Two weeks ago, Mohnish Pabrai came to give a lecture at Columbia Business School’s “Value Investing with Legends” class. His investment philosophy and methodology spoke to me personally so I wanted to share the learning on this blog. Below are some information about him and my key takeaways from the lecture. In addition, I found a taped video of Mohnish’s lecture from a couple of years ago and below is the link. He is quite an entertaining speaker and extremely willing to share his thoughts and ideas with students.
https://cbs360.gsb.columbia.edu:8443/ess/echo/presentation/670921b2-4bad-4843-8dc5-4026360f1369
- Background & bio (copied from ValueWalk.com)
Born on June 12 1964 in Mumbai, India, Mohnish Pabrai moved to the U.S. in 1983 to attend South Carolina’s Clemson University. He worked for 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.
In 1991 Mohnish Pabrai started his IT consulting and systems integration company, TransTech, Inc. with about US$30,000 from his own 401K account and US$70,000 from credit card debt. He sold the company in 2000 for US$20 million, personally pocketing about $1 million. In 1999 Mohnish Pabrai founded the Pabrai Investment Funds, which he still runs today.
- Investment Results (25.7% per year over 18 years)
- 1995-1999: 43.4% annualized
- 1999-2007: 37.2% annualized (before fees)
- 2007-2009: -41.7% annualized
- 2009-2013: 32.7% annualized
Source: basehitinvesting.com
Current portfolio holdings from Dataroma.com:
- Now onto my notes…
Rules for Investing and how Pabari has achieved his extraordinary investment results (surprisingly simple, of course I am sure he does a ton of work on ideas he focuses on):
- Focus on cloning the best investors (e.g. Warren Buffet, David Einhorn, Seth Klarman etc.) but with the option to accept or reject their ideas after doing his own homework.
- For instance, Pabrai invested in Bank of America commons in 2009 after Buffet invested $5 billion in the preferred shares of the bank with warrants to purchase more shares.
- Only do investments that have the potential to double or more in 2-3 years. By this rule, he would reject more investment ideas.
- Have EXTREME PATIENCE, both in holding period and in willingness to say no to most ideas. Does not use EXCEL or DCF. Invest only in ideas that are obvious to him, or in his own words “hitting him in the head with a 2×4”
- Concentrate his portfolio as well as his energy on few ideas
- One man shop – operation that is set up to decrease the propensity for action
Tools for Idea Sourcing
- Dataroma.com (Major 13F updates)
- Valueinvestorclub.com (particularly like contributor named Charlie479)
- If cannot find information in database websites, then go to 13F directly
- A ton of reading on the side
Strategic Intuition 