Pabrai believes that finding and investing in excellent innovators is difficult. Companies with durable and widening advantages can generate better returns on invested capital over the long term. This is a reminder to focus not only on company growth, but on the durability and magnitude of its competitive advantage. Buy businesses with durable and widening competitive advantages.Is the business truly simple if it is in distress? This is where judgement and experience comes in.) (Note that this principle may conflict with the one above. This rule may also apply to stocks in temporarily distressed countries, but investors should treat country-risk with even greater caution. The odds of buying stocks at large discounts to its intrinsic value are higher here. Buy temporarily distressed businesses in distressed industries.If your thesis requires more than a paragraph to defend, and requires sophisticated financial models, it’s probably a red flag, at least in Pabrai’s eyes. When it comes to buying and holding, simple tends to mean less stress. Sometimes, it’s easier to look for investment opportunities in mundane products and services that everybody needs. Intense competition, capitalism and change can be rough on investment prospects. Buy simple businesses in industries with a slow rate of change.Such businesses are usually less risky than an unproven start-up. Buy existing businesses with a proven business model and history of operations.With this in mind, Pabrai outlines several core principles to Dhandho-oriented investing: Buy existing, simple and distressed businesses He describes compounding as a snowball effect that can lead to amazing results over time. To Pabrai, Dhandho is about the maximisation of rewards and the minimisation of risks. The Dhandho frameworkĭhandho is a Gujarati word that means “endeavours that create wealth”. In this post, I will summarise the key lessons that I took from Pabrai on value investing and capital allocation. For the curious, there’s much to learn about his philosophy and temperament in his book, The Dhandho Investor, which I found an insightful and accessible resource. One striking feature of his methods, amongst many, is his willingness to hold a concentrated investment portfolio, even by value investor standards. Mohnish Pabrai, managing partner of Pabrai Investment Funds, is a more prominent value investor.
0 kommentar(er)
