The Dhandho Investor E-Book

Mohnish Pabrai

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 250

Veröffentlichungsjahr: 2011

Beschreibung

A comprehensive value investing framework for the individual investor

In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents how they can be applied successfully to the stock market. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger. Readers will be introduced to important value investing concepts such as "Heads, I win! Tails, I don't lose that much!," "Few Bets, Big Bets, Infrequent Bets," Abhimanyu's dilemma, and a detailed treatise on using the Kelly Formula to invest in undervalued stocks. Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy-to-use format. Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Acknowledgments

Chapter 1 - Patel Motel Dhandho

PAPA PATEL

Chapter 2 - Manilal Dhandho

Chapter 3 - Virgin Dhandho

Chapter 4 - Mittal Dhandho

TRANSTECH DHANDHO

Chapter 5 - The Dhandho Framework

1. FOCUS ON BUYING AN EXISTING BUSINESS.

2. BUY SIMPLE BUSINESSES IN INDUSTRIES WITH AN ULTRA-SLOW RATE OF CHANGE.

3. BUY DISTRESSED BUSINESSES IN DISTRESSED INDUSTRIES.

4. BUY BUSINESSES WITH A DURABLE COMPETITIVE ADVANTAGE—THE MOAT.

5. BET HEAVILY WHEN THE ODDS ARE OVERWHELMINGLY IN YOUR FAVOR.

6. FOCUS ON ARBITRAGE.

7. BUY BUSINESSES AT BIG DISCOUNTS TO THEIR UNDERLYING INTRINSIC VALUE.

8. LOOK FOR LOW-RISK, HIGH-UNCERTAINTY BUSINESSES.

9. IT’S BETTER TO BE A COPYCAT THAN AN INNOVATOR.

Chapter 6 - Dhandho 101: Invest in Existing Businesses

Chapter 7 - Dhandho 102: Invest in Simple Businesses

Chapter 8 - Dhandho 201: Invest in Distressed Businesses in Distressed Industries

Chapter 9 - Dhandho 202: Invest in Businesses with Durable Moats

Chapter 10 - Dhandho 301: Few Bets, Big Bets, Infrequent Bets

THE AMERICAN EXPRESS SALAD OIL CRISIS

Chapter 11 - Dhandho 302: Fixate on Arbitrage

1. TRADITIONAL COMMODITY ARBITRAGE

2. CORRELATED STOCK ARBITRAGE

3. MERGER ARBITRAGE

4. DHANDHO ARBITRAGE

Chapter 12 - Dhandho 401: Margin of Safety—Always!

Chapter 13 - Dhandho 402: Invest in Low-Risk, High-Uncertainty Businesses

STEWART ENTERPRISES

LEVEL 3 CONVERTIBLE BONDS

FRONTLINE

Chapter 14 - Dhandho 403: Invest in the Copycats rather than the Innovators

CASE STUDY: MCDONALD’S

CASE STUDY: MICROSOFT

CASE STUDY: PABRAI INVESTMENT FUNDS

Chapter 15 - Abhimanyu’s Dilemma—The Art of Selling

TO ENTER OR NOT TO ENTER—THAT IS THE QUESTION

TRAVERSING THE RINGS

UNIVERSAL STAINLESS & ALLOY PRODUCTS

EXITING THE CHAKRAVYUH

HOW MANY SIMULTANEOUS CHAKRAVYUH BATTLES?

Chapter 16 - To Index or Not to Index—That Is the Question

FIFTY CENT DOLLARS—HIDING IN PLAIN SIGHT!

Chapter 17 - Arjuna’s Focus: Investing Lessons from a Great Warrior

NOTES

INDEX

Copyright © 2007 by Mohnish Pabrai. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Pabrai, Mohnish.

The Dhandho investor : the low-risk value method to high returns / Mohnish Pabrai.

p. cm.

Includes index.

ISBN-13: 978-0-470-04389-9 (cloth)

1. Business enterprises—United States—Finance. 2. Entrepreneurship—United States—Finance. 3. Small business—United States—Finance. I. Title.

HG4061.P22 2007

332.6—dc22

2006034371

To my three gurus, Warren Buffett, Charlie Munger, and Om Pabrai

ACKNOWLEDGMENTS

This book, The Dhandho Investor, is a synthesis of ideas I’ve encountered in my readings, interactions with friends, and various experiences, both visceral and direct. I have very few original ideas. Virtually everything has been lifted from somewhere.

If there wasn’t a Warren Buffett, there wouldn’t be a Pabrai Funds and there certainly wouldn’t be this book. It is hard for me to overstate the influence Warren Buffett and Charlie Munger have had on my thinking. Their perspectives have, in one way or another, shaped virtually every page. I can never repay my debt to them for selflessly sharing priceless wisdom over the decades. Thank you, Warren and Charlie.

I am grateful to my dear friend Pat Fitzgerald and his daughter Michelle for suggesting that I consider writing this book. It wasn’t on my to-do list. I appreciate their persistence and encouragement. Michelle took a close personal interest in this project and I am thankful for all her efforts. I’d also like to thank my editor at Wiley, Debra Englander, for all her excellent suggestions. Everyone at Wiley was a pleasure to work with, including Greg Friedman and Christina Verigan.

My forum mates in the Young Presidents’ Organization (YPO) were with me every step of the way. Thanks are due to Terry Adams, Andy Graham, Dave House, Michael Maas, Mark Moses, Jay Reid, and Ryan Rieches. Over the past nine years, YPO has been a wonderful life-altering experience for me. If I wasn’t a part of YPO, it is unlikely there would have been a Pabrai Funds or this book. It is impossible to give more than you get from YPO, and I shall forever be indebted to YPO. It is an amazing organization.

I first heard the term Dhandho from my college roommate, Ajay Desai. We lost touch with each other for about a decade and were both delighted to find each other and rekindle our wonderful Dhandho conversations. Thank you, Ajay.

My wonderful office manager at Pabrai Funds, Isabelle Secor, and Marybeth Nagy of Source4 did a wonderful job of editing the manuscript. Thanks, Marybeth and Isabelle. Thanks to Whitney Tilson for all of his editing suggestions. My friend Shai Dardashti encouraged me to include the comments on giving back that are so important. Thanks, Shai. My good friend and neighbor Samir Doshi introduced me to Manilal Chaudhuri and paved the way for the Manilal interview. And thanks are due to Manilal for taking time out of his busy schedule for our meeting and discussion.

My daughters, Monsoon and Momachi, have been excited and supportive of the book since the outset. I wrote it keeping them and their future kids and grandkids in mind. I get great pleasure from thinking about a great grandchild of mine ferreting out a dusty copy of The Dhandho Investor and reading it. I, most likely, won’t be around to see that day, but it was that thought—more than anything else—that drove me every day to get to the finish line.

My late father, Om Pabrai, began giving me invaluable Dhandho lessons even before I was a teenager. And he never stopped. I had earned my MBA before I entered college, and I use those lessons daily. Thank you, Papa. I miss you. And my mother’s back-of-the-envelope accounting methods are still what I use for analyzing businesses quickly.

My best friend and wife, Harina Kapoor, has always been tremendously supportive of all my endeavors. She was the first one to read the manuscript. Thank you, Janaam. I love you more than you’ll ever know. Life is a journey and the journey is the destination. Countless folks have made this journey simply fantastic. I owe my thanks to each and every one of you.

Chapter 1

Patel Motel Dhandho

Asian Indians make up about 1 percent of the population of the United States—about three million people. Of these three million, a relatively small subsection is from the Indian state of Gujarat—the birthplace of Mahatma Gandhi. And a very small subsection of Gujaratis, the Patels, are from a tiny area in Southern Gujarat. Less than one in five hundred Americans is a Patel. It is thus amazing that over half of all the motels in the entire country are owned and operated by Patels. What is even more stunning is that there were virtually no Patels in the United States just 35 years ago. They started arriving as refugees in the early 1970s without much in the way of education or capital. Their heavily accented, broken-English speaking skills didn’t improve their prospects either. From that severely handicapped beginning, with all the odds stacked against them, the Patels triumphed. Patels, as a group, today own over $40 billion in motel assets in the United States, pay over $725 million a year in taxes, and employ nearly a million people. How did this small, impoverished ethnic group come out of nowhere and end up controlling such vast resources? There is a one word explanation: Dhandho.