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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 up 30.3% in 2023, vs. 26.3% for the S&P 500. The portfolio managed to outperform the high-flying S&P 500. Since inception on January 1, 2018, on an annualized basis, the Free Lunch portfolio is up 5.8% while the S&P is up 12.1%. 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 34.2% versus 33.1% for the S&P 500. Tweaks to the 2024 Free Lunch Portfolio: From our fund managers list, we replace ValueAct Capital, FPA and Sequoia Fund with Abram’s Capital, Brave Warrior Advisors and Greenlight. This December, we recommend adding Alpha Metallurgical Resources (AMR), Consol Energy, Lithia Motors and Asbury Automotive. We love these businesses. To bring them in, we recommend selling Alibaba (Cloned Idea), Tencent (Cloned Idea), Restaurant Brands (QSR) and Starbucks (Spawner). The swaps are no-brainers at present prices (the threshold we need to meet to make a change to the portfolio). AMR, Consol, Lithia and Asbury all operate in out-of-favor industries and generate a significant amount of free cash flow. 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 2024. If you are already invested in the Free Lunch Portfolio, and you rebalanced the Uber Cannibals in April 2023 with the New Uber Cannibals, then sell Alibaba, Tencent, Restaurant Brands and Starbucks and invest the proceeds equally between AMR, Consol, Lithia and Asbury. 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 2024, 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 2025, you’ll rebalance the Spawners and Shameless Cloning ideas. Enjoy! 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. 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. 
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I enjoyed my conversation at Schroders - the Value Perspective podcast. We discussed about cloning as a powerful mental model, Berkshire Hathaway's investments and ergodicity. Enjoy! https://www.youtube.com/watch?v=w9oC1rPV5yQ Here is the link to the podcast: If you prefer reading over listening, here is the transcript.  I very much enjoyed my Q&A session with Prof. Arvind Navaratnam's class at Boston College, Carroll School of Management. I talked about the Japan Company Handbook and Moody's Manual, Warren Buffett's Japanese bets and importance of anomalies in investing. Enjoy! https://www.youtube.com/watch?v=jZKOk-hlo8I 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
December 2024
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