Book Summary: Dhandho Investor

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

 

 

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