This is a transcript of Mohnish Pabrai's investor call from August 2025. He discusses his fund's top holdings. On the market, he doesn't give a clear bullish or bearish view but stresses patience, e.g., coal stocks need a global recovery. Key holdings: Edelweiss (Indian financial firm) plans an IPO of its unit EAAA; Pabrai expects shareholders will eventually get shares spun off, like with Nuvama. TAV Airports (Turkish airport operator) owns Almaty Airport outright; he thinks it could be worth over $10 billion in a decade, vs. TAV's $2.4 billion market cap. Alpha Metallurgical Resources (US met coal miner) saw a surprising cost drop last quarter and barely burned cash.
Mohnish Pabrai, during the Pabrai Wagons Fund's Q2 2025 meeting, discussed the fund's largest holdings, including Edelweiss, TAV Airports, AMR, and Warrior Met Coal. The core view is that Edelweiss's EAAA IPO has been delayed to April 2026, but Pabrai expects Edelweiss to distribute 40%-60% of its s
Context: Mohnish Pabrai hosts the Pabrai Wagons Fund's second-quarter 2025 investor meeting. Before the formal discussion, Investor Relations Manager Aidan Townsend reads the standard legal and compliance disclosures, covering fund investment risks, non-diversification characteristics, small- and mid-cap stock risks, limited operating history, past performance not indicative of future results, and that views do not constitute investment advice. Pabrai then opens the meeting, noting that a large number of high-quality questions were received beforehand. He decides to categorize the questions into two types—specific questions related to holdings and general questions at the fund level—and plans to answer them in descending order of position size. A live Q&A window is also opened for follow-up questions.
Response and Views: Pabrai praises the quality of investor questions, stating they are "excellent, with investors demonstrating a deep understanding of holdings, strategy, and the market." He clarifies the order of responses will be from the largest to the smallest holdings but does not commit to covering all questions.
Reasoning Process: Based on the volume and depth of pre-meeting questions, Pabrai judges the investor base to be highly sophisticated. He therefore adopts a structured response strategy—first addressing holding-specific questions (in descending order of size), then general questions. This arrangement implicitly assumes that discussions of the largest holdings are most relevant to the majority of investors and that pre-meeting questions already cover the main concerns.
Conditions and Follow-up: Pabrai does not set an upper limit on the number of questions answered, only stating he will "try to answer as many as possible." The opening of a live Q&A window means subsequent discussion may be influenced by on-site follow-up questions.
Context and Concern:
The fund’s largest holding, Edelweiss, has postponed the IPO of its subsidiary EAAA to April 2026. Investor concern centers not on the delay itself, but on the structure: unlike the earlier Nuvama demerger, this EAAA IPO is a stake sale, meaning investors will not directly receive shares in the subsidiary. The host poses the question on behalf of investors: under this structure, where does the value come from?
Mohnish Pabrai’s Response and Reasoning:
1. Reviewing the Historical Precedent of Nuvama:
2. Current Situation and Expectations for EAAA:
3. The Broader Value Unlocking Narrative:
4. Risk Disclosure and Investment Discipline:
Context: Some investors have noted that TAV Airports' "net cash flow from operating activities" declined from the first half of 2024 to the first half of 2025, and are asking how to interpret this change.
Response and View: Mohnish Pabrai believes that TAV should not be examined as a single business. TAV is a holding company structure with over a dozen independent business units. Looking only at the consolidated financial statements, especially under Turkey's inflation accounting, yields almost no meaningful conclusions and can even be described as "a fool's errand."
Reasoning Process:
1. Structural Complexity: TAV's business portfolio includes airport operations, ground services (Havas), technology company (TAV Technologies), and other segments. Each segment has different cash flow characteristics and growth stages, and consolidated data masks the true performance of individual businesses.
2. Accounting Distortion: Turkey's high inflation environment forces the company to adopt inflation accounting adjustments. Pabrai admits he still does not fully understand its specific impact, and therefore considers conclusions drawn from consolidated statements unreliable.
3. Core Asset Value: Pabrai emphasizes focusing on the value of individual assets. He highlights TAV's most unique asset—Almaty Airport:
4. Other Asset Values:
5. Dividend Outlook: French shareholder Aeroports de Paris, holding 46% of TAV, wants TAV to distribute half or more of its profits as dividends. It is expected that by 2026, TAV's leverage will drop to a level that supports high dividends, at which point strong dividends will begin.
Conclusion and Action: Pabrai states that TAV has an extremely high-quality portfolio of assets and benefits from demographic tailwinds of passenger traffic growth in almost all operating regions. The fund's strategy for TAV is to "sit and do nothing," believing the management team is excellent and no action is required.
Question and Context
The questioner noted that Pabrai previously claimed AMR (Alpha Metallurgical Resources) and Warrior Met Coal are among the lowest-cost metallurgical coal producers globally, but public data does not readily support this conclusion. The questioner requested clarification on which quartile each company occupies on the global metallurgical coal cost curve, including Chinese domestic mines.
Pabrai's Response
Pabrai first praised this as a high-quality question, then pointed out a key premise: when discussing the metallurgical coal cost curve, it must be limited to the "seaborne metallurgical coal market." Chinese domestic metallurgical coal is mostly low-grade and not traded via seaborne routes, making it incomparable to high-grade seaborne metallurgical coal (e.g., the Australian PLV benchmark). This is an "apples to oranges" comparison and irrelevant to the fund's holdings.
Specific Cost Positions
Transportation Cost Advantages
Financial Performance and Cash Position
Despite extremely low metallurgical coal index prices in the second quarter, Pabrai initially expected Alpha to experience significant cash burn, but the actual result was almost no cash burn, surprising the fund. Alpha's cash reserves are nearly double its target level.
Investment Logic and Outlook
Pabrai expressed liking both positions and emphasized that this is a demand-driven rather than supply-driven story. It requires the global economy to "get back on track"; tariff policies are currently unfavorable, but how the situation evolves is unknown. If factors such as the end of the Ukraine war lead to increased construction activity, the demand side could see strong tailwinds. He expects good returns to materialize within the next two to three years.
On Railroad Mergers and Barge Transport
Background: An investor asked whether Mohnish Pabrai subscribes to the paid Substack newsletter of coal industry analyst Matt Warder, and whether he uses it as a basis for decision-making or relies on his own analysis.
Mohnish Pabrai's response:
Background: Some investors learned from a podcast that Pabrai had stated he did not plan to hold more than 33% of Reysas shares across all funds, including Wagons. The questioner wants to know whether this threshold has been exceeded and, if so, what impact it has on the Wagons fund.
Mohnish Pabrai's Response:
1. No Legal Restrictions: Turkish law allows foreign investors to freely hold any proportion of shares in a listed company, so there are no legal barriers.
2. Reason for Voluntary Limit: Pabrai observed that the "body language" of Reysas' founders suggested they might be uneasy about the large position held by Pabrai's funds. Therefore, when Pabrai's funds held slightly less than 33% of Reysas Logistics shares, Pabrai voluntarily committed not to increase the stake further. This was a voluntary action aimed at reassuring management and owners that Pabrai's funds are purely passive investors.
3. Impact on the Wagons Fund: Precisely because of this voluntary limit, when the Wagons fund was launched, it initially had almost no position in Reysas. Since Pabrai Funds (the older fund) was already near the 33% cap, there was no room for the new fund. Later, Pabrai Funds had to reduce some of its Reysas Logistics shares due to redemptions, which created a buying opportunity for the Wagons fund.
4. Two Entities, Different Strategies:
5. Current Holdings and Judgment: The Wagons fund currently holds both Reysas Logistics and Reysas REIT. Pabrai believes both are significantly undervalued and that management is an excellent capital allocator. He expects intrinsic value to grow over time and hopes the gap between market price and intrinsic value will gradually narrow.
Question and Context: Investors note that Valaris has a replacement cost of approximately $25 billion, while its market capitalization is only $3 billion, a stark disparity. The question is: given that asset value is so undervalued, why does the fund not build a larger position?
Mohnish Pabrai’s Response and Reasoning:
1. Replacement cost is not a decisive valuation metric. Pabrai cites U.S. Class I railroads as an example: the assets of Union Pacific or BNSF are nearly impossible to replace (e.g., port access in Long Beach or Los Angeles cannot be obtained, and the cost of building a new transcontinental railroad would be several times the market capitalization), yet these railroads do not trade at replacement cost. The ultimate determinant of enterprise value is the present value of all future free cash flows, and Valaris is no exception. A high replacement cost is merely an interesting data point; it does not imply that the stock price will converge toward it, and it may even exceed replacement cost under market tightness.
2. The more critical variable is supply-demand dynamics. Pabrai believes that these offshore oil service companies are highly unlikely to order new drillships on their own—a single drillship order exceeds $1 billion, and to achieve a 12% return, it would require a day rate of $700,000 for 30 consecutive years of uninterrupted operation. Since no one will offer a 30-year contract, commercial orders are extremely unrealistic. The only possible orders could come from national oil companies, but even then, the order price is as high as $1 billion, with a delivery lead time of 3 to 5 years. This means the current fleet of approximately 80 drillships is unlikely to increase and may instead shrink.
3. Current utilization and near-term outlook: Utilization in this sector is currently around 85%–90%. Once it stabilizes above 90%, day rates could rise significantly. However, Pabrai judges that an "air pocket" will emerge in the next 6 to 12 months, potentially causing a temporary decline in utilization; about 15 to 18 months later, utilization will recover to near 90% or higher.
4. Asymmetry: Pabrai describes both the coal and offshore oil service positions as asymmetric bets—many scenarios could generate remarkable cash flows, but there are also unexpected outcomes that could lead to results falling short of expectations. He believes that, given the very conservative entry prices, the risk-reward ratio justifies the bet, but he has not significantly increased the position size.
Background: The investor asks about the specific timing and reasons for the fund's sale of Tri Pointe Homes, a homebuilder stock.
Mohnish Pabrai's Response:
Pabrai did not directly address the specific timing of the Tri Pointe Homes sale. Instead, he explained the reasons behind the frequent portfolio turnover in the fund's early days, using this to illustrate the underlying logic of the sell decision.
1. Special Context of the Fund's Early Days:
2. Core Logic of Sell Decisions: Opportunity Cost Analysis:
Context: An investor asked about Pabrai's recent trip to Turkey, specifically whether the management of the exited positions CCI (Coca-Cola İçecek) and FS (Femsa? The original text does not specify the full name) had changed their attitude after the fund's exit, as well as the situation following the Russian beer acquisition.
Pabrai's Response:
Context: An investor asked why the fund liquidated its positions in Brookfield Asset Management (BAM) and Core Natural Resources (CNR).
Mohnish Pabrai's Response:
Key Judgment: The exits were not due to major issues with the underlying positions themselves, but rather based on portfolio rebalancing and relative preferences. Pabrai clearly distinguished between "pure-play met coal miners" and "diversified portfolios" to explain the reduction in Core.
Background: In a recent interview, an investor noted that some are shorting certain auto dealers due to factors such as inventory dynamics, and asked for Pabrai’s view.
Pabrai’s Response and Reasoning:
1. Market Misunderstanding: Pabrai believes the market misunderstands auto dealers. The Wagons fund holds positions in some auto dealers, which, while not the highest-conviction bets, have been held for some time, and he is bullish on this sector.
2. Core Business Model: Profits in the Back End: Pabrai points out that the key point people overlook is that most of auto dealers’ profits come from the “back-end business”—namely, parts, service, used cars, and finance & insurance (F&I). New car sales margins are near zero because new cars are highly commoditized and are not a source of profit.
3. Supportive Trends:
Conclusion: Pabrai believes auto dealers are good businesses, and the fund is bullish on and holds related positions.
Context: An investor directly asks Mohnish Pabrai, nearly two years after the launch of Wagons Fund, how he evaluates his own performance, whether he will adjust his strategy, and whether his interests are aligned with the fund's investors.
Pabrai's Response and Views:
Pabrai first notes that Wagons Fund has been around for less than two years, which is too short a period to draw meaningful conclusions, though he acknowledges he may be biased. He adds that this period coincides with the "Magnificent Seven" and AI themes dominating the market, while many small-cap stocks (companies outside the top 20 of the S&P 500) have underperformed. He expects the market to eventually shift from a "voting machine" to a "weighing machine," at which point a rotation will occur.
Core Judgment: Pabrai explicitly states that he loves the Wagons Fund portfolio, describing it as a collection of "wonderful businesses." Drawing on his over 30 years of investment experience, he points out that many investments only truly show returns after being held for five years or more, with the fifth, sixth, and seventh years often being the harvest period.
Key Examples and Data:
Outlook on Turkey:
Pabrai shares observations from a recent trip to Turkey: the business environment is currently very sluggish, with interest rates having peaked at 50% and now falling to just over 40%. However, the high-interest-rate policy has been effective, bringing inflation down from nearly 100% to about 20% annually. He expects Turkish inflation to fall to single digits within 2-3 years, at which point interest rates could also drop to single digits, triggering a significant economic boom. He believes Turkish holdings have performed reasonably well in headwinds and could be very strong once tailwinds arrive. However, he cautions that this should be viewed in light of his own bullish bias.
Alignment of Interests: Pabrai does not directly answer whether his interests are aligned, but by emphasizing his love for the portfolio, his long-term holding strategy, and sharing personal investment experiences (such as the Reysas case), he implies that his interests are aligned with long-term investors.
Context: An investor asks that Pabrai employs a highly concentrated investment strategy in his private funds (e.g., heavy positions in a few names), but mutual funds are required by regulation to diversify. The investor wonders how long-term performance would differ if mutual funds could concentrate like private funds.
Mohnish Pabrai's Response:
Key Reasoning:
1. Mutual fund diversification rules are a reasonable design to protect public investors.
2. While diversification reduces the risk of a single name, it also compensates for the fund manager's potential error in judging "which is the best."
3. The actual portfolio, through "sector concentration, individual stock diversification," retains the concentrated investment approach within compliance—heavy exposure to a few sectors, but holding multiple names within each sector.
Background: Investors are concerned that the Dalal Street hedge fund may be prioritized over the Pabrai mutual fund (i.e., the Wagons Fund) in trading, creating a conflict of interest.
Mohnish Pabrai's response:
Background: Investors note that the Pabrai Wagons Fund currently has assets of approximately $80 million, far below the total assets under management managed by Pabrai (by about an order of magnitude). They ask whether there is a threshold below which the fund might be closed because fees cannot cover operating costs, or fees might be raised to compensate for costs.
Mohnish Pabrai's response:
Additional information: Pabrai then indicated he would check the chat window for interesting questions with broad appeal, suggesting this question had been answered.
Context and Concern
An investor asked about Polaris, an offshore service company held in the fund: Polaris currently employs two- to three-year contracts as its primary strategy, viewing short-term contracts as “stepping stones” to longer-term ones. The investor worries that if most floater contracts have already passed the day-rate inflection point, Polaris might sacrifice upside beyond 2027 by locking in long-term contracts too early.
Mohnish Pabrai’s Response and Views
Pabrai holds Polaris’s management in high regard, believing they deeply understand their assets and take a long-term perspective. He specifically noted:
Reasoning and Key Judgment
Pabrai’s response effectively dismisses the investor’s concern about “sacrificing upside.” His logic is that Polaris’s management is not simply choosing between “locking in visibility” and “preserving upside.” Instead, they achieve both through layered management—the existing fleet fills idle periods with short-term contracts while maintaining flexibility, and the cold-stacked fleet waits for more favorable market timing. Given the long mobilization cycle (12–18 months) for cold-stacked vessels, even if market day rates rise significantly after 2027, Polaris has ample time to deploy before the inflection point. Thus, Pabrai considers the current strategy prudent, with no apparent risk.
Question & Context: Investors have two concerns regarding Edelweiss: first, frequent management departures, particularly the exit of co-founder Venkat; second, Edelweiss’s primary value lies in its subsidiary EAAA, but the IPO of this subsidiary has been repeatedly delayed, raising doubts about whether it will ever materialize.
Response & View: Mohnish Pabrai explicitly refuted the claim of "frequent management departures" and expressed confidence in the EAAA IPO.
Reasoning & Basis:
1. Regarding Management Departures:
2. Regarding the EAAA IPO:
Key Data & Facts:
Context: Investors are concerned that compliance limits on the size and number of positions in the Pabrai Wagons fund may force the manager to sell outperforming stocks prematurely, preventing full enjoyment of long-term compounding.
Response and View: Mohnish Pabrai stated that the fund’s current position structure fully complies with all rules and regulations, and he is satisfied with the existing portfolio composition. He acknowledged some trade-offs but believes the differences are minor and do not materially impact the ability to let winners run.
Reasoning and Examples:
Key Conditions: Pabrai’s optimistic assessment rests on two premises: first, the current position structure is compliant; second, the deviation between actual and ideal positions is within an acceptable range. He did not discuss how the fund would handle a scenario where a stock’s significant appreciation pushes a position above the limit (e.g., whether forced selling would occur).
Issue and Context: An investor noted that Warrior's strength lies in serving the Atlantic Basin (via the Port of Mobile, Alabama), while the Asian market is the primary source of demand. Low-cost coal-producing countries such as Australia, Russia, Canada, and Mozambique are geographically closer to Asia. The investor asked Pabrai how he views this competitive disadvantage.
Response and View: Mohnish Pabrai believes that the most costly part of coal transportation is land transport, not sea transport. Once coal is loaded onto a ship, the origin point globally does not matter; the key is to get the coal to the port at the lowest cost. Warrior has excellent logistics at the Port of Mobile. Pabrai spent most of a day two years ago conducting a field inspection of the Port of Mobile, describing it as a first-class infrastructure built by the Alabama state government for coal and other bulk commodity trade.
Reasoning and Data:
Context: The investor asks whether the bet on Edelweiss essentially relies on corporate actions (such as an IPO or spin-off) to unlock value, and what the potential waiting time might be if no such action occurs.
Response and View: Mohnish Pabrai believes that the Edelweiss situation is more likely to see the independent valuations of its various assets eventually reflected at the parent level, without necessarily waiting for a specific corporate action. He acknowledges the uncertainty of the waiting time but emphasizes the asymmetric nature of the investment.
Reasoning and Examples:
1. Analogy with the Nuvama Case: Pabrai cites the example of Nuvama before its IPO in 2021. At that time, as an asset under Edelweiss, its value was completely unreflected in the parent company's stock price. Today, Nuvama is valued at $3 billion. This case illustrates that even without an immediate corporate action, asset values can eventually be transmitted to the parent company through changes in market perception.
2. Long-Term View on EAAA: Pabrai judges that even if EAAA's IPO valuation might be $1 billion, $1.5 billion, or $2 billion, from a long-term perspective of 5 to 10 years, it will grow into a giant company worth tens of billions of dollars. Therefore, the current investment logic does not rely on short-term IPO arbitrage but is based on an assessment of EAAA's long-term growth potential.
3. Risk and Asymmetry: Pabrai acknowledges that nothing is certain in the stock market, but he believes the odds are favorable for this bet, and it is asymmetric (i.e., the potential upside far exceeds the potential downside). He ultimately responds with "we'll see," indicating acceptance of the uncertainty of the wait.
Conditions and Follow-Up: Pabrai does not provide a specific waiting time, nor does he tie the investment outcome entirely to corporate actions. His core argument is that the release of asset value can be achieved through long-term growth and market revaluation, rather than necessarily depending on short-term events.
Context: Investors noticed that Alpha’s management has been selling some of their holdings, raising concerns that this might be a negative signal. They asked Pabrai for his view.
Pabrai’s Answer and Reasoning:
1. Asymmetry in Buying and Selling Motives: Pabrai first proposed a general principle—people buy stocks for only one reason (optimism), but sell for hundreds of reasons (liquidity needs, tax planning, diversification, etc.). Therefore, the signaling value of management selling is often overestimated or even misinterpreted, and it cannot be simply equated with a bearish view on the company.
2. Specific Assessment of Alpha’s Management: Pabrai listed the strengths of Alpha’s core management one by one, indicating his high confidence in their ability and integrity.
3. Conclusion: Pabrai explicitly stated that he has no concerns whatsoever about the management’s stock sales. His reasoning is that the board and management still hold substantial ownership, which is sufficient to ensure their interests are aligned with shareholders’. He believes these sales are for personal reasons, not due to a loss of confidence in the company’s prospects.
Mohnish Pabrai views this positively, arguing that the French government's presence as a shareholder is not a negative factor but a net positive.
1. Historical Performance and Governance Structure: Pabrai notes that TAV's former Chairman and CEO, Sani, was a highly aggressive manager ("aggressive guy"), acting as an "accelerator"; while French civil servants (representing Aeroports de Paris' 46% stake) played the role of a "brake" on the board. This tension created a healthy balance, ultimately enabling TAV's aggressive investments in major projects such as Almaty and Ankara, which yielded outstanding results.
2. Positive Role of the French Government:
Conclusion: Pabrai explicitly states that he does not view the French government as a negative factor; instead, he considers its presence a "net positive."