Sunday, June 01, 2008

Summary of "Dhandho Investor" by Mohnish Pabrai

The books focuses on taking few ultra low risk bets which have a high pay-off…key being ultra low risk

Dhandho Framework
• Heads I win, tails I don’t lose much
• Few bets, big bets, infrequent bets
• Focus on buying existing businesses
o Long operating history
• Simple businesses with ultra slow rate of change
o We look for mundane products that everyone needs (WB)
o Five ascending levels of intellect: Smart, Intelligent, Brilliant, Genius, Simple.(Einsteen)
• Buy distresses businesses in distressed industries
o Getting the purchase price right is more important
o Entrance strategy is more important than the exit strategy
o Be fearful when others r greedy, Be greedy when others r fearful (WB)
• Look for moats – sustainable competitive advantage
• Bet heavily when odds r in ur favour
• Focus on Arbitrage
• Buy businesses at big discounts to their underlying intrinsic value – Margin of safety
• Look for low risk, high uncertainty business
o Leads to severely depressed prices for buying businesses
• Better to be copycat than innovator

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