6 Investing Secrets by Mohnish Pabrai: Warren Buffett of India

1. Be a shameless cloner.

• Pabrai says, the simplest way to find a bargain is to be a shameless cloner.
• Figure out who the smart people are, who have got high returns in the past, who you can trust, look at what they're buying, & reverse engineer them.
• The shareholding patterns submitted by companies every quarter are a good source for this, and there are other websites you can refer to.

2. Buy stocks with a moat.

• Moat is the ability of a business to have an enduring competitive advantage allowing a better-than-average rate of return for an extended time.
• Some businesses have broad moats (Meta), some have narrow moats (Commodity businesses) while others have easily fillable moats.
• Our job is to find the ones with deep moats, which are not vulnerable to competitors.

3. Make money by waiting.

• As Charlie Munger used to say, you don't make money when you buy or sell stocks, you only make money when you hold them.
• The biggest advantage that an investor can have is patience & the ability to wait.

4. Don't engage in short selling.

• Mohnish says, what is the point of taking a bet when your maximum upside is double your money and your maximum downside is bankruptcy?
• It makes no sense. At least to him.

5. Low risk, high certainty.

• It is a myth that you need to take big risks, in reality, you should work on minimizing risk.
• Buffet & Munger often used to take low-risk bets which have a high-return potential.
• The questions you should ask yourself while analyzing a business is, "How can I lose money?", "How can I minimize my downside?"

6. Have a checklist.

• Pabrai has a checklist of 80 items, when he is done analyzing a business & is ready to pull the trigger, he runs it against the checklist.
• If there are any items that he doesn't know the answer to, he goes back & researches again to find those specific answers.
• Things on his checklist are, low-cost competition risk, a win-win business or not, how leveraged are they, and how the management is.

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