Further Survey on Pabrai's Perfect Portfolio

Mohnish Pabrai I recently read Evan Vanderveer's great article at GuruFocus.com - Pabrai's Perfect Portfolio - about how Pabrai build up his portfolio.

Concepts of Pabrai's Perfect Portfolio
I highlight some brilliant portfolio concepts :

  • How much to buy is as important as what to buy.
  • The Ten by Ten Portfolio
    • Pabrai holds 7~15 different investments, but appears to stay close to the ten by ten benchmark.
    • The portfolio attempts to ensure only the best ideas get in.
  • Placeholder Concept
    • Putting the money in the hands of the world’s greatest investor seems like a better idea than leaving dollars in the bank.
    • “Productive commodity hedge against a declining dollar.”
  • Yellowstone Factor
    • No matter how small the probability an event might occur, the risk must be taken into consideration.
    • No business on earth is totally risk free. There is always a Yellowstone.
    • First fixate on what factors can cause the investment to result in a significant permanent loss of capital.
    • By limiting holdings, hedging against the declining dollar, and estimating risk,
Yellowstone Factor: Minimizing Downside Risk
Among these concepts, "Yellowstone factor" caught my eyes. I did a little survey and found that Pabrai's original article - The Yellowstone Factor: Minimizing Downside Risk - on 2004/02/09. In this article, Pabrai talks more details about Yellowstone concept - what it means, how to figure out the probabilities etc. Pabrai point out at The Yellowstone Factor: Minimizing Downside Risk :
  • Consider factors that can cause your investment to result in a significant permanent loss of capital.
  • Buying fractions of a well-run, well-understood good business starts to put the odds in your favor.
Yellowstone = Black Swan ?
"Yellowstone represents just one of the many ugly outlying events that have an extremely low probability of occurring, but that does not mean the odds are zero or that they can be ignored." said by Pabrai.

Looking into this explanation of Yellowstone, "The Black Swan" concept pops up in my head. It seems to me that Yellowstone and Black Swan all mean the same thing - low probability but huge impact case or use Pabrai's term : low uncertainty but high risk case.

Do'nt ignore six sigma events
Pabrai said "You always need to be cognizant of six sigma events that can have an ugly impact on your portfolio and account for the approximate probabilities." remind us - don't bypass this very low probability but huge impact events when we build our portfolio. If you just ignore them, someday they will cost you a lot of money !


Whitney Tilson Find Bargains in Market's Overlooked Corners

Whitney Tilson and co-manager Glenn Tongue talks about their picks in market's overlooked corners - Resource America Inc. (REXI) , Tyco International Ltd (TYC), and Berkshire Hathaway (BRKa, BRKb).

  • Large-cap, higher-quality companies
    • McDonald's Corp. (MCD))
    • Wal-Mart Stores Inc. (WMT)
  • Undergoing structural changes
    • Tyco International Ltd (TYC)
  • Murky sectors
    • Resource America Inc. (REXI)
  • Walk alongside the patriarch of value investing

Disclosure : I have a long LEAPS of Wal-Mart.

Full article link.

Learning From the Great Investors

Emil Lee at TMF wrote a piece "Learning From the Great Investors". Lee talks about what you can learn from Mohnish Pabrai, Eddie Lampert, Joel Greenblatt and Charlie Munger.

I highlight some points :

  • Mohnish Pabrai - Low-Risk, High-Uncertainty Investing.
  • Eddie Lampert - Capital Allocation : Deploy Capital as Productively as Possible.
  • Joel Greenblatt - MFI = High ROC + High Earnings Yields.
  • Charlie Munger - Learn to Learn : Mental models, Biases, and Methods of Thinking.
Like what I said in Rookie Walk Down Wall Street, I will learn from these great investors piece by piece and step by step. Wish someday I could achieve my long-term goal - to build my own sound intellectual framework for making decisions and the ability to keep emotions form corroding that framework. Enjoy learning !


"Words of Investing Wisdom" from Value Investor Insight

There is a special 11-page section called Words of Investing Wisdom in the latest Value Investor Insight (2007/05/31). It captures some insightful views said by the many brilliant investors like Joel Greenblatt, Bill Nygren, Seth Klarman, Christopher Browne, Bruce Berkowitz, Thomas Gayner, Leon Cooperman, David Eigen, Jeffrey Ubben, Steven Einhorn, Thomas Russo, Julian Robertson, Mark Sellers etc.

It highlights the similarities – and many differences – in how the best investors ply their trade into the following sections:

  • "Efficient" Markets
  • The Craft of Investing
  • Buying and Selling
  • Managing Risk
  • Starting at The Top
  • Activism
  • Energy
  • Going Abroad
  • Continuous Learning
  • Of Sound Mind
  • Motivating Factors
PDF article link.

P.S. : Value Investor Insight is a great reading that I strongly recommend. Mohnish Pabrai also mention it on an interview with The Motley Fool. You can go to here to get one month free trial.


Warren Buffett Talks about Charity and Lunch Bid with Bloomberg on June 25 (Video)

Bloomberg has a interview with Warren Buffett, Chairman of Berkshire Hathaway, on June 25 2007. He talks about Charity and upcoming eBay lunch auction. The annual charity auction on EBay lasts through June 29, you can go to here to be the highest bidder for "Power Lunch with Warren Buffett".

Here is video link or you can watch directly below.


Joseph Brandon Speaks at 2007 S&P Insurance Conference

Joe Brandon, Chairman & CEO of General Re, is a speaker at the Standard & Poor's Conference on 2007/6/4-5. In this "The Reinsurance Industry - The CEOs' Perspectives" conference , he talks about his view on reinsurance industry.

I highlight some points below :

  • Maybe we can learn from past mistakes, but we'll probably make different mistakes.
  • What hasn't change is important than what has changed.
  • Insurance discipline.
  • Cycle end inevitably.
The video is below. Joe Brandon talks about 3 minutes (from 3m45s to 7min30s and during the last 15 seconds).

Source : BRKNEWS

FT : Mohnish Pabrai - There’s a market-beater in your corner shop

FT.com has a piece about Mohnish Pabrai and his book "The Dhandho InvestorThe Low-Risk Value Method to High Returns" on June 22 2007.

I highlight some insightful points below:

  • Find a bet with the minimum downside possible and only then start to look at possible returns.
    • Patel business model and Lakshmi Mittal are good “Heads I win, tails I don’t lose much”examples.
  • Make big bets (“Few Bets, Big Bets, Infrequent Bets”).
    • Look for low risk, high uncertainty opportunities. (Like his recently interview on Bloomberg).
    • Look for companies with a “wide economic moat”:
  • Invest in simple businesses.
    • If it takes more than a short paragraph, there’s a fundamental problem.
    • If it requires me to fire up Excel, it is a big red flag that strongly suggests that I ought to pass.”

Full article link.


Bloomberg Interview with Bruce Greenwald on June 15

Bloomberg had a short interview with Bruce Greenwald, a professor of finance and asset management at Columbia Business School, on June 15, 2007. He talks about growth versus value stocks, his evaluation of American Express (NYSE:AXP) and Wal-Mart (NYSE:WMT).

The interesting part of his talk is that he think Wal-Mart is a value trap, a opposite view from Whitney Tilson (He thinks Wal-Mart will be double next few years). My holdings shows that I'm on Tilson's side right now.

Disclosure : I have a long LEAPS of Wal-Mart.

Here is video link or you can watch directly below.


Bloomberg Interview with Whitney Tilson

Bloomberg had an interview with Whitney Tilson on June 21 2007. Tilson talks about recent market, Tyco, Wal-Mart and McDonald's.

I highlight some points below :

Disclosure : I have a long LEAPS of Wal-Mart.

Here is video link or you can watch video directly below.


Bloomberg Interviews with Mohnish Pabrai

Bloomberg had an interview with Mohnish Pabrai, Managing Partner of Pabrai Investment Funds, on June 19 2007. Mohnish Pabrai talks about his investment strategies, oil prices & the consumer, Harvest Natural Resource (NYSE:HNR), Berkshire Hathaway (NYSE:BRK.B), Delta Financial (NASDAQ:DFC) and his biggest mistakes.

I think Pabrai make some very insightful points :

  • Return of capital is more important than return on capital.
  • Low risk and high uncertainty approach.
  • Looking for Value.
  • Day-to-day fluctuations are mostly noise.
  • Stocks more affected by micro factors than macro economy.
  • Investing like an Entrepreneur.
    • Entrepreneurs look for low risk investments.
    • Entrepreneurs are good at handling uncertainty.
  • Value & growth stocks are 2 sides of same coin.
  • Be patient.
Here is some video clips (Part-1, Part-2) or you can watch directly below (more complete, about 21 minutes). You can also watch another interview with Mohnish Pabrai on May 31 2007 - CNBC Interview with Mohnish Pabrai about investment strategy.

Disclosure : I don't have any of these equities listed above.


The Motley Fool Interviews with Oak Value Capital managers David Carr and Larry Coats

The Motley Fool had an interview with Oak Value Capital managers David Carr and Larry Coats in January 2007.


Kiplinger's Interviews with Bill Miller - A Legend Sizes Up the Market

Kiplinger's had a interview with Bill Miller recently. Miller talks about his streak, mis-valued mega-cap stocks, "value conundrum", potential opportunity and his reading books.

Full article link.

Fortune Interviews with Jean-Marie Eveillard - A value maestro's encore

Fortune has a interview with Jean-Marie Eveillard on his return to money management. Eveillard had been one of Wall Street's best value investors, leading Bleichroeder's First Eagle Global fund to a 15.8% average annual return - compared with 13.7% for the S&P 500 - over his 26 years at the helm, according to Morningstar. Eveillard retired in 2004, after a two-year break, he's back.

In this interview, he talks about his two-year break, lack of opportunity in today's market, gold, homebuilder stocks, global credit boom and Japan and South Korea.

Full article link.


FlashBack - Q & A with George Soros

In a classic book “Soros on Soros”, there is an insightful Q & A with George Soros. He talked about his investing framework, philosophy, general theory of reflexivity and boom/bust theory.

Article link.

PBS Tavis Smiley Interviews with Nassim Nicholas Taleb

PBS Tavis Smiley also has a interview with Nassim Nicholas Taleb about his latest book The Black Swan: The Impact of the Highly Improbable.

Audio & transcript link.

NPR Interviews with Nassim Nicholas Taleb - 'Black Swans' and the Problems of Probability

NPR had a interview with Nassim Nicholas Taleb on May 21, 2007 about 'Black Swans' and the Problems of Probability. Nassim Nicholas Taleb discusses his theory about events he calls "Black Swans" — occurrences that seems to be totally impossible.

Article & audio link.

Book - The Black Swan: The Impact of the Highly Improbable

Recently the book The Black Swan: The Impact of the Highly Improbable got my attention. Because Edward Lampert recommended The Black Swan at Sears Holding 2007 AGM. Michael Mauboussin said that all investors should be alert to black swans at his recent report - Turtles in Omaha - The Mindset of Great Investors. Bankstocks.com also had a review on this book - Bankstocks Booklist: Black Monday, Black Swan.

Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable; former dean's professor, sciences of uncertainty, University of Massachusetts at Amherst. He also has another book, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

I have read Fooded by Randomness, it's a great book. I have not read The Black Swan yet, but I think it's also a great one. I will get a copy ASAP, so you too.

Whitney Tilson: Wal-Mart's Mistakes Are Fixable - This Stock's Cheap

Whitney Tilson posts a article about Wal-Mart at Seeking Alpha. He talks about Wal-Mart has made many mistakes but are fixable. Now Wal-Mart is taking steps in the right direction - for example recent cut supercenter growth, share repurchase program - but it takes time for change to happen.

Full article link.

You can also watch CNBC interviews with Tilson about Wal-Mart after Wal-Mart announces to cut supercenter growth and buyback $15 billion shares.

Disclosure : I have a long LEAPS of Wal-Mart.


25 Years of Legg Mason Value Trust

Legg Mason Value Trust is celebrating its 25th annaversary. Read commentaries from legendary fund manager Bill Miller and strategiest Michael Mauboussin. Also included in the Commentary is a brief recap of LMCM’s 2006 Thought Leader Forum.

Pdf direct link.


Bloomberg Interviews with Jim Rogers

Bloomberg interviews with Jim Rogers. Jim talks about commodity, China economic and stock market, agriculture, inflation etc.

CNBC Interviews with Bruce Berkowitz

CNBC has a short interview with Bruce Berkowitz, Fairholme Fund portfolio manager. He talks about value in oil & gas sector, good manager traits and his picks - Canadian Natural Resources (CNQ), Berkshire Hathaway (BRK.A).

Here is video link or you can watch video directly below.


Bloomberg Interviews with James Chanos About His Short Ideas

Sometimes it's useful to listen to voices from the other side. Jim Chanos talks about his short ideas like Macquarie Bank Australia, Moody's(NYSE:MCO), WCI(NYSE:WCI) and Warner Music Group(NYSE:WMG). Here is video link or you can watch directly below.

You can also find a piece talks more details about his Moody's short - James Chanos, Betting Against Buffett, Sells Moody's Short.

A Moody's chart from Berkshire Hathaway Shareholders Message Board

FT.com Interviews with Jim Chanos

FT.com's "View From the Top" series interviews with Jim Chanos of Kynikos Associates. In these interviews, Jim Chanos talks about short selling, hedge fund regulation and private equity.

Video Direct Link
Highlights from his video interview


Burgundy Asset Management Resource Centre - Video & Audio

The Burgundy Library features a collection of video and audio recordings from various conferences and lectures, capturing the invaluable thoughts, ideas, and philosophies of prominent value investors. Like Charles Brandes, Francis Chou, Peter Cundill, Mason Hawkins, Mark Holowesko, Irving Kahn, Richard Rooney.

FT.com : Endowments - Swensen style

There is a article in FT.com about David Swensen, manager of Yale University endowment fund, speaking at the recent Yale commencement. Here is direct link. Some good quotes below.

“Investment management is a simple business,” he said. It came down to two principles. First, equities are best for the long run (as proved by many surveys). “With a portfolio like Yale’s, with a time horizon measured in centuries, everyone would come to the same conclusion: it’s far better to have equities in your portfolio than bonds or cash.” By equity, he means any asset where there is a potential upside that can be taken by the investor.

His second principle is simpler: “Diversification is important.”

CNBC Interview with Mohnish Pabrai, David Winters about Buying Like The Billionaires

CNBC interviewed with Wintergreen Advisers CEO David Winters and Pabrai Funds Managing Partner Mohnish Pabrai on 16 May 2007. They discussed Citigroup, railroads, Berkshire Hathaway and how billionaires like Buffett think when buying stocks.

Video Link.

CNBC Interview with Mohnish Pabrai about investment strategy

CNBC had a short interview with Mohnish Pabrai, managing partner at Pabrai Funds, on 31 May 2007. Mohnish Pabrai talks about his investment strategy as less than 1 dollar, few bets, big bets, infrequent bets and "copy cats" approach.

Here is video link (after watching an ad video) or you can watch directly below.


FT.com Ask the expert: Whitney Tilson on Value investing

This is also a old readable stuff.

Whitney Tilson answered questions about Value Investing. For example : When do you sell?, How to use DCF?, How can I start my own investment fund? etc.

Direct Link.

FT.com Ask the expert: Michael Mauboussin on Investment strategy

This is a old stuff, but I think it readable.

Michael Mauboussin had a Q&A session on FT.com's "Ask the expert" column. He answered questions on investment strategy and how understanding investor behavior could enhance investment strategy and returns.

Direct Link

Mauboussin on Strategy : Turtles in Omaha - The Mindset of Great Investors

Michael Mauboussin, Chief Investment Strategist of Legg Mason Capital Management, released his latest report "Turtles in Omaha - The Mindset of Great Investors" on May 23. In this report, he talked about patterns of great investors' behavior, black swans - events that are outliers, human cognitive errors, and randomness.

Pdf Direct Link.
Podcast Direct Link.


FT.com Interviews with George Soros

FT interviewed with George Soros in New York on March 6. He talked about markets turbulence, appreciation of the yen, liquidity, emerging markets, private equity, American politics, Russia etc.

Video Direct Link (Scroll down to Mar. 7)
Transcript Direct Link.

FT.com Interviews with Mohamed El-Erian

FT interviewed with Mohamed El-Erian, Harvard Management Company, in Boston on March 13. He talked about sub prime, market turbulence, private equity, emerging markets, investment strategy etc.

Video Direct Link (Scroll down to Mar. 12)
Transcript Direct Link.


Fortune Interviews with Mohamed El-Erian

Fortune interviews with Mohamed El-Erian, 48, who heads up Harvard University's $30 billion endowment. He talks about investing, the market, and the global economy.

Direct Link


Add First American Corp. (FAF) to my watch-list

Today I find a old news, "Highfields Capital Accumulates 6.7% Stake in First American (FAF)", published on 2007/5/14.

In a 13G filing this afternoon on First American Corp. (NYSE: FAF), Highfields Capital disclosed a 6.7% stake (6.5 million shares) in the company. The firm did not show a stake in FAF for the quarter ended 12/31/06.

After a little survey, I find out that John Osterweis, Osterweis Capital recommended First American Corp. (NYSE: FAF) in Value Investor Insight 2007/01 issue. There are also some value funds on the top 20 institutional shareholder list. (listed below)

Since John Osterweis recommended, the price has up 28+% from 42 to 54 now. It seems like a little too late to get in now, better wait for better price to buy. I will add First American Corp.to my watch-list.

Top 20 Institutional Shareholders (abridged)
Name Share Held % of Shares Held
Highfields Capital Management LP 6.5M 6.71%
Glenview Capital Management LLC 5.2M 5.38%
Pzena Investment Management LLC 3.9M 4.07%
Maverick Capital Ltd. 1.5M 1.55%
RS Investment Management Co. LLC 1.2M 1.23%
Third Avenue Management LLC 1.0M 1.03%


Bill Ackman's recent Ira Sohn Conference presentation

Here is Bill Ackman's recent Ira Sohn Conference presentation. The title is Who's Holding the Bag ?. He talks about credit market trends, MBIA and Ambac.

New York Times also reports about Ira W. Sohn Investment Research Conference - Stock Picks From Hedge-Fund Stars

Disclose : I don't have any of these stocks listed above.

Interview with Larry Coats, Oak Value Fund

Morningstar Justin Fuller chats with the Oak Value Fund co-manager Larry Coats. Here is video links.
Or you can watch directly below.


Barrons also interviews with Larry recently - A Buffett Disciple with Mixed Results .

Larry discusses some of his picks like BRK, AXP, JNJ, EBAY, ORCL, SSP, MMM etc. in these interviews.

Disclose : I don't have any of these stocks listed above.


Whitney Tilson's 2007 Berkshire Hathaway Annual Meeting Notes

Value manager Whitney Tilson releases his 2007 Berkshire Hathaway Annual Meeting Notes.
Here is the Direct Link


Whitney Tilson Talks about Wal-Mart

Value manager Whitney Tilson lays out comeback plan for Wal-Mart shares. Here is the Direct Link .

You can also watch CNBC interviews with Tilson about Wal-Mart after Wal-Mart announces to cut supercenter growth and buyback $15 billion shares.

Disclosure : I have a long LEAPS of Wal-Mart.


Rookie Walk Down Wall Street

I live in Taiwan and never have been to the US. I never really touched US markets until I use Scottrade to buy my first US equity on November 2006. I am just a novice investor walking in the Wall Street.

Since I'm a rookie, so my investment strategy is simple. I take people who play the game very well and follow them to play. I just look at what great investors have found. In other words, I'm a shameless idea thief. :P

Thanks to the magic of Internet. I can easily get many valuable stuff about great investors like Warren Buffett, Charlie Munger, Benjamin Graham, Philip Fisher, Bill Miller, Joel Greenblatt, Seth Klarman, Wallace Weitz, Michael Price, Whitney Tilson etc. I will learn intelligent investing from these outstanding investors.

My long term goal is to build my "sound intellectual framework for making decisions and the ability to keep emotions form corroding that framework" as Warren Buffett said in the preface of The Intelligent Investor.

So this blog will be my learning journey to intelligent investing. This blog is also a exercise to improve my broken English.