 2018
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