He paid USD 650,000 (with his best friend and fellow investor Guy Spier) to win a ‘power lunch’ with Warren Buffett. His Mantra is Heads, I win; tails, I don’t lose much, And he says “I’m a shameless copycat, Everything in my life is cloned…. I have no original ideas.”
We are talking of Mohnish Pabrai, a renowned Indian-American value-investor and founder of Pabrai Investment Funds and Dhandho Funds. Since inception (1999), his fund has delivered a return of 517%. During the same period the S&P 500 has moved up 77%. His net worth is Rs 1,185.62 crore, as of June 2022.
He is also the author of The Dhandho Investor and Mosaics: Perspectives on Investing.
Table of Contents
About Mohnish Pabrai
Mohnish Pabrai was born and raised in Mumbai before he moved to the US for higher studies.
He began his career as a software programmer. Pabrai worked with Tellabs between 1986–91, first in its high speed data networking group, and then in 1989, joined its international subsidiary, working in international marketing and sales
but quickly transitioned to entrepreneurship, establishing the IT consulting firm TransTech in 1991. This was sold in 1999, little than a decade later, to Kurt Salmon Associates for USD20 million.
He launched Pabrai Investment Fund with an initial investment of USD1 million in undervalued stocks. His first bet was Satyam Computers in 1995 where his investment went up 140x in five years.
Pabrai became one of the leading investors of our time – simply by copying or ‘cloning’, as he himself prefers to term it, Buffett’s style of investing and later, Charlie Munger’s.
In 2005, Pabrai and his wife, Harina Kapoor started the Dakshana Foundation (Infinite good) with the goal of recycling most of their wealth back to society. Their starting point is to give back approximately 2%, or US$1 million every year
He realised Buffett had mastered the game of compounding to double his money multiple times on his path to become the world’s sixth richest man. What Pabrai chose to do was pick the most skilled player in this particular game, studied why he was so good, and then meticulously replicated his strategy. But even imitation has the limitation of common sense. He knows what ideas to borrow and in what capacity to apply those.
Buffett has often reinstated that one of his criteria for buying a stock is that it should be undervalued. He is often quoted as saying, “it’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
Following the same principle, Pabrai’s portfolio is also focused on mispriced or undervalued stocks
“The driver for me is not to get wealthy,” he was quoted as saying. “The driver is to win the game. It’s exactly the same driver for Warren, which is to show through results that I did the best and I am the best because I played the game by the rules, fair and square, and I won.”
He avoids investing in startups and initial public offerings (IPOs) and has never shorted a stock.
He also avoids macro investing in favour of micro, where he focuses on businesses he understands. He sees life as a game, and more importantly, enjoys it.
Here is the latest portfolio of stocks which Pabrai holds through Dalal Street, LLC (legal entity for Pabrai Investment Funds).
|Company||Ticker||Market Value as of 30.09.2022||Number of Shares|
|Micron Technology Inc.||MU||91,373,000||1,823,812|
|Brookfield Asset Management Inc.||BAM||91,373,000||1,823,812|
|Seritage Growth Properties||SRG||30,000||3,375|
|Market Value as of 30.09.2022 ($)||98,776,000|
As of June 2022, Mohnish Pabrai’s India portfolio consists of three stocks. His portfolio is as follows:
|Stock name||June holdings value (Rs in cr.)||June 2022 Holdings (in %)||March 2022 Holdings (in %)|
|Rain Industries Ltd||482.13||8.39||7.86|
|Sunteck Realty Ltd||408.24||6.68||6.68|
|Edelweiss Financial Services Ltd||369.91||6.43||6.43|
Mohnish Pabrai’s India portfolio holdings analy
Mohnish Pabrai Lecture at Boston College (Carroll School of Mgmt) – October 8, 2020
Mohnish Pabrai Investment Advice
Mohnish Pabrai’s investment advise is as follows :
- Identify and pick the right stock: Pabrai has often remarked that investors should buy a stock — a fraction of ownership in the company — if they are willing to buy the whole company. Buy a valued company and stay invested.
- Moat: Don’t miss the moat! It can be explained in terms of a financial advantage a company has over its competitors, which enables them to protect their market share and profitability.
- Invest in value: To know the fair value of a stock is crucial in making investment decisions. Pabrai suggests that assets worth USD1 should be invested for less than USD1.
- Few, but big bets: The reason why Pabrai’s portfolio has only limited stocks is that he picks them carefully and these bets are likely to bring positive returns.
He also shared with CNN recently, two books that he advises investors to give a read
100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities by Thomas William Phelps; and
100 Baggers: Stocks That Return 100-to-1 and How To Find Them by Christopher Mayer — a book detailing companies that returned USD100 for every single dollar invested.
Book Dhandoo Investor
The Dhandho Investor: The Low-Risk Value Method to High Returns lays out the powerful framework of value investing. The author has developed the theme of Dhando investing with analogies to some successful businesses and similarities in those businesses with investing.
This is a do it yourself investment book which will help all equity investors irrespective of their experience. The case studies are from the practical experience of the author. The chapter on kelly formula for capital allocation is a must read.
Here are a few key investment learnings from his book.
- Make sure to invest in existing established businesses.
- Try acquiring shares from simple businesses, i.e., where the flow of change is very low.
- Find shares in companies or industries with durable moats.
- Buy businesses with a helpful margin of safety.
- Understand when to sell and by what margin.
We can learn from Successful investors like Mohnish Pabrai and their investment portfolios.