Mohnish Pabrai (Trades, Portfolio) has revealed his portfolio for the second quarter of this year. The immensely successful guru made only one trade in his U.S.-based portfolio to boost portfolio newcomer Alibaba Group Holding Ltd. (BABA, Financial).
Pabrai, the managing partner of Pabrai Funds, told GuruFocus in 2019 that he had moved the majority of his funds into India, Turkey and South Korea where he was finding much better opportunities. His U.S.-based portfolio makes up a small portion of the fund’s total assets under management and focuses on discounted and out-of-favor stocks.
Portfolio overview
At the end of the quarter, the portfolio contained three holdings in Micron Technology Inc. (MU, Financial), Seritage Growth Properties (SRG, Financial) and Alibaba. It is valued at $262 million and has seen a turnover rate of 15%.
Based upon Pabrai’s three holdings, technology maintains the largest representation at 47.5% with real estate (31.37%) and consumer cyclical (21.13%) following behind.
Alibaba
Pabrai initially established the holding in Alibaba (BABA, Financial) in the first quarter and allocated 14.61% of the equity portfolio to the holding and purchasing shares at an average price of $245.98. The second quarter saw share prices continue to fall, so Pabrai jumped on the opportunity to boost his holding. The purchase of 89,878 shares grew the holding by 53.23%
During the quarter, the shares traded at an average price of $222.15, below Pabrai’s average price paid per share of $237.70. This has placed him at a total estimated loss on the holding of 20.93%. Overall, the trade had a 7.34% impact on the equity portfolio as the position now holds a 21.13% weighting.
Alibaba is the world's largest online and mobile commerce company, as measured by gross merchandise value. It operates China's most-visited online marketplaces, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer). Alibaba's China commerce retail division accounted for 69% of revenue in the December 2020 quarter, with Taobao generating revenue through advertising and other merchant data services and Tmall deriving revenue from commission fees.
On Aug. 13, the stock was trading at $187.78 per share, down 2.02%, with a market cap of $507.62 billion. According to the GF Value Line, the stock is trading at a significantly undervalued rating.
GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rank of 8 out of 10. There are currently two severe warning signs issued for declining gross and operating margins. Despite the warning signs, the company’s margins easily exceed industry competitors and drive the strong profitability rank. A cash-to-debt ratio of 3.21 ranks above 79% of competitors alongside the strongest cash flows seen in the last decade.
Top gurus invested in Alibaba (BABA, Financial) alongside Pabrai include Baillie Gifford (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Frank Sands (Trades, Portfolio).
