MOHNISH PABRAI'S Lessons In The Dhandho Of Investing

Indian-American investor Mohnish Pabrai draws heavily from Warren Buffett's investing philosophy, but he uses real-world scenarios, such as the Patel community's business in the US to make his investment principles appeal to a wider audience. We get into the details of Pabrai's investing philosophy to break it down for you

- Shoaib Zaman

Mohnish Pabrai, Indian-American investor, author, and founder and managing partner of Pabrai Investment Funds, is famous primarily for his value investing approach, which draws heavily from the philosophies of investing legends Warren Buffett and Charlie Munger. His ability to simplify complex investment principles and apply them to real-world scenarios has made him a well-regarded figure in the investing world.

Pabrai gained widespread attention for achieving extraordinary returns with Pabrai Investment Funds, a hedge fund modelled on Buffett's partnerships in the 1950s. He started the fund in 1999 and managed to outperform the S&P 500 for several years.

Another reason for his fame is his book, The Dhandho Investor, which has become a go-to guide for those interested in value investing and are looking for something simple to start with. Finally, his close alignment with Buffett's principles, including his successful bid to have a charity lunch with Buffett in 2007 for over $650,100 also added to his fame.

INVESTING PRINCIPLES

In The Dhandho Investor, Pabrai emphasises the importance of minimising risk while maximising returns, echoing the teachings of Buffett and Benjamin Graham, but with a unique twist.

His use of real-world examples, such as the business models of the Patel community in the US, makes the concepts both relatable and applicable to a wide audience.

Here are the nine key principles set in the book creating the Dhandho framework:

1. Invest In Existing Businesses

2. Invest In Simple Businesses

3. Invest In Distressed Businesses In Distressed Industries

4. Invest In Businesses With Durable Moats

5. Have Few Bets, Big Bets And Infrequent Bets

While the first five are self-explanatory, the next four require explanations.