Semi-Annual Investor Call Transcript – March 19, 2025 — Summary & Takeaways

Opening and Background

The meeting opened with fund distribution manager Canh Tran reading standard legal and compliance disclosures, followed by Mohnish Pabrai briefly outlining the meeting agenda. Key information is as follows:

Meeting Type: Pabrai Wagons Fund semi-annual investor conference call, held on March 19, 2025.
Investor Participation: Pabrai received over 160 pre-submitted questions. Given the one-hour meeting duration, he could only address a small portion of them.
Answer Strategy: Pabrai stated he would prioritize questions raised multiple times in different forms, those related to the largest portfolio holdings, and those most likely to interest investors. He noted he would allocate time based on his best judgment.
Future Adjustments: Pabrai revealed that the meeting frequency may be changed from the current semi-annual schedule to quarterly, in order to more fully address investor questions.
Legal Disclaimer: The disclosures read by Canh Tran included: the fund is non-diversified, with higher concentration risk; it may invest in small- and mid-cap companies, which carry liquidity and higher volatility risks; the fund has a limited operating history and cannot guarantee achieving or maintaining an economically viable scale; past performance does not guarantee future results; expressed views may change and do not constitute investment advice or predictions of future events.

Question 1: The fund has given back all gains since inception—how to explain this? How can the fund be protected from future market declines or a potential recession?

Response and View (Mohnish Pabrai): Pabrai acknowledges that the fund has experienced significant drawdowns in recent weeks and confirms this is true. However, he clearly states that the fund's core objective has always been to optimize long-term performance, rather than to smooth volatility or hedge risks. He has never seriously considered volatility, smoothing returns, or hedging strategies, and admits he is incapable in these areas.

Reasoning Process:

1. Optimizing a Single Variable: Pabrai points out that any effort can only optimize one variable, not two simultaneously. The fund chooses to optimize long-term performance, thus inevitably sacrificing short-term stability.

2. Core Investment Decision: The primary driver of his investment evaluation is the risk-reward ratio—seeking bets with relatively low downside risk and relatively high upside potential.

3. Nature of Markets: In auction-driven markets, listed securities can deviate significantly from intrinsic value, with price fluctuations far exceeding those of asset classes like single-family homes or apartments, which are dominated by rational buyers and sellers. He cites an example: the arrest of the Istanbul mayor (a leading candidate for the 2028 presidential election) triggered a market crash and a historic low for the currency, resulting in losses across all his Turkish positions. However, from a long-term intrinsic value perspective, he believes this political event has a negligible impact on these businesses.

Key Data and Cases:

Drawdown Fact: The fund has experienced significant drawdowns in recent weeks, though no specific percentage was provided.
Market Case: The Turkish market experienced sharp volatility due to a political event (the mayor's arrest), and all of Pabrai's Turkish holdings declined. However, he believes this will not affect the long-term intrinsic value of these companies.

Conclusion: The fund does not seek protection from market declines. Instead, it adheres to a long-term value investing strategy based on low downside risk and high upside potential, accepting the significant price swings inherent in auction-driven markets.

Question 2: The Specific Undervaluation and Growth Prospects of Two Major Holdings: Edelweiss and TAV Airports

Mohnish Pabrai first confirmed the weight of these two stocks in the portfolio: as of year-end, TAV Airports and Edelweiss each accounted for approximately 15%-16%, totaling nearly 31%, making them the fund's highest-conviction holdings.

Edelweiss (Indian Financial Services Holding Company)

Pabrai has tracked the company for 7-8 years and recently spent half a day in Mumbai meeting with heads of various business lines.
The core thesis is spin-offs and IPOs: Two years ago, the wealth management business successfully went public, and its market cap now exceeds $2.5 billion. The alternative asset management business (analogous to an Indian version of Brookfield/BlackRock/Blackstone) is expected to list within weeks or months, with a potential market cap of $1-1.5 billion.
Key data: Edelweiss itself has a market cap of only about $1 billion, while the soon-to-be-listed alternative asset management business alone could surpass the parent company's valuation, similar to what happened with the wealth management IPO. Over the next 4-5 years, Pabrai expects one subsidiary to go public annually (insurance, mutual funds, alternative asset management, etc.), each potentially exceeding $1 billion in market cap.
These new businesses have low capital requirements and high growth, operating in India's high-growth mutual fund and financial services sectors. Pabrai believes the current valuation is completely unreasonable and is willing to hold for the long term.

TAV Airports (Turkish Airport Operator)

Pabrai describes this as one of the best management teams he has seen in Turkey and globally, with Harvard Business School having written two case studies on the company.
Core asset: Almaty Airport in Kazakhstan. The deal was completed during COVID when passenger traffic was zero, and the company faced the choice of invoking force majeure to exit or renegotiate, ultimately completing the acquisition at a lower price.
Key data: The initial equity investment was about $120 million, paired with approximately $300 million in debt at a 5% interest rate over 25-30 years. An additional $250 million was later invested to build a new terminal (opened last year). Pabrai estimates that Almaty Airport alone could generate over $200 million in EBITDA annually within a few years, growing at more than 10% per year. If sold, the valuation could reach several billion dollars, while the total acquisition cost was only about $300 million.
Additionally, multiple airports under TAV benefit from a surge in passenger traffic driven by low-cost carriers, and since airports charge the same passenger fees regardless of airline type, this creates a strong tailwind.

Conclusion: Pabrai believes both stocks are currently priced well below their intrinsic value, and that intrinsic value itself is growing, making them excellent bets.

Question 3: Is the Coal Bet Based on Short-Term Price Judgments?

Question and Context

An investor argued that Pabrai’s coal holdings essentially amount to betting on prices returning above $300 per ton within the next two to three years—i.e., short-term price speculation. Pabrai denied this and explained the true logic behind his coal investments.

Answer and View

Pabrai explicitly stated that all coal bets are concentrated on metallurgical coal (met coal), not thermal coal. Metallurgical coal is an essential raw material for iron and steel production, fundamentally different from thermal coal used for power generation.

Reasoning Process and Key Evidence

1. Long-Term Certainty on the Demand Side: Blast furnaces currently under construction or about to be built globally have lifespans of 40–70 years. No company would invest in building a blast furnace if it believed the furnace would be unusable for the next 40–50 years. Therefore, demand for metallurgical coal is unlikely to be replaced by scalable, cost-effective alternatives for decades (even into 2070–2080).

2. Structural Constraints on the Supply Side: The geographic distribution of metallurgical coal is extremely limited, and even when new deposits are discovered, logistics and infrastructure development are exceptionally difficult and time-consuming. Past underinvestment in this sector will lead to a future mismatch between supply and demand.

3. Reserves and Cash Flow Potential: The coal companies Pabrai invests in have 20–60 years of recoverable reserves. These companies have market capitalizations between $1–2.5 billion, but annual cash flow could exceed $1 billion. He expects that in more than half, or even two-thirds, of the next 20 years, annual cash flow could surpass $600–700 million.

4. Risk-Reward Ratio: Taking a company with a $2 billion market cap as an example, if it can generate $20–30 billion in cumulative cash flow over the next 20 years, even after discounting and accounting for uncertainty, the risk-reward ratio is highly attractive. Pabrai stated that this is why he is willing to make a long-term bet.

Limitations

Pabrai did not provide specific price targets or timelines, instead emphasizing the supply-demand fundamentals over a multi-decade horizon. He acknowledged that metallurgical coal prices will fluctuate but believes the long-term cash flow potential far exceeds what current market capitalizations reflect.

Question 4: Why Sell Core Natural Resources (CNR) While Retaining Warrior Met Coal (WAR) and AMR?

Background: Investors noted that the fund sold Core Natural Resources (CNR) from its holdings while retaining Warrior Met Coal (WAR) and AMR, seeking the rationale behind this decision.

Guest Response: Mohnish Pabrai explained that Core Natural Resources is a company formed by the merger of Arch Resources and Consol Energy, with operations encompassing both thermal coal and metallurgical coal (met coal) production. The fund has adjusted its coal holdings to a pure met coal portfolio. Pabrai stated that he personally prefers the met coal side, hence the decision to sell CNR and retain Warrior Met Coal and AMR, both pure met coal producers.

Reasoning Process:

The core of the decision is business purity: CNR is a hybrid (thermal coal + met coal), while Warrior and AMR are pure met coal companies.
Source of preference: Pabrai believes met coal has more favorable fundamentals or risk-reward characteristics, though no specific data or mechanisms were elaborated here.
No mention was made of the timing, price, or position size of the sale, nor was there a negative judgment on CNR's long-term prospects.

Key Data: No specific figures.

Limitations: Pabrai did not discuss a detailed comparison between thermal coal and met coal, nor did he explain why he chose not to hold all three coal stocks simultaneously.

Question 5: Does Coca-Cola and Anadolu Efes dropping out of the top ten holdings indicate a loss of confidence in these companies?

Mohnish Pabrai first explained the direct reason for Anadolu Efes falling out of the top ten holdings: On December 31, 2024, Russia took over the assets of Anadolu Efes and AB InBev in Russia. These two companies were once the largest beer companies in Russia. Pabrai noted that this event was unexpected, as relations between Turkey and Russia are generally acceptable, albeit with fluctuations, but this takeover appears to be related to the Ukraine conflict. He categorized such events into the "too-hard pile," arguing that from a fund perspective, this makes the investment difficult.

Subsequently, Pabrai elaborated on the position structure constraints of the Pabrai Wagons Fund to explain why changes in the top ten holdings do not necessarily reflect shifts in investment conviction:

The fund's assets are divided into two halves: The top 50% must hold at least 3 stocks, with no single position exceeding 25%; the bottom 50% has no single position exceeding 5%, typically targeting 4%.
Under this rule, the fund holds a minimum of approximately 16 stocks (about 3 in the top 50% and about 13 in the bottom 50%).
Since only about 7 of the 13 stocks in the bottom 50% can enter the top ten holdings (depending on specific percentages, such as the subtle difference between 4% and 3.9%), the entry and exit of the top ten holdings may result solely from minor changes in position ranking, rather than changes in conviction.

Pabrai did not directly answer whether he has lost confidence in Coca-Cola, but he implied that Anadolu Efes's exit was due to a "too-hard" judgment driven by geopolitical risks, while Coca-Cola's exit may be more of a natural consequence of position ranking.

Question 6: Auto Dealer Holdings — Which Moats Has the Market Misread? Thoughts on Asbury’s Acquisition of Herb Chambers?

Question & Context: An investor asked whether successful acquisition-driven expansion is the core logic behind Pabrai’s holdings in auto dealers, and requested his views on Asbury’s recently announced acquisition of Herb Chambers.

Answer & View: Mohnish Pabrai believes the market has two to three significant misreadings regarding the moats of auto dealers and their durability. He explicitly states that these misjudgments are the source of the opportunity in his holdings.

Reasoning Process & Data:

1. Misjudgment on the Pace of EV Adoption: The market originally expected EVs to dominate at a much faster pace, with a large number of EVs bypassing dealer networks to sell directly to consumers. However, Pabrai points out that the U.S. public’s willingness to switch to EVs is far lower than initial forecasts. Consumers still have concerns over a range of issues, including driving range and charging time, and the adoption process for EVs has slowed significantly.

2. Misjudgment on Sales Channels: He argues that a large number of EVs will ultimately still be sold through traditional auto dealers. For original equipment manufacturers (OEMs), the cost of selling through dealer networks is low, with minimal friction costs, making it a reasonable choice to use this channel.

3. Misjudgment on Aftermarket Parts & Service Profitability: The market believes that EVs use far fewer parts and services than internal combustion engine vehicles, which would severely erode dealer profits. However, Pabrai cites multiple studies indicating that, in terms of total parts and service usage, EVs are comparable to non-EVs. He even suggests that EVs may bring dealers higher parts and service margins, as traditional businesses like oil changes have inherently low margins and a significant portion of that business has already been diverted to third parties. In contrast, major repair items for EVs, such as battery issues or battery replacements that arise after four or five years, typically must be performed at the dealer, representing high-ticket, high-margin business.

Experience & Cases: Pabrai specifically named Asbury, AutoNation, and Group 1 as three auto dealers, stating that they are exceptionally well-managed with high-quality management teams. In terms of capital allocation, these companies have been very prudent in balancing acquisitions of other dealers with share buybacks.

Conclusion: Pabrai summarizes this as a bet on a very stable long-term business at a relatively low valuation multiple. He did not directly comment on the specifics of Asbury’s acquisition of Herb Chambers but placed it within the context of the industry judgments above, as an example of these excellent dealers continuing to engage in prudent capital allocation.

Question 7: If homebuilders increase supply, won't home prices be affected?

Question & Context: The investor notes that the structural housing shortage in the U.S. has persisted for quite some time, helping homebuilders sell homes at higher prices. However, the investor raises a critical follow-up: If builders increase the number of homes (supply), wouldn't that affect the prices they can charge? This essentially questions the sustainability of builders' current high profit margins—increased supply typically implies pricing pressure.

Answer & View: Mohnish Pabrai believes the issue is far more complex than simple supply-demand dynamics. He acknowledges the housing shortage in the U.S. but emphasizes that affordability and purchasing power are more critical constraints. His core judgment is: Large homebuilders are continuously capturing market share through structural advantages, which allow them to maintain pricing power even as they increase supply.

Reasoning Process & Key Mechanisms:

1. Market Structure Shift: The largest homebuilders (e.g., Toll Brothers) are capturing market share from smaller "mom-and-pop" builders. Large builders possess significant structural advantages that make it difficult for small firms to compete at equivalent production costs.

2. Brand Premium: Large builders have brands preferred by homebuyers, which inherently supports higher selling prices.

3. Capital Allocation Discipline & the NVR Model: Pabrai notes that large builders took a long time to truly understand and adopt the NVR model. The core of this model includes:

Asset-light approach: All large builders are reducing land holdings and increasingly using land options, significantly improving capital efficiency.
Centralized manufacturing: NVR pioneered this model—prefabricating large components of homes in central factories and then transporting them to sites for assembly, rather than building everything on-site. Both practices further increase the competitive difficulty for smaller builders.

4. Financial Discipline: Current builder valuations are low, and they demonstrate strong buyback discipline with very prudent capital allocation.

Conclusion: Pabrai believes that large builders have built a moat through the structural advantages mentioned above (brand, asset-light model, centralized manufacturing, capital discipline). This allows them to offset pricing pressure through efficiency gains and market share expansion while increasing supply, delivering "more than fair" returns to shareholders.

Question 8: What will Reysas’s revenue and net profit look like over the next 10, 15, and 20 years? How large can it grow?

Mohnish Pabrai did not provide a direct quantitative financial forecast. Instead, he explained from a management perspective why it is impossible to think about Reysas over such a long time horizon.

Management Structure: Reysas is run by a father-son duo with distinctly different styles. The son describes his father as the "accelerator" and himself as the "brake." Pabrai, after observing them for several years, believes this characterization is accurate.
Role Division: The father is a dreamer, more creative, constantly seeking new businesses or ventures. The son is energetic, strong in execution, and possesses a pragmatic, accountant-like mindset, keeping him very grounded.
Decision-Making Mechanism: There is "healthy friction and debate" between the father and son, resulting in exceptionally high-quality decisions. Pabrai emphasizes that ensuring both individuals remain in place is important for the fund. Currently, their relationship is stable, and while tension exists, it leads to good decisions.
Time Horizon Constraints: The father is around 65 years old, and Pabrai is uncertain how long he will remain fully engaged. Therefore, the fund cannot think about Reysas over spans of 10, 15, or 20 years, as the management structure—particularly the father’s level of involvement—could change within 5 years or even sooner.
Track Record: Over nearly six years of observation, Pabrai has never seen the father-son duo make a major mistake. While he believes the business could have easily seen some missteps, their "betting hit rate" has been very high. They have completed a series of outstanding transactions and are currently performing exceptionally well.

Question 9: Why Not Build a Larger Position in Reysas?

Issue and Context: An investor asked whether there were technical reasons preventing the Pabrai Wagons Fund from expanding its position in Reysas.

Response and View: Pabrai explicitly stated that the reason for limiting the position was not technical or liquidity-related, but out of respect for the founding family's wishes. He observed that the founding family conveyed, through very subtle body language, a preference that Pabrai not continue to increase his holdings. Pabrai emphasized that when combining holdings across Pabrai Funds (other funds under his management), they already held a considerable stake in Reysas. He chose to respect the founder's wishes to avoid damaging the positive relationship.

Reasoning and Conditions:

Pabrai acknowledged that without this constraint, he would have preferred to buy more Reysas earlier and across his other funds (not just the Pabrai Wagons Fund).
However, out of consideration for maintaining a long-term cooperative relationship, he voluntarily restrained further accumulation.
Conclusion: Reysas will not become a heavy-weight position in the Pabrai Wagons Fund.

Question 10: You exited Danos in another fund but continue to hold it in this fund. Could you explain the different risk-reward calculations behind these two decisions? Given tariffs and the global economic situation, are you uneasy about the outlook for daily tanker rates?

Mohnish Pabrai responded that Danos is a shipping company with a currently very low valuation. He noted that when comparing the company's locked-in long-term charters and future cash flows to its market capitalization, the valuation appears unjustified. Pabrai stated that they are satisfied with their position in Danos.

Regarding the reason for the difference in holdings across funds, Pabrai explained that the Pabrai Wagons Fund holds a much larger number of positions than the other funds he manages. For example, Pabrai Funds does not have such position size constraints. Consequently, the Pabrai Wagons Fund may contain several positions that have no corresponding holdings in other portfolios. He concluded that this discrepancy should not be overinterpreted; it is simply a result of how the different funds operate.

Question 11: Why does the fund hold multiple similar positions (e.g., coal, homebuilders, auto dealers) rather than concentrating investment in the single most favored stock?

Question and Context: Investors note that the fund holds basket-like positions across industries such as coal, homebuilders, and auto dealers, and ask whether this is due to liquidity, diversification, or other strategic considerations, and whether there is a preference for concentrating investment in the top-ranked single stock.

Answer and View: Mohnish Pabrai acknowledges that he personally prefers concentrated investment in a single best stock, but the fund currently adopts the "basket" approach due to constraints from diversification rules.

Reasoning Process:

Pabrai points out that within the three baskets—coal, homebuilders, and auto dealers—he can identify "the best of the three," and if rules allowed, he would allocate all capital to that single stock.
Using auto dealers as an example, although differences among the stocks are small, one or two are clearly superior to the others; the same applies to homebuilders.
He explicitly states that his natural tendency as an investor over decades is to be concentrated, but the fund must comply with rules, so the final approach is to concentrate capital as much as possible on the highest-conviction stocks while respecting those rules.

Key Data and Constraints:

The original text does not disclose specific details of the diversification rules (e.g., single position limits, industry concentration caps).
Pabrai does not specify which companies are preferred within each basket, nor does he provide position weights or ranking criteria within each basket.
The conclusion is that the current basket-style holdings are a second-best choice under rule constraints, not a strategic preference.

Question 12: As Assets Under Management Grow, Will the Fee Rate Be Reduced or Will the Fund Convert to an ETF?

Background: Investors are asking whether the Pabrai Wagons Fund plans to lower its fee rate as assets under management increase, and whether it might eventually convert to a more tax-efficient ETF structure.

Pabrai's Response:

Current Fee Structure: All mutual funds have fixed costs. As scale increases, most of the fees may convert into profits. The Pabrai Wagons Fund has not yet reached the point of economies of scale and would need assets under management to reach tens of billions of dollars to achieve sufficient scale.
Fee Philosophy: Pabrai explicitly stated that he does not favor high fees and noted that the fund has already set a fee cap and is internally subsidizing fund operations as assets grow.
Future Possibility: When the fund reaches sufficient scale, the feasibility of reducing the fee rate will be reassessed, but no specific timeline or commitment was given. Regarding a potential conversion to an ETF, Pabrai did not directly respond, implying that scale growth is the current priority over structural conversion.

Question 13: Recent Reading Recommendations

Question: The host asks Mohnish Pabrai about books he has recently read or is currently reading.

Answer:

Pabrai recommends a new book, Buffett and Munger Unscripted (by Alex Morris). This book compiles all archived CNBC videos of Berkshire Hathaway annual shareholder meetings from 1994 onward and reorganizes them by topic—similar to what Larry Cunningham did with Buffett’s letters to shareholders.

Reasoning and Basis:

Unique Value: Pabrai notes that the Q&A sessions at the shareholder meetings are impromptu; Buffett and Munger do not know the questions in advance, and their answers are unrehearsed, thus better reflecting their unfiltered, genuine thinking.
Personal Experience: Pabrai himself has watched all 30 years of shareholder meeting videos (5–6 hours each year) three times in total. He believes Morris’s approach of reorganizing the content by topic is highly valuable and a resource worth paying attention to.

Question 14: Oxy’s current FCF yield is about 10%, so why is it still worth holding?

Context: An investor noted that Occidental Petroleum (Oxy), based on current production and oil at $70/barrel, generates approximately $4 billion in annual free cash flow, corresponding to a price-to-earnings ratio of about 10 times. He believes this represents merely a “decent” rather than a “stunning” opportunity, and that the low-carbon business risks are too far in the future. He asked what he might be overlooking.

Mohnish Pabrai’s response:

Positioning: Oxy is a lower-conviction bet within the fund, but still worth holding.
Core rationale:

1. Management: Betting on CEO Vicki Hollub, whom he considers highly capable.

2. Assets and operations: Oxy has a strong position in the Permian Basin and has made significant innovations in extraction technology and cost reduction.

3. Moonshots:

The carbon capture business is one potential catalyst.
Citing Charlie Munger, Oxy has achieved some “magical” breakthroughs in fracking technology, driving growth; further technological breakthroughs may unlock additional asset value.

4. Oil price floor: When oil prices fall significantly below $70, $60, or even $50, a large amount of shale oil production would disappear. Since shale oil plays a key role in global oil and gas production, this effectively sets a floor for oil prices (shale becomes the marginal producer), reducing extreme downside risk.

Summary: Pabrai is bullish on management, the company’s positioning, and its prudent capital allocation and operational approach, which he believes constitute investment value.

Question 15: The Future of Home Insurance and Its Impact on Home Builders

Issue and Context: An investor asked Mohnish Pabrai for his views on the future trends of residential home insurance and whether this would affect home builders.

Response and View: Pabrai believes that people buy homes out of necessity, much like purchasing a car. The home insurance issue largely depends on geography and will have an impact, but it is not yet significant enough to fundamentally alter home-buying behavior.

Reasoning and Data:

Necessity Attribute: Home buying is a necessity, so rising insurance costs will not lead people to completely abandon purchasing homes.
Significant Geographic Variation: Pabrai used specific data to illustrate the vast differences in insurance costs across regions:
In Baton Rouge or New Orleans, Louisiana, approximately one-quarter (25%) of the monthly mortgage payment goes toward insurance.
In Florida, this ratio is 17% to 20%, also very high.
Limited Impact on Builders: Large home builders have footprints all over the place across the United States, so rising insurance costs in a single region have a limited impact on their overall business.
Adjustments in Buyer Behavior: Home buyers consider the total cost of ownership. Rising insurance costs are indeed a negative factor, but Pabrai believes it has not yet reached a level that forces people to massively shift toward buying smaller or cheaper homes to maintain affordability. The core reason remains: they still need to have a place to stay.

Question 16: Why Do We Hold Three Auto Dealers but Not the One I Consider the Best?

Question and Context: An investor noted that the fund holds three auto dealer companies but does not include the one he considers the best, asking Pabrai why he made this investment choice.

Answer and Perspective: Pabrai frankly admitted that the questioner was correct. Among all the dealers he examined, Penske Automotive Group (PAG) left the strongest impression. However, he clearly stated, "Even though it is the best, I am not sure that investing in Penske will necessarily outperform investing in Asbury." He acknowledged that one of his shortcomings is a "difficulty paying a premium," which sometimes leads to suboptimal decisions.

Reasoning Process and Examples:

1. High Regard for Penske: Pabrai detailed his experience visiting Penske. He toured Penske's Premier Truck Group (truck retail and service division) in Dallas and was impressed by the cleanliness of its service bays and the amenities provided for drivers (lounges, showers, Netflix, recliners). He highly praised founder Roger Penske and his team, citing an example of Roger's extreme attention to detail—he would personally call the business CEO to point out a dirty truck on the road, believing it damaged the brand image. Additionally, Penske owns two Lexus dealerships in Austin, creating an almost monopolistic position.

2. Equal Recognition for Asbury: Pabrai also visited Asbury's Park Place Lexus dealership in Dallas, describing it as "one of the most eye-opening field trips." He marveled at its operational efficiency: selling a car every 30 to 35 minutes, with over 200 service bays, and salespeople fully empowered to close deals without seeking manager approval, which reminded him of Sam Walton's philosophy of "stack it high, sell it fast, and earn a reasonable profit."

3. Key Decision Factor: Valuation Difference: Although Pabrai believed Penske was operationally superior, Penske's valuation was significantly higher. He had to weigh whether paying a premium for Penske's excellent operations or investing in equally impressive Asbury or Group 1 at a lower price would offer a better risk-reward ratio. He ultimately chose the latter and admitted this could be a mistake.

Conditions and Follow-Up: Pabrai acknowledged that his "difficulty paying a premium" is a flaw and may have led to a suboptimal decision. He also noted that Lexus imposes strict limits on dealer ownership (no more than eight nationwide), so these top dealers are very cautious in selecting which eight stores to hold. Finally, he ended the answer due to time constraints and reiterated his commitment to communicating more frequently with investors in the future.

Pabrai Wagons｜投资者电话会逐字稿｜2025-03-19

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