Further Survey on Pabrai's Perfect Portfolio

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
• Berkshire Hathaway (BRKa, BRKb)

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 Investor– The 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 :

• Avoid Leverage
• Risks in CDO market could curb the buyout boom.
• Buy Extreme-High-Quality Businesses
• Opportunity in mega-caps (Same view with Bill Miller in recent Kiplinger's interview)
  
• Mega-caps don't have any "buyout premium".
• His Picks
• Tyco (NYSE:TYC)
• He thinks Tyco is worth $40 a share.
• Shares of Tyco's spin-off units will start trading on July 2. (Geoff Gannon had a good post about this - Tyco Split Set for End of June.)
  
• Wal-Mart (NYSE:WMT) could be double next few years.
  
• You may see more details about Wal-Mart in his recent post at Seeking Alpha - Wal-Mart's Mistakes Are Fixable - This Stock's Cheap.
  
• McDonald's (NYSE:MCD)

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.

• Part-1 : Meet the Managers
  
• Part-2 : Meet the Portfolio
  
• Part-3 : More on the Portfolio
  
• Part-4 : Know the Business
  
• Part-5 : Just a Little Patience
  
• Part-6 : On the Lighter Side
  

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.