Finding the Next Deep-Value Winner

Value investor Mohnish Pabrai had a huge success Monday with one of his holdings, Harvest Natural Resources(HNR Quote).

The Venezuelan oil company was up 37% on news that Venezuela would restructure HNR's in-country operations so that the Venezuelan government would be a majority owner. The market abhors uncertainty, and now that we know what will happen with HNR's oil properties in the country, the stock came out of its range and shot up.

I had been following the stock for a while, and I've had great success with other Mohnish Pabrai plays, but I could never quite get behind this one because of concerns about Venezuela. Pabrai, a noted deep-value investor in the Warren Buffett tradition (see my interview with him in Trade Like Warren Buffett) stuck to his guns and won big.

Every one of the companies in his portfolio seems to have two qualities: deep value (as measured by a low multiple over assets or earnings) and a slight taint of scandal or uncertainty. ...