Book: Dhandho Investor
Author: Mohnish Pabrai
Key takeaways:
7 Questions One Must Ask Before Making an Investment –
- Is it a business I understand very well–squarely within my circle of competence? (You don’t need to have a large circle, but you need to know your circle of competence.)
- Do I know the intrinsic value of the business today, and with a high degree of confidence, how likely will it change over the coming years?
- Is the business priced at a huge discount to its intrinsic value today and in 2/3 years? Is the discount >50%?
- Would I be willing to invest a large portion of my net worth in this business?
- Is the downside minimal? Spend a lot of time thinking about the downside.
- Is it run by able and honest managers?
Below are some points from some of his talks over Youtube:
Why he works alone (as Buffett does too)? – there is a natural tendency for action in a team.
Pabrai said: 2-3x for 75-80% of AUM, 4x for next 10%, 5x for next 10% etc.
I’d reverse that somewhat to say 5x and 4x first, rest of 80% with 2-3x and 4x for the next 10% and 5x for the next 10% etc.
Built checklist (and keep examples of failures in parentheses again each of this checklist failures). Learn from FAA on how to build checklist. His checklists has items for…
- valuation
- moats and competitive advantage
- leverage issues
- management and ownership
- personal bias
Prasad Capital 