In the latest Semi-Annual call for the Pabrai Wagons Fund, Mohnish Pabrai didn’t sugarcoat the recent portfolio drawdown. Instead, he offered insights into long-term thinking. “We’ve had a significant drawdown in the fund in the last few weeks,” he admitted, but quickly reframed the conversation: “You can only optimize for one variable… and for good or bad, the focus at the Wagons Fund has always been to optimize for long-term performance.”
That mindset—avoiding the noise of market fluctuations and staying anchored to intrinsic value—is a core takeaway for any serious investor.
Pabrai also made a compelling case for embracing volatility, especially in markets driven by emotion and momentum. “Auction-driven markets… tend to overshoot and undershoot from intrinsic value quite significantly,” he explained.
That means opportunities abound for the patient. As investors, we’re often tempted to smooth the ride, hedge our bets, or flee at the first sign of red. But Mohnish is clear: volatility is not the enemy—bad judgment is.
Some of the fund’s highest conviction bets offer textbook examples of buying mispriced assets. Take Edelweiss in India. “The market cap of Edelweiss is approximately $1 billion… Each of these businesses that are going public will probably come out at a market cap north of $1 billion each,” he said. That kind of sum-of-the-parts undervaluation doesn’t last forever, but while it does, it’s a dream for value-focused investors.
Similarly, his Turkish bet on TAV Airports is anchored in world-class management. “Probably the best management team I’ve met in Turkey.”
Then there’s his view on coal—an area many avoid due to ESG concerns. “We think that these companies… have the possibilities of having single-year cash flows exceeding a billion,” he said, making the case that met coal (used in steelmaking) has decades of relevance ahead. The play here is simple: misunderstood industry + low valuation + strong cash flow = opportunity.
Pabrai also reminded listeners that some things go “into the too hard pile,” referring to geopolitical risks affecting holdings like Anadolu Efes. And he emphasized that sometimes the best company—like Penske—is just too expensive. “One of my flaws is I have difficulty paying up,” he confessed, showing that even seasoned pros wrestle with valuation discipline.
Above all, this call was a lesson in staying grounded. “We like where we are sitting and where we are positioned,” he said at the close. Investors take note: ignore the noise, know your edge, and trust your process—even when the market doesn’t.
You can watch the entire call here:
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