This is a transcript of investor Mohnish Pabrai's Q&A call. His top conviction is Turkish logistics firm Reysas, praising its management's energy and creativity. He also favors Warrior Met Coal over Alpha Metallurgical, calling Warrior the 'Saudi Aramco of met coal' due to lower costs and better logistics. On heavily indebted Transocean, he admits risk but trusts management's deleveraging. He sees India's financial services as an early-stage opportunity, like the US in the 1980s.
Mohnish Pabrai discussed the core logic and risks of the fund's holdings during this shareholder Q&A session. He reiterated that Reysas is the highest-conviction position, citing management's rare energy and creativity, though constrained by an artificial position cap—REIT accounts for approximately
This section covers the opening of the meeting, including legal disclaimers and an overview of the meeting agenda, with no substantive investment content.
Aidan Townsend read the standard risk disclosures on behalf of the fund, covering key points such as the risk of principal loss, concentrated position volatility from non-diversification, liquidity risk in small- and mid-cap stocks, past performance not indicative of future results, position changes not constituting buy or sell recommendations, and that ETFs trade at market prices rather than net asset value, potentially at premiums or discounts.
Mohnish Pabrai then thanked participants, explaining that the meeting would select questions submitted by shareholders for answers, prioritizing questions on different companies to increase diversity, while also addressing fund-level general questions. He noted that the first question pertained to the fund's largest position, Reysas.
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Question and Context
The host noted that Reysas Logistics operates similarly to Amazon—using the parent company to make numerous small-scale attempts to see which one succeeds. The REIT is one such example, now accounting for most of the group’s value. So, by allocating more capital to the REIT rather than the parent, could the fund miss the next explosive business like AWS, akin to holding only the spun-off Amazon bookstore business and missing out on AWS?
Pabrai’s Response and Reasoning
Pabrai first acknowledged this as an excellent question, then elaborated from three perspectives: current position status, artificial constraints, and management traits.
1. Position Status and Artificial Constraints
2. Management Traits: Energy Level and Creativity
Pabrai spent considerable time explaining why he has such high conviction in Reysas, centering on management traits—directly relevant to the question, as these traits enable Reysas to continuously create new businesses like the REIT and tomato farm.
3. How Creativity and Energy Translate into New Businesses: Two Cases
4. Conclusion and Caveats
Pabrai concluded: Reysas is the fund’s strongest, highest-conviction idea. He explicitly stated: “We will only sell when the family sells.” He acknowledged that he cannot cover all details in this call but emphasized that Reysas checks all boxes in energy level, creativity, integrity, cheap valuation, capital allocation, and operations.
Question and Context: The questioner compared two metallurgical coal companies, Alpha Metallurgical Resources and Warrior Met Coal. Alpha is repurchasing shares and reducing its share count, but simultaneously depleting its reserves; Warrior, on the other hand, is heavily investing in the Blue Creek project to build a long-life, low-cost mine. The questioner noted that Alpha has approximately 50 years of reserves, while Warrior has less than 30 years, and asked: Has Pabrai calculated the economically recoverable reserves after deducting sustaining capital, reclamation, and development costs? Is Alpha's share reduction rate faster than its reserve value depletion rate? What per-share metric could prove that Alpha is creating value rather than engaging in an orderly liquidation?
Answer and Perspective: Mohnish Pabrai believes the two companies have similar businesses but exhibit significant operational differences. He explicitly stated that after weighing all factors, he considers Warrior to be the better business, and therefore the fund has a higher allocation to Warrior. He referred to Warrior as the "Saudi Aramco of the metallurgical coal space."
Reasoning Process and Key Differences:
1. Mining Methods and Costs: Warrior is a pure longwall miner, which typically has lower costs but requires large-scale mines. Warrior operates three large mines, with Blue Creek being the newest. Alpha, in contrast, runs many relatively smaller mines.
2. Logistics Costs (Core Difference):
3. Reserves and Mine Life:
Conclusion: Although Alpha has an advantage in reserve life, Warrior, with its lower mining costs and significant logistics cost advantages, sits at the bottom of the global seaborne metallurgical coal cost curve, an extremely favorable position. Therefore, Pabrai considers Warrior to be the superior business and has given it a higher portfolio allocation.
Question and Context:
A shareholder cited Pabrai’s own words—“debt is the primary cause of corporate failure”—and noted that his other cyclical holdings reflect this principle. Yet, even after the merger with Valaris, Transocean remains heavily indebted. The shareholder raised a series of pointed questions:
Mohnish Pabrai’s Response and Reasoning:
Pabrai first acknowledged this as a “great question.” His defense rests on several key points:
1. Management’s Attitude Toward Debt: Transocean’s CEO and CFO are “allergic” to debt and “hate” the current situation. Over the past few years, they have been actively deleveraging.
2. Historical Resilience: During the “nuclear winter” of offshore drilling from 2015 to 2019, only two companies in the entire industry—Transocean and Odfjell—survived without debt restructuring or harming equity and creditor interests. This demonstrates the quality of management.
3. Deleveraging Path:
4. Investment Logic: Pabrai admitted he “went out a little on a limb” on this issue, but his bet is based on:
Key Data and Judgments:
Summary: Pabrai acknowledges the debt risk but views Transocean as a special case. His judgment is based on trust in management’s deleveraging resolve, the company’s past resilience, the leverage reduction from the upcoming merger, and the cash flow prospects from improving industry fundamentals. He chooses to bet on management’s execution ability rather than making a decision based solely on debt figures.
Context and Question: The host notes that Edelweiss and Nuvama share a common historical origin and are both exposed to India’s financial and capital markets. The host therefore asks Pabrai whether he views them as two separate investment themes or, to some extent, as a single combined bet on the growth of India’s wealth management, asset management, and financial services sector.
Answer and View: Pabrai acknowledges the connection between the two but emphasizes their distinct business focuses. At the same time, he clearly states that he does view the entire Indian financial services industry as a holistic, early-stage, and massive opportunity.
Conclusion: Pabrai’s response indicates that while Edelweiss and Nuvama are two independent companies with their own focuses, his investment in them is largely built on a unified belief in the long-term growth of the Indian financial services industry as a whole.
Context and Question: The questioner notes that TAV’s underlying economics may be favorable, but its growth is constrained by geopolitical and other external factors. They ask to what extent geopolitics should be viewed as a structural risk factor when valuing airports.
Answer and Perspective: Mohnish Pabrai first acknowledges this as a good question and agrees with the questioner that a different lens should be applied when evaluating Heathrow or Paris Charles de Gaulle versus TAV’s airports. He concedes that the comparison is, to some extent, “apples and oranges.”
Reasoning and Data:
1. TAV’s Favorable Factors (Tailwinds): Pabrai emphasizes that while TAV is cheap, it has already benefited from several tailwinds.
2. TAV’s Unfavorable Factors (Headwinds):
Conditions and Follow-up: Pabrai states that they remain bullish on the business because TAV is generating cash and is seeking other opportunities in the region, potentially adding more assets. He responds to the questioner by saying he will continue to monitor geopolitical risks. Subsequently, the discussion moves to the next position—Gimat, which Pabrai compares to “the Costco of Turkey.”
Issue and Context: The host notes that in companies like Reysas, where the founder holds a high percentage of shares, management and shareholder interests are typically aligned. However, Gimat’s founder and CEO holds far less than 1% of shares. Does this concern Pabrai?
Response and View: Pabrai admits that this is indeed disappointing. He is not satisfied with this situation.
Reasoning Process and Experience:
1. Site Visit and Communication: Pabrai visited Gimat’s headquarters and warehouse in Ankara about two and a half weeks ago, and had pleasant meetings with the founder and several board members.
2. Current Compensation: The issue is not just the low shareholding; the founder’s salary is also very low. Pabrai has suggested in person, both last year and this year, that the founder significantly increase his own compensation. He acknowledges that it is unusual for an outside shareholder to make such a suggestion.
3. Solution: Pabrai suggested that the founder find a way (through restricted stock or options, though he is unsure how Turkish law differs from US law) to increase his shareholding or compensation.
4. Core Judgment: No Concern About Impact on Performance: Despite the above concerns, Pabrai does not believe this will affect Gimat’s performance. The reason is that the founder is a model of “servant leadership” and is not driven by money. Pabrai believes this differs from the leadership at Reysas or other companies.
5. Source of Investment Appeal: Pabrai emphasizes that part of the reason they were attracted to Gimat is precisely the founder’s traits: highly capable and selfless. He runs the company for the benefit of customers, suppliers, and shareholders, not for himself.
6. Follow-up Actions: Pabrai has clearly told the founder that he would support any action he takes in this regard. However, no progress has been seen so far, and Pabrai plans to continue raising this suggestion in future interactions.
Question & Context: The host asks Pabrai whether the fund’s investment in container ship owner Danaos Corporation is based on a long-term investment thesis, or whether it aims to capitalize on current short-term favorable conditions in the shipping market driven by geopolitical events in the Middle East.
Answer & View: Pabrai clearly states that Danaos is a high-quality enterprise fundamentally different from its peers, and the investment thesis is long-term. He adds that after a recent meeting with management, his assessment of the company has “significantly improved.”
Reasoning & Key Evidence:
1. Initial Impression & Shift: Pabrai admits that before becoming a shareholder, he was generally skeptical of Greek shipowners, viewing them as having strong “animal spirits” and potentially reckless operations. However, Danaos’s balance sheet and operating approach are “completely unlike any peer.”
2. Core Investment Thesis: The initial attraction was Danaos’s “bond-like” characteristics—highly visible cash flows for several years ahead, combined with a stock price undervalued relative to net asset value (NAV). The fund began buying shares at $70–80 per share less than a year ago. While the stock price has more than doubled since, it remains “deeply undervalued” from a NAV perspective.
3. Competitive Advantage: Danaos is doing “smart things” to enhance its NAV, particularly in asset financing. Pabrai specifically highlights a transaction with Japanese special purpose companies (SPVs), describing this financing arrangement—with “low interest rates and low covenants”—as something 99% of shipowners cannot obtain, representing a massive competitive advantage. This stems from the company’s personnel quality, reputation, and balance sheet strength.
4. Personal Reflection: Pabrai jokingly calls himself “a bit stupid” because he did not fully realize how exceptional the company was until after placing the bet and conducting an on-site “kick the tires” visit.
Conclusion: Pabrai clearly positions Danaos as a “special place,” not an ordinary shipping company. The investment is based on long-term structural competitive advantages and undervalued assets, not short-term shipping market volatility.
Question and Context: The host asks whether the investment in Kaspi.kz goes beyond what Pabrai shared in a recent podcast, and whether this position signals that the Pabrai Wagons fund is launching a broader emerging market investment theme beyond India, or if it is merely an exploratory position.
Answer and Perspective: Mohnish Pabrai explicitly states that the Kaspi investment is not part of any broader theme. He emphasizes that the fund's approach is opportunistic, drawing a parallel to the previous investment in shipping company Danaos: they did not seek out other shipping stocks after investing in Danaos, unless another company similar to Danaos emerged. Likewise, Kaspi is an extraordinary business with an extraordinary leader and founder. The investment decision is based entirely on the founder (Mikhail Lomtadze), the quality of the balance sheet, and the ability to return cash to shareholders, rather than a larger emerging market strategy.
Reasoning Process and Examples:
1. Opportunistic, Not Thematic: Pabrai positions Kaspi as an isolated, opportunity-specific bet rather than a systematic allocation.
2. Integration Progress at Hepsiburada: Pabrai reveals that they met with management of Hepsiburada, a Turkish e-commerce company in which Kaspi holds a 92-93% stake, in Istanbul to observe Kaspi's operations from another angle. He judges that Kaspi may eventually take Hepsiburada private and fully absorb it.
3. Cross-Pollination of Talent and Products: Founder Mikhail spends roughly 40% of his time in Turkey. The teams at Kaspi and Hepsiburada (15-25 people each) do not operate independently but engage in extensive cross-collaboration—the Istanbul team may develop Kaspi products for the Kazakh market, and vice versa. Mikhail knows which products and teams can be transferred.
4. Early Signs and Uncertainty: Pabrai acknowledges that it is still early days and the outcome is unknown. However, he says he "would not bet against Mikhail" and describes Mikhail's transformation at Hepsiburada as "a bull in a china shop." User feedback indicates a slight improvement in the Hepsiburada app experience, but banking features have not yet been integrated. He expects to see more exciting changes within 1-3 years.
Conditions and Next Steps: Pabrai views the Kaspi investment as a standalone case that will take 1-2 years to yield results, and uses this as a transition to discuss the next holding—Constellation Software and its CEO Mark Leonard.
Context: The host asks whether Pabrai's investment thesis for Constellation Software has changed after founder Mark Leonard reduced his daily involvement (and even left the board) due to health issues.
Response and View:
Reasoning:
Caveats: Pabrai did not provide specific verification signals or timelines to support his judgment, nor did he discuss potential long-term risks from Leonard's departure (such as cultural dilution or key talent loss). His view is largely based on trust in the strength of Constellation's corporate culture.
Transition: After answering this question, Pabrai immediately moved on to discuss the next position, Tab Gida, indicating that the discussion on this topic had concluded.
Context: The host asks Mohnish Pabrai how GLP-1 class weight-loss drugs will affect his holding Tab Gida’s fast-food business.
Response and View: Pabrai acknowledges that no significant impact has been observed in the Turkish market yet, but he is convinced the impact will eventually arrive and negatively affect Tab Gida, similar to how such drugs have already impacted the U.S. fast-food and grocery industries.
Reasoning Process:
Question and Context
A shareholder raised a series of questions about the fund's liquidation of Mongolian Mining: Was the exit to make room for new positions, or did the company no longer meet expectations? During the holding period, what rationale supported the position given risks such as high stripping costs, lack of rail access leading to stranded cargo at the border, complete reliance on China as an inland producer, and diversification into gold? And why was the stock position always so small?
Answer and Perspective
Mohnish Pabrai first responded, noting that the questioner was clearly dissatisfied with multiple aspects of Mongolian Mining. He explained the holding logic and exit reasons in detail.
Reasoning Process
1. Holding Logic: Pabrai personally visited Mongolia in 2024, flying to Ulaanbaatar, then taking a helicopter to the mine site, and finally flying to the China-Mongolia border to inspect logistics on the ground. He highly praised the company's founder—from Mongolia's wealthiest family, a long-term thinker and excellent operator with a top-tier team. The mine is a surface metallurgical coal mine, extremely rare globally; surface mining costs are far lower than those of underground mines like Warrior. The problem is that the mine is deep inland, with no direct access to ports. However, China has relocated steel mills south to the Gobi Desert near the Mongolian border to utilize this high-quality coking coal. Although Mongolian Mining does not receive seaborne pricing (PLV), it still generates stable profits. Its gold business (initially designed with a breakeven point of $800/oz) has become highly successful as gold prices rose to approximately $5,000/oz and reserves increased; the company also stepped in to improve the inefficiencies of the previous operator.
2. Exit Reason: Factions emerged within the Mongolian government, believing that some mining agreements (such as Mongolian Mining's concessions) were too favorable to miners, with intentions to renegotiate terms, which could fundamentally alter the project's economics. Pabrai considered this an existential threat and, unable to assess its probability, decided to liquidate the position.
3. Reason for Small Position: The original text did not directly address this, but it implied that the stock was always held as a small position due to the aforementioned political risks.
Key Data and Limiting Conditions
Question and Context
The host noted that Pabrai recently mentioned on a podcast that the S&P might be overvalued and that young investors might be better off holding Berkshire. The host pressed: Since you also manage the Wagons fund, why recommend your own fund over Berkshire? Conversely, what differentiated advantages or opportunities does Wagons offer compared to simply holding Berkshire?
Answer and Perspective
Mohnish Pabrai clearly stated that his role on the podcast was for education and entertainment, not product promotion. He said bluntly: "If I were to promote products in which I have a vested interest on those platforms, I would lose a lot of credibility, so I don't do that." He believes that for investors with liquidity needs and other conditions, Berkshire, as a large entity, is a more suitable choice. He never considered promoting the Wagons fund to that audience at the time.
Reasoning Process
Pabrai's logic is based on credibility and role separation:
1. On public podcasts, he plays the role of an independent analyst or educator, and the audience expects objective opinions.
2. Using that platform to promote a fund he manages would create a conflict of interest and damage long-term credibility.
3. Berkshire is a large, liquid asset suitable as an alternative recommendation to the S&P, and it involves no personal interest.
4. Therefore, recommending Berkshire over Wagons is an active choice to maintain credibility, not a lack of confidence in Wagons.
Regarding Differentiated Advantages
When the host asked about Wagons' unique opportunities compared to Berkshire, Pabrai did not directly answer. He only explained why he did not recommend Wagons, without elaborating on Wagons' differentiated advantages or opportunity set. Thus, the original text provides no specific description of Wagons' advantages over Berkshire.
Question and Context: The host noted that the portfolio holds two distinctly different types of investments—deeply discounted or supply-constrained cyclical stocks (e.g., metallurgical coal, offshore drilling) and long-term compounding stocks (e.g., Constellation, Topicus, Lumine)—and asked Pabrai how he compares the expected returns and risks of these two asset classes when deciding where to allocate the next dollar, as well as which signals indicate that industry economics have normalized and it is time to exit.
Response and Views: Pabrai explicitly opposes the simplistic categorization of companies into labels such as "cyclical," "compounder," "value," or "growth," arguing that this is a flawed way of thinking. He advocates focusing on the essence of the business, particularly cost structure and earnings certainty.
Reasoning Process and Examples:
1. Using Saudi Aramco as an example to illustrate the misleading nature of labels: Saudi Aramco's production cost was once as low as $1–2 per barrel and remains well below $10 per barrel. Pabrai does not describe it as a "commodity company" but rather as "an exceptional business with ultra-low costs that can make money in almost any price environment." Even when facing unusual issues (e.g., transportation problems for the first time in 50–60 years), he judges that "this too shall pass."
2. Comparing Warrior to "our Saudi Aramco": Warrior sits at the bottom of the cost curve, similar to Saudi Aramco—it will either make a little money, decent money, or a lot of money, but the probability of losing money is extremely low. He uses an extreme statement: "If their mine is running and they are losing money, then civilization doesn't exist."
3. Using Reysas REIT to show that the "compounder" label is also inapplicable: This REIT, with zero debt, delivers a return on equity of over 12%. Pabrai notes that no U.S. REIT can achieve this (U.S. REITs are generally highly leveraged). He believes Reysas is essentially a "compounder" rather than a traditional REIT, and its capital allocation approach, operational creativity, and energy are the key factors.
4. Redefining classifications: Warrior is a compounder; Alpha is also a compounder, but due to its higher position on the cost curve, its quality is inferior to Warrior's.
Conclusion: Pabrai does not rely on the "cyclical vs. compounder" framework to allocate capital or determine exit timing. His core approach is to look through industry labels and evaluate a company's own cost advantages, earnings certainty, and capital allocation capabilities. The exit signal is not a macro indicator that industry economics have "normalized," but rather whether a fundamental change has occurred in the company's fundamentals.
Mohnish Pabrai responds: In the cases of Kaspi and Gimat, they have exceptional leaders with extremely high integrity. He has no concerns about this—if these two investments ultimately fail to succeed, the reason will not be that management treated outside shareholders unfairly; failure may stem from other factors, but it will never be due to unfair treatment. Pabrai clearly states that he has no worries on this front.
Issue and Context: A shareholder asked that while Pabrai claims to rarely pay high prices, when an ETF receives cash subscriptions, it must buy holdings at market prices, potentially forcing it to build positions above its psychological price threshold. The shareholder worries this could dilute existing shares or that the fund might buy regardless of price.
Response and View: Mohnish Pabrai explained the ETF's internal mechanics, clearly stating that there is no issue of forced buying. Subscription funds are not automatically allocated proportionally to all holdings; instead, the fund manager flexibly allocates them based on current judgment.
Reasoning and Mechanism:
1. Fund Allocation Process: When the ETF receives cash subscriptions (e.g., $3 million or $5 million), Pabrai is notified and independently decides how to allocate the funds. It may go entirely into one stock or be spread across two, three, or five stocks, entirely at the fund manager's discretion.
2. Basis for Decision: Allocation decisions are based on a comprehensive assessment of multiple factors, including:
3. Conclusion: Pabrai stated that to date, in terms of subscription fund allocation, there has been no situation that caused discomfort. The fund does not buy at high prices to passively track the portfolio; instead, it actively chooses to add to positions with favorable prices and high conviction.
Limitations: This mechanism relies on the fund manager's active judgment ability, and Pabrai only stated historical experience ("I do not think we have had discomfort so far"), without committing to or extrapolating future extreme scenarios (e.g., large-scale subscriptions when all holdings are at high prices).