6 Investing Secrets by Mohnish Pabrai: Warren Buffett of India
Updated: Jul 20, 2024, 14:55 IST
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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