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Hello, welcome back everyone. Today we will look at Monish Pabrai's investment portfolio as of the end of the first quarter of 2023 . His Form 13F report came out just a few days ago, and his portfolio has several interesting sales and even one purchase in the past month. As you can see from the thumbnail, there are two significant positions: one he sold completely and the other he reduced.
So in this video we'll talk about these two promotions. If this is your first time watching my video, I am a value investor. My name is Justin. I follow Warren Buffett, Howard Marks, Monish Pabrai, and other value investors. And I believe Pabrai has a long track record of successfully outperforming the market.
However, I think his portfolio in particular has not shown the best results in the last 12–18 months. But historically, I think his portfolio has performed very, very well . In fact, there was a nearly 10-year period where it delivered about 26% compound annual growth for its portfolio. So that's pretty impressive.
And sometimes your investment philosophies don't work all the time in every single market. In fact, if you look at Howard Marks' book, What Matters Most, which is behind me, this is one of the things he talks about: Every investor, their specialization or niche or way of investing, their philosophy and strategy, are not necessarily going to work year after year, depending on the type of market.
So, Monish Pabrai is not having the best of times right now, but I think he will fix that in the near future. So let's get down to business and take a look at his portfolio. So, the screen you see in front of you is Monish Pabray's briefcase. It is provided by the Ticker Terminal platform. This is my favorite platform that I use personally.
They have a guru search feature where you can browse over 10,000 different funds. They have different levels of access on the platform: a free version and several paid options. I actually use the highest paid version because I get more access. It seems like you get 15 years of financial data, and you also have the option to view more investment or hedge funds.
So personally, I like this version. Um, but as you see here, keep in mind that in many of my other videos you see me using dataroma.com. It focuses only on 13F reports that relate to US stocks or US companies. And Ticker Terminal pulls up anything, even things that go beyond 13F reports. So, for example, if you are going to invest in a global fund, say Alibaba, and you buy on the Hong Kong Stock Exchange, it will show up here if you own more than 5% of the company.
In particular, Monish Pabrai, you know, he owned Alibaba in the past and sold it, which he talked about, and at this time, I think he still owns or many assume that he owns Prosus or even Tencent. They wouldn't appear here if he owned them because he would have to own 5% of the company for them to actually report his stake and then it would be on this list.
As for Tencent, it has a market capitalization of half a billion dollars. As for Prosus, I think the capitalization is about a hundred billion dollars. So there is no chance, since his funds, I think, are about 300-400 million that he manages in total, and even if he owned or invested all his money in Prosus, it still wouldn't be enough to get to 5% of this company.
So just keep that in mind. But if you look at this , you can see, let's start with the ones he bought this month, or this quarter, sorry. Edelweiss Financial, he increased his position by about 3%. Sentient Realty, very little growth. Only, you know, not even a 0.1% change. So that's pretty interesting.
So I'm not sure why he bought so few. Maybe there's something else going on there that we don't know about. And then Brookfield Corp, ticker BN, he increased his position by almost 8.5%. This is interesting because he actually bought a stake in BAM, Brookfield Asset Management Corp, which we'll talk about in more detail in a moment.
He exited it completely last quarter and then invested more money in Brookfield Corp. And, again , I'll explain more about this company in a moment so you can understand better. And now two that he sold completely or reduced his stake in. Micron Technology, he reduced his position by 14%. Nice Holdings, reduced by 28%.
I already talked about BAM, Brookfield Asset Management Group, which he completely sold. So let's start with Brookfield Corp. He did purchase the stock, and maybe I'll open up a PowerPoint presentation that will go into a little more detail about what happened. OK. This screenshot is from their investor presentation this year from Brookfield Asset Management Group.
This ... and they are trying to explain here that they announced it in September-October last year, and everything was implemented in December. But Brookfield completed the spin-off of a 25% stake in its asset management business, creating two public companies. Brookfield Asset Management Group under the ticker BAM and Brookfield Corporation under the ticker BN.
The purpose of the transaction was to carve out the value of the asset management franchise as a separate entity, which would act as a catalyst for a revaluation and allow Brookfield Asset Management to use the properly valued shares for mergers and acquisitions. For example, before the split, the market valued the former Brookfield Group at around $70–80 billion in market capitalization.
However, after the transaction, management expected that shareholders would own one share of Brookfield Asset Management. This represented a 25% share in the asset management business. And the interesting thing is that they thought that the two companies together were worth about $80 billion, and that would remain true after the creation of the two separate companies.
But that's not how it happened. In fact, if we go back here and look at Brookfield Corp , for example, ticker BN, give it a second to load. Oops, something didn't display correctly. Wait one second. For some reason he pulled up the old ticker. I will change it to USD. Let's go down here. You see, the market capitalization of Brookfield Corporation alone is about $50 billion.
But now let's also look at BAM. Ticker BAM, let's look at its market capitalization. Turns out...Oh, it's in Canadian dollars. Let me change back to USD for a second . It turns out 12. So together they are worth about $61 billion , whereas before this transaction they were worth between $70 and $80 billion.
So this suggests that perhaps one or both of these two businesses are currently undervalued. And for a long time, I really believed that Brookfield Asset Management Group was the company worth investing in. They feel much better now, uh, after this transaction took place . So if you look at the last, you know, three months, uh, Brookfield Asset Management Group is down about 10%.
Uh, but if we look at the ticker BN , Brookfield Corporation, uh, actually suffered more. Yes. Uh, let's look at the last three months in US dollars. So it turns out that it has fallen by 33% over the last ...Oops. Er, by 17, almost 20% . So it fell by 20 % compared to about 10%. Well, speaking in general terms.
So, uh, that raises the question, you know, maybe it's actually Brookfield Corporation, looking at which, you might think that's where the best investments are. And, you know, when I dig deeper, Brookfield Asset Management Group, or BAM, when compared to other hedge funds, Brookfield Asset Management Group is trading at a premium right now .
So I'm going to seriously think about my investment in BAM, and maybe it makes more sense to invest in Brookfield Corporation or split it between them. I'll just have to , I'm going to think about it some more. But that's pretty much what happened to this business. Now, if we talk specifically about Micron, that's another interesting case.
So, he sold a significant portion of his position last quarter, even though he had held it for quite a while and was generally very bullish on Micron. It has fallen by 10% over the last year. Uh, it's actually up 20 % since the beginning of the year. Quite interesting. Over the last 3 years, it has grown by 33%.
Now, if I look at their latest earnings presentation, I just wanted to point out a few points. So , uh, Micron makes memory chips. They produce DRAM and NAND chips. DRAM is about 75% of the revenue. NAND chips—about 25%. Now keep in mind that they have been stating for quite some time that their growth in the DRAM sector will be in the mid- teens percent range.
So, you know, let's say 15, 16, 17%-ish revenue growth, and we do n't see that anymore. In fact, they say that demand growth has slowed to about 5% in DRAM and to the low teens in NAND , well below their expected long-term compound annual growth rate (CAGR), which is mid- teens for DRAM and just over 20% for NAND.
So, this business has been hit hard over the last year because of the bad economy, and customers are just buying a lot less, but they expressed optimism in their earnings presentation, saying that they think customers are running out of inventory. Moreover, Samsung announced last month that it was going to reduce or even stop production of memory chips simply because their stocks had become too large.
And remember, this particular business is an oligopoly, so there are a lot of fixed costs here. So when there is high demand for their products, they can raise prices, and then their profits increase significantly. But the situation doesn't look good right now, at least for next year. At the same time, they remain optimistic that in the long term they will return to growth at mid-teens rates.
But things are n't looking good at the moment. OK. So, those are the stocks I really wanted to talk about in his portfolio. Because the two things that interested me the most were the reduction of his stake in Micron. A fairly significant reduction in his portfolio, as well as the sale of shares in Brookfield Asset Management Group and an increase in his position in Brookfield Corporation.
And why this is interesting, or why I'm following Monish so closely , is because I own shares of Micron as well as Brookfield Asset Management Group. So I'm always interested in seeing what other hedge fund managers I respect are doing with their positions. As for me personally, I started reducing my position in Micron about a month ago, and quite significantly.
I would say I sold maybe about 30% of my position. Looking ahead to next year and beyond, I just think this business won't do as well as they expected. And I'm worried about what's going to happen at the end of this year and even next year, and how the economy is going to feel. I think we are in a recession right now.
And how quickly we will get out of it—who knows? Um, and I think it might get worse before it gets better. Hmm, but some of the inflation data that has come out recently is encouraging. But still, in my opinion, there is less liquidity coming into the market than I would have hoped for as an investor in general.
Hmm, but we'll see. And then, you know, as far as Brookfield Asset Management Group is concerned, that's what I own. Um, but I'm going to look into Brookfield Corporation more, and maybe it would make more sense for me to transfer the money there like Monish did, or maybe split it between Brookfield Asset Management Group.
The only thing that concerns me about BAM is that by industry standards or metrics, the company looks a bit overvalued. For example, look at BlackRock and some others, it trades at a higher premium than them. Um, and that might be a sign that she's overrated right now. What is even more alarming is that this business initially grew from 70-80 billion after the separation of these two structures, and now together they are worth about 60 billion.
So this is just a sign that, you know, at least one of them is looking pretty cheap, and maybe it's Brookfield Corp, because its value has fallen by almost 20%. Overall, from a metrics perspective, it doesn't look like that; It looks like it's undervalued, at least from a multiplier perspective. So it will be interesting, I'm going to explore this issue more deeply again.
So I would be interested to know your opinion. So, do you follow Monish Pabrai? What do you think about his quarterly portfolio ? What about selling shares of Brookfield Asset Management Group? Also Micron and some of the changes it made last quarter. Do you think he still owns Prosus? That would be interesting to know.
That's it. So I would love to hear from you in the comments section. Write them below. I read every one of them. See you in the next video. Take care of yourself, may God bless you.
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