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Davy Bui
Davy Bui
Articles 

Mohnish Pabrai and Whitney Tilson: A Change In Strategy Or Just Finetuning Tactics?

March 15, 2009

One of the toughest aspects of successful investing is maintaining discipline in the face of adversity. Every investment strategy will have periods of underperformance. Those unable to hold to their strategies in down periods risk compounding their woes.

In my estimation, value investors have a harder task in this respect than do growth or momentum investors. Growth investors have their views confirmed by company earnings and guidance while momentum players use technical indicators and market pricing as validation.

In contrast, value investing is contrarian by nature; bad company developments and horrible price action are often invitations for investing capital. The value investor is reliant on what Warren Buffett calls "the courage of your convictions." This begets that most famous of value mottos, "The massive drop in the share price doesn't bother me -- I'm a long-term investor."

Which brings us to a Financial Times article by Whitney Tilson titled "Lessons To Be Learnt From Losses." Tilson's piece illustrates the slippery slope between self-confidence and denial, conviction and stubbornness.

Tilson is, among other things, a hedge fund manager whose views on the housing/mortgage markets have been spot on. Despite being early and right on the carnage in the financial sector, Tilson didn't fully anticipate the collateral damage this carnage would inflict on the rest of the economy. As a result, his long picks fared poorly.  Tilson's lesson? In his case, an overly strict definition of "bottoms-up" investing and inadequate consideration of macro factors in his stock-picking.

Tilson also mentions the case of Mohnish Pabrai (see my review of his book, The Dhandho Investor). Pabrai's losing streak is going on a few years now. Coincidentally, he announced a change to his investment strategy, basically switching from "focus investing" (holding a concentrated portfolio of a handful of positions) to a diversified portfolio with more stocks and less concentration in holdings. Anyone who has read Pabrai's book will recognize this change as a complete retreat from the chapter in his book titled "Dhandho 301: Few Bets, Big Bets, Infrequent Bets." His new motto could be summed up as "Lots of Small, Frequent Bets."

Where is the line between improving yourself and admitting defeat with a change of course? In the case of Pabrai and Tilson, it's impossible to say. Each of us can only make that distinction for ourselves. Perhaps the most important investing tenet can be summed up as "investor, know thyself."

For what it's worth, I generally agree with both Tilson's and Pabrai's new insights. In fact, I previously discussed both Pabrai's performance/outlook and macro views in value investing in this June 2008 post.

I've always felt that value investors have misunderstood the bottoms-up vs. macro question -- after all, how can an investor accurately assess a company's future prospects without a good handle on the industry and economy that company operates in? No company exists in a void.

As for Pabrai's fascination with the Kelly Formula, which uses expected value (EV) to dictate how big a position to take in a stock, perhaps a key point is overlooked: assessing EV may be straightforward in terms of hypotheticals or card games but in stocks, both the expected return and the probabilities are guess-timated by the investor. As Ben Graham would point out, the more assumptions built into your decision-making process, the more likely a mistake will be made.

The current bear market will present investors with many opportunities for self-introspection. Perhaps the true lesson from Tilson and Pabrai is that there are no set rules for investing. Rather, investors should consider a guidelines-type approach and assess each situation in its own right. It's never different this time except the one time it is.

Seth Klarman, in his seminal Margin of Safety book, implied that investors did not need "a book about investing, but a book about thinking about investing." Somewhere in that cryptic quote lies one of the keys to investing success.

--

Davy Bui

http://enlightened-american.com


Rating: 2.5/5 (28 votes)

Comments

7189ab
7189ab - 11 years ago    Report SPAM
Mohnish, Unfortunately has been totally exposed. One can only be impressed in the way he built his fund from a million of his own money to $600,000,000+ at the top.

But in reviewing his holdings and hearing about his great Buffett love something did not compute-another bull market baby comes back to earth.
marcolanaro
Marcolanaro - 11 years ago    Report SPAM
I do not believe that diversification has given any help to investors in this market. I still believe that few good ideas is the way to go, if you want to be an active investor, on the other hand but still valid way of investing is the passive way through an ETF which is low cost.

the macroeconomic picture is relevant in investing but far more is the mood of the investors, that is something that really moves the markets more than any other thing and is impossible to measure ( that is my opinion).

My approach is still bottom-up, few stocks that you understand, and stay the course, keep some cash, and add up on the way down.
PHILCIR
PHILCIR - 11 years ago    Report SPAM
never ever add up on the way down. that's how you go broke. i.e, billy, the neanderthal, miller. the rest of the points made in the 2 comments are pretty good especially about monish who is one of the most stubborn inflexible hominids alive. Not too sure whether he has fully evolved to human yet. He may be someplace in between. Focus investing is the worst advice given to investors. It assumes that the over sized pick is right. You have to assume you are wrong. Nygren thought he was a focus investor genius -- that guy is a giant shmuck who should be removed from this board immediately.
traderashish
Traderashish - 11 years ago    Report SPAM
My take:

1) Do bottom up investing in certain Macro trends. Do not ignore macro trends.

( Most gurus now can be categorized as complete morons as they did bottom up investing in financials and home industries in later 2007 and first half of 2008 and ignored very visible macro trends going against those industries.)

2) 5% each in around 20 stocks sound good. Less risky than 10% in 10, yet manageable.

3) Sell at less profit. Do not buy and hold for longer than necessary. This is not your 1970s or 1980s markets. Times have changed. I have no clue where this Buy and Hold Mantra came from...But it should mean hold only till you make reasonable profit or stock is fairly valued or your thesis for buying is no longer true and then sell sell sell. Be quick to book profits.

My only dilemma - is there a place in my portfolio for Mutual Funds and if yes then how do I make buying and selling decisions on those MFs. Buy and Hold in Gurus Mutual Funds is really hurting bad. This market found most gurus swimming naked when tides went out.



Sivaram
Sivaram - 11 years ago    Report SPAM
I see many so-called value investors starting to focus more on macroeconomics but I think they are making a mistake. If one wants to value macro that's fine but I think that's deviating from pure value investing. If you are really good with pure value investing (i.e. bottom-up stockpicking) you should stick with it. But if you are weak and are somewhat better at factoring in macro events, then considering macro is fine.

I'm not sure if the recent focus on macro by popular value investors such as Whitney Tilson, Mohnish Pabri, David Einhorn, and others, is going to cost them dearly. These individuals likely don't have any competitive advantage against macro-oriented investors like Jeremy Grantham, Jim Rogers, Marc Faber, George Soros, and so forth.

Anyway, we'll see what happens. I suspect that pure value investors will beat the macro-oriented ones in the medium to long term.
Sivaram
Sivaram - 11 years ago    Report SPAM
PHILCIR: "never ever add up on the way down. that's how you go broke...Focus investing is the worst advice given to investors. It assumes that the over sized pick is right. You have to assume you are wrong. "


What you say is almost as meaningless as if I say the opposite. In the end it depends on the person and how successful they are with their execution.

I could probably find as many people who have posted massive losses being diversified as concentrated investors that you cite. A widely diversified investor probably had a greater loss last year than someone who was concentrated in American stocks or the S&P 500 in general. This is likely the case last year since a diversified investor would have had exposure to emerging markets (whereas someone holding S&P 500 only wouldn't) and would have underperformed (especially due to the US$ appreciation.) Similarly, someone who was momentum oriented probably has posted greater losses than the broad market last year, although it depends on the details. Momentum oriented investors follow your strategy of not averaging down into losing stocks, which basically means they end up overweighting the hot sectors. Last year this would have meant that these guys would have been overweight energy and materials, if you assume they couldn't predict the October collapse. These two sectors got absolutely crushed last year (materials and energy even underperformed consumer discretionary--don't forget that consumer discretionary includes weak industries like homebuilders, retailers, autos and a lot of leisure stuff.)) Admittedly, anyone averaging down into financials would have been bankrupt but can you say the same in general?
buffetteer17
Buffetteer17 premium member - 11 years ago
"Coincidentally, he [Pabrai] announced a change to his investment strategy, basically switching from "focus investing" (holding a concentrated portfolio of a handful of positions) to a diversified portfolio with more stocks and less concentration in holdings."

Firstly, I'm not sure this is correct. According to gurufocus's report on Pabrai's holdings, it appears that just 7 stocks make up 80% of his portfolio. Seems pretty concentraded to me. Secondly, those "few years" of underperformance amount to about 18 months. That's very few years.

However, to the main mistake. I myself have gone from a concentrated portfolio with 80% in the top 6 stocks to a rather more diversified portfolio with 80% in the top16 stocks. I do not regard that move as inconsistent. In 2006 and 2007 I had trouble finding 6 companies selling for well under 50% of intrinsic value. Now I have little trouble finding really good companies selling for 40% of intrinsic value. It is all about margin of safety. If I can maintain my margin of safety with more companies, I am happy to do so.
David Pinsen
David Pinsen - 11 years ago    Report SPAM
"Firstly, I'm not sure this is correct. According to gurufocus's report on Pabrai's holdings, it appears that just 7 stocks make up 80% of his portfolio."

Buffetteer,

I think the writer was referring to what Pabrai said about position sizing in his annual investor letter.
Amit Chokshi
Amit Chokshi - 11 years ago    Report SPAM
Why an article covering two hack investors?

Pabrai is exposed as a lucky gambler but he sure made off nicely with other people's money. Comes off as a swell guy but one that is really clueless about investing. But the usual MO of quoting WEB and suckering in those that think this guys is "the one" seems to work.

Tilson is a marketer/writer. Find just ONE significant holding in his portfolio that is not a copy of one of his buddies. TGT, BGP, BKS, DPS, WINN, REXI, SATS?? The guy is a total joke. He quotes WEB but then his mutual fund has a turnover of nearly 200%? His mutual fund performance is laughable, isn't Bill Miller's fund as "good"? Not to mention its a roach motel, you can check in but check out the expense ratio and redemption fees.

I think one thing with value investing is to say some WEB quote like be greedy when otehrs are fearful along with hey brother can you spare a few mil into my fund. I give credit to Pabrai and Tilson for finding rich dumb money. Given my family and friends I'd say I suspect doctors make up a large part of the poor souls that are in with Pabrai and Tilson.

cm1750
Cm1750 - 11 years ago    Report SPAM
If I remember correctly, Pabrai last year bid $600K at a charity event to have lunch with Buffett.

Maybe WEB told him that he should buy more stocks, in keeping with WEB's view that diversification is good protection against incompetence. I am guessing he also told Pabrai to stop telling people he was a Buffett-type investor.
traderashish
Traderashish - 11 years ago    Report SPAM
Just curious, Why these sentiments against Pabrai and Tilson?

Are they doing that much worse than Dreman, Pzena, Miller, Nygren, Ken Fisher, Bruce Berkowitz, Whitman etc?

Is not 18 months period too small to judge a value investor?
Amit Chokshi
Amit Chokshi - 11 years ago    Report SPAM
Traderashish

Pabrai is a great guy, just not the kind of guy to follow for investment advice. The difference between retail and a professional investor is not the ability to pick stocks it's in risk management. That's why when PhilipCR talks about not buying into losing positions, some of what he says is good advice. It's not a totally blind rule but it helps manage risk as well as realizing, hey I have done a lot of work on company X and its stock but for whatever reason the market is haircutting it 20% weekly, is it really prudent for me as a RISK manager to keep buying more and more and increasing my losses? Pabrai bought more and more of stocks like DFC and PNCL and that absolutely crushed him and more importantly his investors. Plus, this could be just my opinion but I find the general reporting of his track record to be misleading. Pabrai had 4 funds, the first fund was tiny but that had the highest level of returns while his larger funds have stunk it up. Pabrai lost money in both 2007 and 2008 which does not mean much for long-term track records but his holdings are outright abysmal. This is my hindsight 20/20 talking but if you look back at his holdings over the years, Pabrai benefited from the liquidity glut. He held a lot of mediocre businesses in the micro/small cap space with a lot of business leverage and these took off. They took off because a lot of hedge funds had liquidity back then resulting in abnormally high valuations for the micro/small cap space. You've seen that reverse now where you see companies trading now for less than cash value in the micro/small cap space. If you look at Pabrai's holdings now, there's nothing there to let anyone think those holdings offer much. TCK is a highly levered metals play, but why not buy PCU which is much safer? To me he is probably just gearing his portfolio to jack up his returns at the expense of more zeros in his portfolio, more or less gambling to me. SHLD? PNCL? These stocks are not coming back.

Tilson I've written about before. My problem and I think anyone that has a problem with him are people that do this for a living and the issue with him is that he's marketed himself (successfully) as some high caliber investor mainly in my view because he gloms along with Bill Ackman and David Einhorn basically using their ideas along with others to craft a portfolio for which he charges you 2/20 on the hedge fund side and those exorbitant mutual fund fees for his dog mutual fund. Nearly every significant position in his 13F is someone else's idea. It would be like me just picking some holdings off GuruFocus's database, doing little follow up research, and then charging people for it. There's nothing wrong using other sources for research but the fact that he buys/sells when these guys do tends to demonstrate he has poor analytic abilities, this same guy rode BGP the whole way down along with Ackman, same with TGT and BKS. And what a surprise that he now owns DPS as Einhorn and Ackman do, SATS which Einhorn owns... And who could forget the Amherst Securities research he peddled trying to present himself as a person who called the MBIA/ABK fiasco and the broader housing and financial crisis. People have short-term memories but all you need to do is find Tilson pumping Mueller Water Products which had 50+% of its sales from NEW HOUSING builds as a guy that had no clue about the crisis until MBIA was down 90%. He also was on Bloomberg talking up how Corus Banc could be attractive in 2007 and warned people not to front run him jokingly. On top of that he has regular articles for the FT and Kiplingers to market himself and basically kill people who follow his advice. Seriously, he's pumped DPS, WU, MWA, AXP, TGT, BKS, WINN, REXI in these articles. I can understand losing money but many of his picks lost a FORTUNATE, MWA he was an "aggressive" buyer at $15 in teh article and it's at $2-3. Maybe the problem is with Kiplingers or FT for not having Tilson revisit these bungled calls but how is this much different than Cramer? Lastly, this guy is one of those WEB types that spews every WEB saying in the book but tends to be un-WEB like in the fees he charges and the turnover in his funds and all of the other activities he does to line his pockets. Investing to me is like a professional sport. If you're doing this for a living, it's all consuming except for the philanthropy stuff. Tilson does his newsletters which he charges about $300-$400 and value congresses which i get spammed for but i can save $1200 based on the latest one to hear Pzena give me his next cheapest stock in 25 years... and write ups for the FT and Kiplingers. Do I want someone havign all of these activities, especially getting compensated and having that sort of conflict and maybe not giving my investment the 110% attention it should have?
traderashish
Traderashish - 11 years ago    Report SPAM
Wow, you know your stuff really well Dizzy. Do you have a blog?

That leaves very few real gurus - Buffet, Seth Klarman, Bruce Berkowitz, Whitman, Jeremy Grantham, Bill Gross, may be Mohmad El Erian of Pimco and ... I cannot think of any other...Most other I thought as gurus are falling like nine pins...

Are there any gurus you really respect regardless of their recent performance...
traderashish
Traderashish - 11 years ago    Report SPAM
add Jean Marie to that list of real gurus.
David Pinsen
David Pinsen - 11 years ago    Report SPAM
I think the recent crash is the best thing that could have happened to guys like Pabrai and Tilson. It's sort of the opposite of Buffett's old quip about the tide going out -- in this case it's a tsunami that swamped almost everybody, so most people can't tell the good swimmers from the bad.
Amit Chokshi
Amit Chokshi - 11 years ago    Report SPAM
I agree and it's what I'm seeing with various fund managers that run $50-$500MM. Some that performed very well (+10%) through long/short can't raise any money because people are just skeptical. they know many smart people got smoked as did a lot of pretenders and have trouble distinguishing who was sharp and who wasn't.

I still think Pabrai is mostly done. His investor base was HNW individuals and a lot of the late comers just got smoked big time, if you put money in from 2006 on, you're down huge and his lack of any real risk mgmt just is a killer.

Tilson might last a bit because he markets himself nonstop. He's always out there, CNBC, 60 minutes, FT, Kiplingers and he knows how to position himself. He was just at the CT Hedge Fund Association talking about the next big financial crisis. His mutual fund I think would be shut down, he has to have just about $5MM or so. Then his hedge fund has a little under $100MM. I think his partners just don't care though, if they haven't pulled money from this guy basically being a follower of the Ackman and Einhorns of the world they prob will ride it out.
David Pinsen
David Pinsen - 11 years ago    Report SPAM
Tilson seems to have built a nice income stream for himself outside of managing money. He might as well phase that out and focus on his newsletters, VIC conferences, etc.

You make an excellent point about risk management. I made a comment about that in a recent post elsewhere ("Marty Whitman Wishes He Had More Liquidity").
Sivaram
Sivaram - 11 years ago    Report SPAM
Dave: "I think the recent crash is the best thing that could have happened to guys like Pabrai and Tilson. It's sort of the opposite of Buffett's old quip about the tide going out -- in this case it's a tsunami that swamped almost everybody, so most people can't tell the good swimmers from the bad."


Well, it goes the other way too. I see a lot of people bashing who I consider as superinvestors because of poor recent performance. Just like how every hedge fund manager or private equity shop was smart and talented a few years ago, I think the sentiment has shifted excessively to the other side. It seems that many consider almost everyone to be untalented.

I feel that many are very short-term-oriented and ignoring the fact that many assets may be irrationally low. We need to wait a longer period and see what happens since the market has sold off almost everything. Part of it surely is due to valuation compression but some of it is likely irrational pessimism. When say American Express or Sears gets marked down by the Street, is that a real credit impairment? It's not clear to me. Many here seem to think it is a real loss (because they put great weight on market prices rather than any notion of instrinsic value) but I'm not so sure.
David Pinsen
David Pinsen - 11 years ago    Report SPAM
"When say American Express or Sears gets marked down by the Street, is that a real credit impairment? It's not clear to me. Many here seem to think it is a real loss (because they put great weight on market prices rather than any notion of instrinsic value) but I'm not so sure."

I don't think the decline in those companies' share prices is the only reason some people are skeptical about them.
PHILCIR
PHILCIR - 11 years ago    Report SPAM
Dizzy said: The difference between retail and a professional investor is not the ability to pick stocks it's in risk management.

well said - hit the nail on the head.

Most of these alleged gurus biggest problem is their inflexibility. They have sort of this upbeat attitude when they are getting crushed like oh well that's just an irrational market being an irrational market. Chris Davis is another chump - don't forget him. Berkowitz is the ultimate logger head of stubbornness. In reality these guys are not anything special, and know about as much as you do. They are cycle investors who buy after a security gets knocked down and need a bull market to bail em out. They cloak their strategy in graham and buffettisms but in reality don't know the first thing about business other than what they read. They obviously know squat about trading. They have one thing in common -- they are highly addicted to skimming off the top. That is their real talent.

Forget Mohnish, Tilson (an absolute chameleon) Berkowitz, Hawkins, Nygren, Whitman (who is setting up to come back to the well to replenish because the skim is now way down), and focus on you. The top guys aren't these clowns. Look at guys like Paul Jones and Louis bacon - they are the real gurus.

Good day.
Ranni
Ranni - 11 years ago    Report SPAM
traderashish

Date: March 16, 2009 05:42PM

Just curious, Why these sentiments against Pabrai and Tilson?

Are they doing that much worse than Dreman, Pzena, Miller, Nygren, Ken Fisher, Bruce Berkowitz, Whitman etc?

Is not 18 months period too small to judge a value investor?


Yeah some of those performance have been horrible, but the main point to critics is... Have you hear those guys aren't sticking with their guns?

Tilson´s function in value investor community seems to be just parroting what WEB said.
traderashish
Traderashish - 11 years ago    Report SPAM
Paul Jones and Louis Bacon are macro traders as opposed to most others in Gurufocus. Most other claim to be bottom up value investors. Macro trading sounds much riskier than value investing on paper at least.

It is very interesting to know about Louis Bacon. How does he hedge or manage his risks?

I have heard of Paul Jones. I am not sure if I have the courage or temperament to trade like them.

For me it is value investing in some macro trends.

I have read many books on value investing.

Any good books or sites on macro trading? Is it suitable or possible for small investors?

I think Sivaram is going in Macro trading direction. So he might know a lot

http://www.marketfolly.com/2008/07/hedge-fund-manager-interviews.html

batbeer2
Batbeer2 premium member - 11 years ago
>> Why an article covering two hack investors?

>> Pabrai is exposed as a lucky gambler......

Somewhere in that post I missed the answer to the question. Would you care to highlight the answer. I think it is a great question.
Sivaram
Sivaram - 11 years ago    Report SPAM
Traderashish: "I think Sivaram is going in Macro trading direction. So he might know a lot"

Nah... I'm just a newbie and don't follow those guys... Althought I don't consider myself a value investor because I'm more macro-oriented, I'm shifting towards value investing. I used to be more of a macro investor a few years ago (was a big commodities bull) but am less so now. I don't know if I'm cut out for value investing (several stockpicks of late have been a total disaster) but we'll see.

The problem with macro is that it is very dangerous if you get the trend wrong--and you won't know it except in hindsight (I guess the experts can detect their mistakes but newbies like me can't.) When you have the trend right, everything looks great. But if you are wrong, you just won't know. For instance, consider Jim Rogers, who is one of the top macro investors out there. I have no idea what he owns but he would have been absolutely decimated last year due to his bearish US$ bet and his superbullish commodity bets (his shorting of financials woudln't have made up for it, unless he used immense leverage.) Yet, he would have looked amazing until October of 2008. To make matters worse, I don't even know if anyone knows if Rogers is correct right now. Are his commodity bets going to turn around? Will oil go back to $147? Will copper go back to $4? It's really hard to say.

Even George Soros, from what little I understand, was barely saved last year on some of his key bets. In an article (I think in Financial Times) he said that he was completely wrong with his bearish call on the US$ and was luckily able to reverse out of that and make money off a bearish bet on the British pound due to a correct call by one of his strategists.


In the long run, value investing is what works. It is the only "type" of investing that has worked in differing environments. All these other styles come and go out of fashion. It doesn't mean it is foolproof. After all, the best investor of all time, Warren Buffett, likely has permanent losses on ConocoPhillips, USG, and maybe even Moody's and Wells Fargo. But, in the long run, I'm confident the style will survive and outperform.

People such as PHILCIR are correct in pointing out how we can't excuse the massive losses of many value investors. I suspect he lost a fortune and many others have as well. But I really wonder if his method, if there is one, will outperform anythign in the long run. If we just look at Phil's strategy of blindly buying a basket of beaten down stocks, a la John Templeton, what is he going to do if the market rallies 50% (which is pretty reasonable bear market rally)? Then what? What does he do after that? Wait another 20 years for a big crash?
jhliang2k
Jhliang2k - 11 years ago    Report SPAM
I just saw that Tilson was labeled "The Prophet" on Fast Money. Funny how they don't ask him, if he called the financial crisis, how his funds did during this time. I like the guy, but he is just a poor investor.
David Pinsen
David Pinsen - 11 years ago    Report SPAM
Maybe he's a profitless prophet?

As for Mohnish Pabrai, he might be the M. Night Shyamalan of value investing.
Sivaram
Sivaram - 11 years ago    Report SPAM
DaveInHackensack: "As for Mohnish Pabrai, he might be the M. Night Shyamalan of value investing."

Shyamalan actually makes good movies so that's not a good comparison...
David Pinsen
David Pinsen - 11 years ago    Report SPAM
Siv,

I think Shyamalan's first major movie, The Sixth Sense, was great, but it's been downhill since then. The critics and the box office seem to agree, for the most part. That's the similarity I see with Pabrai: a strong start, and then downhill from there.
Amit Chokshi
Amit Chokshi - 11 years ago    Report SPAM
Pabrai might have a good quarter, he did buy ZINC and TCK which i'd think he might have like 50-150% type of returns. Not sure if he bought big though considering his new strategy of 2.5%-5%-10% position scaling.

M Night's movies suck, sixth sense was decent, rest of them were terrible. Always some mysterious thing as the main premise with a lousy ending.

Tilson is down about 9% this year. Tilson "The Prophet" is hilarious, he should be Tilson "The Harvard Hustler". If his fund investors ever come around and realize he just leverages the 13Fs of Ackman and Einhorn this guy will prob become a regular on Fast Money. He has a book on Amazon too now. I am waiting for the Tilson Channel next, all Tilson all the time.
Sivaram
Sivaram - 11 years ago    Report SPAM
I haven't seen Shyamalan's latest few films but The Sixth Sense was great; Unbreakable was good too; and Signs was ok for someone into family-type movies (not me). Haven't seen the others...
sabonis
Sabonis premium member - 11 years ago
Abdb886 wrote: Hey Guys, instead of spending your time pondering which fund manager is a good value investor and which one is not, why don't you use that time to focus on your own investments, doing your own homework?

Isnt that the whole point of gurufocus? To "focus" on what the "gurus" are buying? I think most people on here like to look at the picks of fund managers that they respect and then do their own homework. I think you have to start by differentiating between a good and bad fund manager.
sabonis
Sabonis premium member - 11 years ago
I liked M. Night Shyamalan's last two movies "the Love Guru" and "slumdog millionaire"...Pabrai should make a movie called "slumdog $250k" since he is down about 75%.
David Pinsen
David Pinsen - 11 years ago    Report SPAM
"Pabrai should make a movie called "slumdog $250k" since he is down about 75%."

You might be onto something there, Sabonis. I can see the makings of a good movie based on Pabrai. One idea would be that he loses so much money that he has to move his family back to a small village in India, where the cost of living is lower. Inspired by the success of micro-finance lenders, Pabrai proceeds to start a new micro-hedge fund there, accepting new investors with a 1,000 rupee minimum. Within a few years, the villagers' 1,000 rupee investments are only worth 250 rupees, and they chase him out of town. He then moves to an even poorer village and starts a new hedge fund with an even smaller initial investment requirement.

Another movie idea could be set in Southern California, where Pabrai lives now. In order to make up for the money he has lost for his investors, many of whom are friends and family, Pabrai agrees to work as a butler for his biggest investor. Along the way, he learns valuable lessons about humility.

Still another movie idea could be that, again, to atone for the money he's lost, one of his investors makes him manage a motel for him. This might actually be better as a TV idea, because the motel concept allows for regular guest stars. The motel guests could include salt-of-the-earth types -- the sort of people Pabrai wrote about in The Dhando Investor -- and each week, Pabrai could learn a new life lesson from them.
Ranni
Ranni - 11 years ago    Report SPAM
Dizzy: Tilson is down about 9% this year. Tilson "The Prophet" is hilarious, he should be Tilson "The Harvard Hustler". If his fund investors ever come around and realize he just leverages the 13Fs of Ackman and Einhorn this guy will prob become a regular on Fast Money. He has a book on Amazon too now. I am waiting for the Tilson Channel next, all Tilson all the time.


Yeah, i read editorial reviews of that Tilsons new book and i think Einhorn made it clear when he said.

"Two great students of investing explain the great economic debacle and teach us what to do about it."

—David Einhorn, founder, Greenlight Capital


Question: When you guys try to learn something about investing , are you going to read books written by students or teachers. ;)

alanb9
Alanb9 premium member - 11 years ago
Ranni Wrote:

-----------------------

> Question: When you guys try to learn something

> about investing , are you going to read books

> written by students or teachers. ;)

I see and understand the wink ;)

However, I will point out the following from Wikipedia (merely a quick and easy source):

"The word student is etymologically derived through Middle English from the Latin second-type conjugation verb "stud?re", meaning "to direct one's zeal at"; hence a student could be described as 'one who directs zeal at a subject'. In its widest use, "student" is used for anyone who is learning."

and:

"In education, teachers facilitate student learning, often in a school or academy"

Given these two choices, I'd pick the student any time over the teacher!
port45
Port45 - 11 years ago    Report SPAM
Where would I find the doc about Pabrai's new diversification strategy?

We are in a rare environment where even for the bottom's up value investor it makes sense to spread your bets more as everything has been hammered down so much from macro forces. When you have more dollars selling for 50 cents than you know what to do with across several industries it makes sense to diversify. Look at Buffett's equity portfolio in the early 80's. Easily 20 or 30 holdings I believe.
Altmanva
Altmanva - 11 years ago    Report SPAM
Dizzy I appreciate your comments. You may have also observed that in 2008 good performance was met with redemptions to cover massive losses elsewhere. --- It happened in my business. Your comments on risk management are very provocative. The small guy doesn't typically make significant mistakes and even novices understand the limitations and benefits of diversification --- its the pros who don't fully understand the "dynamic" nature of correlation across asset classes.

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