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Mohnish Pabrai - The Dhandho Investor
Mohnish Pabrai is a close friend of Buffett and Munger and is one of the world's most underrated investors.
He admits to mimicking the investing styles of Buffett of Joel Greenblatt and has had tremendous success.
These 12 insights will make you a better investor.
- Mohnish Pabrai is known for buying deeply distressed companies, but he also favours other forms of investment.
- Here are his 5 types of business that can lead to a multi-bagger investment.
- Pabrai utilises the Dhandho Framework.
- "Heads, I win. Tails, I don’t lose much.”
The premise of this strategy is to locate opportunities with considerable upside and limited downside.
High reward, low risk.
- In his book, The Dhandho Investor, he lays out the nine core principles of his framework.
You can find them below.
- He is known as a "checklist investor" and uses lists to avoid repeating past mistakes.
- Here is one of Pabrai's checklists to run through before investing in a company.
- "Mistakes are the best teachers. One does not learn from success. It is desirable to learn vicariously from other people's failures, but it gets much more firmly seared in when they are your own".
- There is no greater teacher your own failings.
- "Einstein recognised the power of simplicity. He noted that the five ascending levels of intellect were Smart, Intelligent, Brilliant, Genius, Simple".
- The greatest sign of intellect is the ability to make the complex appear simple.
- "Wall Street sometimes gets confused between risk and uncertainty, and you can profit handsomely from that confusion".
- This relates to Pabrai's "heads I win, tails I don't lose much" framework.
- "You don’t make money when you buy stocks. And you don’t make money when you sell stocks. You make money by waiting".
- The hardest part is keeping your emotions in check between buying and selling your investments
- "If I were too proud to copy the ideas of others, I likely wouldnt have even a fraction of my current success".
- Being original is overrated
- "The businesses that are monopolies, typically go to some serious lengths, to try to convince you that they are not a monopoly and the competitive ones will try to convince you that they have all these competitive advantages".
- Focus not on what they say but what they do
- "Read voraciously and wait patiently, and from time to time these amazing bets will present themselves."
- Nothing can substitute patience and conducting your own research.
- "I don't look for reasons to buy a given business. I look for reasons to reject buying the stock. I'm looking for why should I turn it down".
- Like Munger says. Invert, always invert.
"Heads, I win. Tails, I don’t lose much"
I like this.
Adding this quote to our playbook in a section on "Seek Return Asymmetry"
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