Looking Up to Warren Buffett - Interview with Mohnish Pabrai

It often seems like every hedge-fund manager is reading from the same playbook about how to look, work and behave. Neatly pressed khakis; thumbs glued to a BlackBerry; slick digs in Greenwich or Manhattan staffed by number-crunching research drones. But apparently, Mohnish Pabrai never got his copy. He wears shorts to his Southern California office, keeps e-mail to a minimum and almost never misses his 4 p.m. nap. And forget goosing returns with fancy computer models or using complex derivatives: Pabrai doesn't even sell stocks short.

Direct Link - Looking Up to Warren Buffett

Buffett's Words of Wisdom - 2007 Annual Letter

Warren Buffett's 2007 annual letter to Berkshire Hathaway shareholders comes out.

Related Links :

• 2007 Annual Letter (PDF)
  
• Whitney Tilson on Buffett's annual letter
• Andrew Kilpatrick, a Warren Buffett biographer, and Robert Miles, author of "The Warren Buffett CEO," discuss the Sage of Omaha.
  
• Buffett's Bets - Mohnish Pabrai
• A take on Warren Buffett's famed investor letter, with Mark Hake, Hake Capital Mgmt.; Mohnish Pabrai, Pabrai Investment Funds; and CNBC's Maria Bartiromo.

Mohnish Pabrai's Mosaic Article Links - Poor Man's Mosaic from VIN

VIN collects several chapters of Mohnish Pabrai's book, Mosaic: Perspectives on Investing. It's Poor Man's Mosaic !

• Mosaic Chapter 1: The Yellowstone Factor
• Mosaic Chapter 2: Steer Clear of Trading on the Short Side
• Mosiac Chapter 3: Tectonic Shifts in the American Class System
• Mosiac Chapter 4: Astronomers, Astronauts and Styles of Investing
• Mosiac Chapter 5: The Sure Bet of Corporate Morticians
• Mosaic Chapter 6: Retailers Aren't Worth the Risk
• Mosaic Chapter 7: What Warren Buffett Can Teach Microsoft
• Mosaic Chapter 8: The Danger in Buying the Biggest
• Mosiac Chapter 9: Decoding a Company's DNA
• Mosaic Chapter 10: Buffett Succeeds at Nothing
• Mosaic Chapter 11: Latticework-I
• Mosaic Chapter 13: Blue Chip Blues
• Mosaic Chapter 15: The Demise of a Prized American Treasure
• Mosaic Chapter 17: All You Need is Love!
• Mosaic Chapter 19: Is it time to buy Infosys?
  
• Mosaic Chapter 18: Risk vs. Uncertainty
• Mosaic Chapter 20: When Mr. Market Gets Depressed, Back up the Truck!
• Mosaic Chapter 21: Entrepreneurs Aren't Risk Takers - They're Arbitrageurs
• Mosaic Chapter 22: The Investor's Dilemma
• Mosaic Chapter 24: Intrinsic Value
  

Pabrai Funds Meeting Notes

Articles about Pabrai Funds Meeting :

• Pabrai Funds Meeting
• Joe Ponzio
• Why Ask Me? Ask Mohnish.
• Mohnish: On Noise, Emotion, Gold And Change
• Pabrai Week: The Kelly Formula
• Dah Hui Lau - Pabrai's Annual Meeting at Chicago
• Sham Gad : 2007 Pabrai Funds Annual Meeting
  

Morningstart Interview with Mohnish Pabrai (Unabridged Video)

Morningstar Justin Fuller chat with Dhandho Investor author Mohnish Pabrai on July 27 2007. This is a full version of the interview (about 34 minutes). You can also watch the shorter version (about 10 minutes) - Morningstart Interview with Mohnish Pabrai (Video).

Here is video link or you can watch directly below.

Morningstart Interview with Mohnish Pabrai (Video)

Morningstar chat with Dhandho Investor author Mohnish Pabrai on July 27 2007. Pabrai talks about his investing philosophy, risk vs. uncertainty, time arbitrage, Berkshire Hathaway and lunch with Buffett.

Here is video link or you can watch directly below.

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

GuruFocus 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.

InvestorGuide Interview with Mohnish Pabrai (Transcript)

InvestorGuide had a great interview with Mohnish Pabrai on July 11, 2007. They asked him questions that no one else had asked him in other interviews, and I thought Pabrai's answers were very valuable.

I highlight some insightful points below:

• Investment Style Evolution
• Buying a fair business at a cheap price.
• Buying good businesses at a fair price.
• Buy a good business at a cheap price.
• Moats
• Moats are critically important.
  
• They are usually critical to the ability to generate future cash flows.
• Buy and Hold Forever Approach
• The key in these cases is large discounts to intrinsic value and not to think of them as buy and hold forever investments.
  
• Running Businesses
• Being an investor is vastly easier than being a CEO.
• Both investing and running a business are two sides of the same coin.They are joined at the hip and having experience doing both is fundamental to being a good investor.
• Wit and Wisdom
• Temperament and passion are the key.
  
• Change is the enemy of the investor.
  
• Future performance is a function of future investments.
• Advice To Investors
• There is just one way to invest - buy assets for less than they are worth and sell them at full price.
• One should stick to one's circle competence, read a lot and be very patient.
  
• Studying Buffett. Then I added Munger, Templeton, Ruane, Whitman, Cates, Hawkins, Berkowitz etc.
  
• Best to study the philosophy of the various master value investors and their various specific investments. Then apply that approach with your own money and investment ideas and go from there.
  

Full Interview Transcript.

Book Summary: The Dhandho Investor

I won the June Contest at Value Investing News. The prize is a copy of Mohnish Pabrai's new book - "The Dhandho Investor– The Low-Risk Value Method to High Returns". I haven't received the book yet, but I can't wait to read it.

Björn Kijl posts his summary of The Dhandho Investor. It's a good summary. You can read it on GuruFocus or get a pdf version.

I highlight 9 core principles of Dhandho framework :

• Principle # 1: Focus on buying an existing business
• Principle # 2: Invest in simple businesses
• Principle # 3: Invest in distressed businesses
• Principle # 4: Invest in business with durable moats
• Principle # 5: Few bets, big bets, and infrequent bets
• Principle # 6: Fixate on arbitrage
• Principle # 7: Margin of safety – always
• Principle # 8: Invest in low-risk, high-uncertainty businesses
• Principle # 9: Invest in the copycats rather than the innovators

Mohnish Pabrai Talks Buffett Lunch Bid at CNBC

CNBC had a short interview with the winner of this year's Buffett charity lunch auction on eBay, with Mohnish Pabrai, Pabrai Funds managing partner on July 3.

Pabrai considers his winning bid a way to "repay the tuition bill". He thinks money spend on this auction is the "greatest allocation of capital". He also talks about charity : The Dakshana Foundation.

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

Get Mohnish Pabrai's Disappear 2001 Shareholder Meeting Transcripts

I found Mohnish Pabrai's Pabrai Funds 2001 shareholder meeting transcripts posted at GuruFocus.com on June 28. I think it's a great stuff, so I post the link on Value Investing News. But it was removed after a few days. Some friends ask me to send them this transcript.

The following steps show you how to get this transcript (just a little trick) :

1. Use Google to search "Pabrai Funds shareholder meeting 2001 transcripts"
2. Find the article link from GuruFocus.com and click the "Cached" item to get it. (Or just simple click this Cached link)
   

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 !

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 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.

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.