GuruFocus's Q&A Sessions with Mohnish Pabrai (Transcript)

Mohnish PabraiGuruFocus had a great Q&A session with Mohnish Pabrai on July 13. Today we got some more answers from Mr. Pabrai.

I highlight some insightful ideas below:

  • Investment Philosophy
    • There are many different approaches that Buffett has applied over his long career. Even today, Buffett’s investing approach when investing for his own account differs significantly from his approach when allocating capital for Berkshire.
    • If you’re a buy and hold forever investor, then having a very durable moat becomes extremely critical.
    • Buffett the individual investor can buy a cheap stock and sell it at full price and pay mostly 15% long term gains. It is much smaller and does not have the incentives Berkshire has to just do buy and hold forever investing.
  • Valuation Techniques
    • There is no need for Excel
    • Depends on the situation. In some cases you can only hang your hat on liquidation value. In other cases there is enough of a moat to focus on future cash flows.
    • If a business has zero growth and consistent stable cash flow, that business is worth 10x FCF plus any excess capital. I then divide by two and see if it’s available at half off.
    • If there is growth, depending on how much and how consistent, I’d be willing to value it at 12-15x plus excess capital.
  • Investment Categories
    • Placeholders - like Berkshire Hathaway, are stocks with ultra-low downside and decent upside, but not at a 50% discount to intrinsic value. I’ll part money in these till a real/normal investment opportunity shows up.
    • Normal - those that are available at 50% off of intrinsic value. These can be distressed, misunderstood etc. type businesses.
  • Lessons Learned From Investing Mistakes
    • Not to be an innovator, but be a cloner.
    • Being a totally passive investor - Once you get even slightly active in a given business (taking a board seat, for example), scalability drops off very very quickly. You get sucked in.
    • The best investments are total no-brainers that can be explained in a short paragraph or two. The more words and spreadsheet cells it takes to layout the case for an investment, the worse it’s likely to do.
  • About Management
    • I don’t endeavor to visit companies or meet up with CEOs or senior management.
    • You’re better off getting to know them by looking at the track record.
Full Transcript - 10 Questions to Mohnish Pabrai–The Answers.
Full Transcript - 10 Questions to Mohnish Pabrai–Additional Answers.

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