The 15 Stocks In Mohnish Pabrai’s ‘Free Lunch’ Portfolio

Portfolio average returns Vs S&P 500 (11/30/2017)

The 15 Stocks In Pabrai’s Free lunch Portfolio

2018

Here’s the Stocks you will be buying if you are going to follow the rules of the ‘Free Lunch’ Portfolio. ​​ Remember you hold each stock according to the Rules. ​​ If you don’t know them, read this first.

For the ‘Free Lunch’ Portfolio, you buy all 15 stocks on this list, or you can pick your favorite individual strategy or a combination of two. I’ll include all the links you’ll need below the list, and I’ll update this list as soon as the new picks are available. Here they are:

Shameless Cloning Portfolio

• Alibaba Group Holding (BABA)

• British American Tobacco (BTI)

• Fiat Chrysler Automobiles (FCAU)

• General Motors (GM)

• Micron Technology (MU)

Spinoffs Portfolio

• Adient (ADNT)

• CSRA (CSRA)

• GCP Applied Technologies (GCP)

• Lamb Weston Holdings (LW)

• Synchrony Financial (SYF)

The Uber Cannibals Portfolio (Updated April 2018)

• Sleep Number Corp. (SNBR)

• Corning Inc. (GLW)

• PulteGroup (PHM)

• Discover Financial Services (DFS)

• Lear Corp. (LEA)

Here’s what you need to know before investing in any of these portfolio’s

• What Mohnish Pabrai’s ‘Free Lunch’ portfolio consists of.

  • The Shameless Cloning Portfolio

  • The Uber Cannibals Portfolio

  • The Spinoffs Portfolio

• Comparing The ‘Free Lunch’ Portfolio to the S&P 500 over a 17 year period. (Spoilers, the Pabrai’s portfolio trounces the S&P 500).

• The power of a 17.1% strategy can have on a $6,000 and $12,000 account (it’s Big).

• The Rules you need to know to follow the ‘Free Lunch’ Portfolio.

Summary of each of Pabrai’s Portfolios

Each portfolio consists of a specific theory regarding investing. Each portfolio has its own set of rules and guidelines you should understand before making any investment.

The Uber Cannibals: This portfolio follows the idea that companies that ‘eat themselves’ through the purchase of their own stock, at a staggering rate will greatly outperform the market over any long-term period. ​​ The portfolio defines an Uber Cannibal as a business that is;

• Cash rich

• Undervalued &

• Consistently buying back shares

Pabrai believes that because of these factors, the portfolio is likely to outperform the market by a large margin. ​​ Backtesting agrees with his sentiment. ​​ The Uber Cannibals have beaten the market handily over the 17+ year period by more than 14% on average per year!

Shameless Cloning: Ever had the desire to invest with the some of the best value investors in the world? Well, this is exactly the theory behind Pabrai’s shameless Cloning portfolio. ​​ In fact, this portfolio consist of five separate stock picks from some of the best fund managers in the world, randomly selecting from a curated list created by Mohnish Pabrai himself. ​​ This portfolio has vastly outperformed the market benchmark over the backtested period by more than 10% on average per year over the last 17+ years.

The Spinoffs: This one originally comes from famous value investor Joel Greenblatt and his amazing book; ‘You Can Be a Stock Market Genius’ where he clearly explains why spinoffs as a group trounce the stock market. When a business is spun off, it can focus on whatever it does best, allowing it to outperform over time. Greenblatt showed that over time, spinoffs beat the market by an average of 10% per year (through the period of 1964 to 1988). ​​ Thirty years later and the Spinoffs still come out on top, beating the S&P 500 by 8% per year on average over the last 17+ years.

The ‘Free Lunch’: Now that you better understand the three portfolio’s above, this one is much easier to understand; It’s the combination of all three portfolio’s into a single Fifteen Stock Portfolio. ​​ This portfolio has been shown to garner a return of 17.1% on average per year compared to the S&P 500’s 5.4%. ​​ Not only that, but it tends to greatly reduce the overall volatility of the portfolio compared to that of the S&P 500.