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Mohnish Pabrai Buys Seritage, Sells Chrysler

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- By Rupert Hargreaves

Mohnish Pabrai (Trades, Portfolio)'s Pabrai Investments made two notable portfolio changes during the second quarter of 2020, according to the firm's latest 13F filing.

An international investor

Unfortunately, this filing only details Pabrai's U.S. securities, so it does not provide us with a full picture of the guru's investments. According to various investor documents, Pabrai has most of his assets invested in other countries around the world. In recent years, he's been struggling to find undervalued securities in the U.S. market, so he deployed capital in markets such as India and Turkey instead.

According to the latest 13F, Pabrai has nearly $150 million invested in U.S. stocks. According to a recent letter to investors, this compares to his overall assets under management between $400 million and $500 million at the end of the second quarter. These numbers indicate that the holdings detailed in the 13F only account for around a third of assets under management.

Pabrai does not need to provide any detailed analysis of other positions. However, we do have some idea of the Indian and Turkish stocks he has been buying according to blogs and recent interviews.

Pabrai's portfolio changes

In his U.S. portfolio, the value investor made two notable changes to his portfolio in the second quarter.

He sold his position in Fiat Chrysler Automobiles NV (NYSE:FCAU) in its entirety. The value investor has been pursuing this course of action for some time. He started selling the position in the fourth quarter of 2018, taking some profits after an impressive run, which saw the stock increase in value several times over from his first acquisition.

Pabrai said that he started selling out of the position in the automaker after the coronavirus crisis began to unfold in the first half of 2020. He said he decided to turn his back on the business after it became too hard to predict what impact the crisis would have on the company. He reduced the position by 92% during the first quarter of 2020 and sold the remainder in the second quarter.

While we don't have any detailed information on international stocks he acquired during the second quarter, I think it is likely that the value investor will have used the market decline to increase his position in his favorite Indian and Turkish stocks.

Pabrai Investments' second-quarter 13F also reports that the hedge fund initiated one new U.S. position in Seritage Growth Properties (NYSE:SRG) during the three months to the end of June.

At a time when so many brick-and-mortar retailers are running into solvency problems, it may seem strange that Pabrai would allocate around 10% of his firm's assets under management to this company. But he has held a position in the stock before, which indicates that he knows the business quite well and may better understand the impact the pandemic will have on the operation.

Pabrai Investments first acquired a position in Seritage Growth in the first quarter of 2016. This was a relatively small holding by Pabrai's standards. It was worth around $26.5 million. That was approximately 5% of total assets under management at the time. Filings suggest the firm bought the stock in the mid-$40s. However, by the second quarter of 2017, the position had been completely removed from the portfolio.

It now seems as if Pabrai thinks the stock is undervalued. He has allocated around $50 million to the position, buying nearly 10 times as many shares as he did the last time around, at a reported price of between $11 and $12 per share. These deals give the position an estimated 10% portfolio weight (as a percentage of total assets under management).

Disclosure: The author owns no share mentioned.

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This article first appeared on GuruFocus.