I enjoyed my Q&A session with students of JNV Bangalore (Urban) on December 23, 2022. I talked about the Dakshana Foundation model, Charlie Munger and his mental models, and my journey from a below average to a topper student.
https://www.youtube.com/watch?v=sjb4Tv_X0xg Enjoy! Here is the link to the podcast: If you prefer reading over listening, here is the transcript.
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I very much enjoyed my session with students at the Rotman School of Management and the Rotman Student Investment Fund on Warren Buffett's 2022 Shareholder letter. I also talked about the "Circle the wagons" investing approach, finding great businesses and circle of competence.
Enjoy! https://www.youtube.com/watch?v=miqfRmUDwFQ Here is the link to the podcast: If you prefer reading over listening, here is the transcript. 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 2023 Uber Cannibals picks. Recap of 2022 Uber Cannibals: As a recap, in my 3/31/17 blog post 6 years ago, 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 2022 Uber Cannibals were:
As of 3/31/23, Sonia's $100k was worth $170,766, up 8.9% annualized since inception. If Sonia had instead invested in the S&P 500 over that period, she would be up 12.2% annualized and her portfolio would be worth $205,465. The Uber Cannibals portfolio was down 3.7% in the last 12 months, vs. the S&P 500 which was down 7.7%. Over the last three years, Uber Cannibals was up 24.2% annualized vs. 18.6% for the S&P 500. The Uber Cannibals 5-stock portfolio is far more concentrated than the indices and will be more volatile. The 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 assumes that stocks are bought at the high price of the day and sold at low price of the day, whereas the S&P 500 and Small Dogs of the Dow performance assumes that stocks are bought at last close. Below is the 12-month return of the 2022 Uber Cannibals:
The New 2023 Uber Cannibals: The Uber Cannibals portfolio has not been touched since March 2021, when we implemented a heavy bias towards inaction. We now make a trade only if it is a no-brainer to add significant firepower to our buyback arsenal. We have two tweaks that meet that threshold this year: Sell Discover Financial Services and Navient, and invest the proceeds equally into eBay and Toll Brothers. Here is the resulting 2023 Uber Cannibals portfolio:
Navient and Discover have been in our portfolio since March 2020. They’ve served us well. Over the last three years, Discover and Navient had an annualized return of 43.7% and 34.3% respectively, vs. the S&P 500 which was up 18.6% annualized. Ebay and Toll Brothers may be better buyback vehicles from here, however. Ebay has bought back 48% of its shares in the last 5 years and 9% in the last year alone. Toll Brothers has plowed back earnings into share repurchases and bought back 9% of its shares last year. 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 2024, when I'll provide the 2024 portfolio on www.ChaiWithPabrai.com. Happy Cannibal Investing! Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome. I enjoyed my session at the SumZero Top Stocks Virtual Summit 2023 on Turkey. I also talked about investing in global markets including Turkey, my decision to sell Ferrari, Charlie Munger's Belridge Oil deal and about some spawners.
Enjoy! https://www.youtube.com/watch?v=ncYdcZEnH7E Here is the link to the podcast: If you prefer reading over listening, here is the transcript. I enjoyed my talk with the students at London School of Economics on sustainable moats. I talked about emerging markets, evaluating investments, and Charlie Munger's mental models.
Enjoy! https://www.youtube.com/watch?v=c7Oyv-Echa0 Here is the link to the podcast: If you prefer reading over listening, here is the transcript. I enjoyed my Q&A session with students of JNV Bangalore (Rural) on December 23, 2022. I talked about the Dakshana Foundation model, the fear of failure and how failures can be a blessing, and the importance of truth to build up trust.
https://www.youtube.com/watch?v=kCTdgDQUoWw Enjoy! Here is the link to the podcast: If you prefer reading over listening, here is the transcript. I very much enjoyed my session with the EO Gurgaon, India on entrepreneurship. I talked about the reinvestment framework, how spawning can be useful and the advantages entrepreneurs can have in investing.
Enjoy! Here is the link to the podcast: If you prefer reading over listening, here is the transcript. In December 2017, I co-authored an article in Forbes about The "Free Lunch" Portfolio, a strategy to invest in 15 stocks across Uber Cannibals, Shamelessly Cloned Ideas and Spin-Offs. The Spin-Offs bucket was later replaced with Spawners, which I detailed in the 2021 Free Lunch Portfolio post. Each of the portfolio buckets is reassessed for changes once a year: the Cannibals in April, and Cloned Ideas and Spawners in December. I publish updates to the portfolio here on Chai With Pabrai. The Free Lunch portfolio was down 17.7% in 2022, vs. 17.9% for the S&P 500. The portfolio tracked the S&P 500 in the market sell off this year. Since inception on January 1, 2018, on an annualized basis, the Free Lunch portfolio is up a paltry 1.6% while the S&P is up 9.5%. The S&P 500 has trounced the Free Lunch portfolio so far. In 2021 we decided to ignore the algorithm’s buy and sell decisions and only make portfolio tweaks if they are no-brainers. This bias towards inaction will avoid disrupting the compounding engine and should help the Free Lunch perform well over time. Since 2021, the Free Lunch portfolio is up 3.0% versus 5.7% for the S&P 500. Tweaks to the 2023 Free Lunch Portfolio: This December, we recommend adding Reysas Tasimacilik ve Lojistik Ticaret A.S. (Reysas Logistics) and TAV Havalimanlari Holding A.S. (TAV Airports). We love these businesses and just need to have them in the portfolio. To bring them in, we recommend selling Micron (Cloned Idea) and Berkshire Hathaway (Spawner). The swaps are no-brainers at present prices (the threshold we need to meet to make a change to the portfolio). Reysas and TAV are both based in Turkey and listed on the Istanbul Stock Exchange. Reysas is a logistics business that owns 62% of Reysas REIT, which in turn owns over 12 million sq. ft of Grade A warehouses in Turkey. It is led by a father-son duo who are fantastic capital allocators. Reysas trades at a steep discount to its liquidation value, and an even steeper discount to intrinsic value. TAV operates 15 airports in 8 countries, and has developed world-class competencies in ground handling, catering, and duty free. The gem in TAV’s portfolio is the Almaty International Airport, which is it recently acquired outright (a rare feat). TAV continues to expand its reach of operations to new airports and is markedly cheaper than other publicly listed airport operators. I discussed investing in Turkey, and specifically Reysas and TAV, in my Q&A Session with YPO Gold Nairobi in Kenya. It is not easy for US retail investors to buy stocks listed on the Istanbul Stock Exchange, but Fidelity does offer the service to trade Turkish stocks by phone. Once you open an account at Fidelity.com and fund it, you can call Fidelity at +1.800.343.3548, ask for “international trading” and advise the Fidelity representative of your order. Trades are placed in Turkish Lira, so the representative can help you determine the correct number of shares that you can buy with your USD balance, after accounting for possible movements in the Turkish Lira overnight. Trades need to be placed between 5 AM and 7 PM eastern. Limit orders are generally the best way to go. To our knowledge, Fidelity is the only game in town that offers Turkish trading to US retail investors, and it charges a hefty commission (approx. $83 per ticket order). To avoid racking up significant commission charges, you will want limit the number of orders you place and try to maximize the number of shares you buy per ticket order. In another tweak for the Free Lunch, an existing portfolio holding, Brookfield Corporation, spun-out Brookfield Asset Management, its asset management business in December 2022. As a shareholder of the Brookfield parent, the Free Lunch portfolio automatically received shares in the newly spun out entity. We recommend holding on to the spin-off company: the business has exceptional economics and a long runway. Here are the constituents for the upcoming year: Spawners
Shameless Cloning
Uber Cannibals
If you are a new investor to the Free Lunch Portfolio, you can just equal weight these 16 stocks (i.e., invest the same amount of money in each of these 16) between now and early January 2023. Reysas recently announced its intention to issue a rights offering, which would likely take place in 2-3 months following regulatory approval. To avoid dilution, one should participate in this offering, which will offer existing shareholders the right to purchase shares at TL 1 per share (the current share price is around TL 23). You can invest 90-95 percent of the amount allocated to Reysas today and keep 5-10 percent for the rights offering. Keep your eye out for information on the rights offering from Fidelity. If you are already invested in the Free Lunch Portfolio, and you rebalanced the Uber Cannibals in April 2022 with the New Uber Cannibals, then sell Micron and Berkshire and invest the proceeds equally between Reysas and TAV. You can do the same 90-95 percent approach with Reysas to allocate the 5-10 percent to the rights offering. These are the stocks to sell, along with their full-year 2022 returns:
As a reminder, the new Uber Cannibals get published every April, while the new Spawners and Shameless Cloning businesses are released in January. When we publish the new Uber Cannibals in April 2023, 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 2024, you’ll rebalance the Spawners 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. The contents of this website are for educational and entertainment purposes only, and do not purport to be, and are not intended to be, financial, legal, accounting, tax or investment advice. Investments or strategies that are discussed may not be suitable for you, do not take into account your particular investment objectives, financial situation or needs and are not intended to provide investment advice or recommendations appropriate for you. Before making any investment or trade, consider whether it is suitable for you and consider seeking advice from your own financial or investment adviser. I very much enjoyed my talk with the UNC Kenan-Flagler Business School's Investment Management Club about some aspects of the checklists. I talked about active and passive investing, alternative investments and investing in emerging markets.
Enjoy! https://www.youtube.com/watch?v=W--321tO12M Here is the link to the podcast: If you prefer reading over listening, here is the transcript. I enjoyed my talk with the Helvetian Investment Club at St. Gallen University of Switzerland on the asymmetry mental model. I talked about different aspects of value investing, the power of truth and analyzing the portfolio for maximizing returns.
Enjoy! https://www.youtube.com/watch?v=m606MaKujq4 Here is the link to the podcast: If you prefer reading over listening, here is the transcript. |
Mohnish PabraiMohnish Pabrai is the founder and Managing Partner of the Archives
April 2024
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