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Holly LaFon
Holly LaFon
Articles (9489)  | Author's Website |

Mohnish Pabrai Taking GuruFocus Reader Questions for Upcoming Interview

Master investor will sit down with us next month

February 26, 2019 | About:

GuruFocus is excited to welcome Mohnish Pabrai (Trades, Portfolio) for an upcoming interview on March 21.

The interview will include questions from readers. To ask yours, submit it in the comments section below, and look out for Mr. Pabrai’s answer when we post the talk next month.

Mr. Pabrai is a celebrated investor who manages about $1 billion through Pabrai Investment Funds and Dhandho Funds. He also wrote two award-winning books on value investing, “The Dhandho Investor” and “Mosaic: Perspectives on Investing.” Mr. Pabrai came to value investing largely by way of Warren Buffett (Trades, Portfolio)’s biography and shareholder letters, and in 2007 he, along with fellow investor Guy Spier, placed a winning $650,000 bid in a charity auction for lunch with Buffett, whom he counts as a friend.

The most notable aspect of Mr. Pabrai’s Dalal Street portfolio that GuruFocus covers is its lack of investments at fourth quarter-end. Viewing the U.S. stock market as overpriced, Mr. Pabrai has moved 40% of his overall assets in India-listed securities, with only 0.1% invested domestically.

“In fact, I am bullish on the U.S. in general, it is just that things are not heavily mispriced and under priced,” he told The Economic Times in an interview. “At the same time, India has increased quite dramatically. It has gone from basically less than a $100 million two-three years ago, to over $400 million and so all of that has happened because I am able to find opportunity here and I am not able to find opportunity in U.S.”

(He discusses more about his preference for India’s market with CNBC here and here.)

One of his two remaining U.S.-listed holdings is a long-standing investment in luxury carmaker Fiat Chrysler Automobiles (NYSE:FCAU), a stock that ascended 147% over the past five years. Mr. Pabrai has highlighted the company’s management, undervaluation and potential for a sale as integral to his thesis for the investment (read more here).

In the fourth quarter, he made waves when he disclosed a stake in memory chipmaker Micron Technology (NASDAQ:MU), also known for taking the largest place in hedge fund manager David Tepper (Trades, Portfolio)’s portfolio, as it plunged in the latter half of the year. Already rebounding, its stock price has soared more than 30% year to date.

Mr. Pabrai left behind a stake in Ferrari (NYSE:RACE) in the third quarter of 2018, and exited Alphabet (NASDAQ:GOOGL) and Southwest Airlines (NYSE:LUV) in the first.

A much sought-after speaker, Mr. Pabrai has expounded on his investment approach in universities and publications worldwide. Often discussed is his famous investing checklist, which ranks three criteria as most important for a company: leverage, moat and management. He also closely studies other great investors, following in their footsteps and avoiding their mistakes.

"The checklist that I created came out of looking at mistakes made by great investors. The single biggest reason why investments don’t work out for investors is leverage,” he has said. “The second biggest reason has to do with a misunderstanding of the comparative advantage of the moat. Then you get to management and ownership and other issues.”

Read more about Mr. Pabrai here:

· Mohnish Pabrai Talks About the 10 Commandments of Investing

· Mohnish Pabrai on His Top Checklist Criterion

· Mohnish Pabrai on Fiat Chrysler

· Mohnish Pabrai Buys Shares of Tepper Stock Micron Technology

The GuruFocus interview will cover all of these topics and more. To ask your question for Mr. Pabrai, don’t forget to post it in the comments section below.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


Rating: 5.0/5 (4 votes)

Voters:

Comments

pnicholls
Pnicholls - 3 weeks ago    Report SPAM

Hey Mohnish, I have noticed there seems to be increasing concern around FCA's inventory levels with day supply levels quite elevated, is this something you monitor and are you also concerned that FCA is making more cars than it can currently sell?

> Dealers had 166 days’ supply of Jeep Wranglers at the beginning of this month, up from 116 days at the start of the year, and 120 days a year ago, according to data from Automotive News.

https://finance.yahoo.com/news/suvs-hotter-ever-jeep-may-050001282.html?soc_src=hl-viewer&soc_trk=tw

Nelson Rojas
Nelson Rojas - 3 weeks ago    Report SPAM
Mr. Pabrai, do you read as much as Warren Buffett (Trades, Portfolio)? Say, 500 pages a week? Or do you take a different approach about reading? Thank you.

sureshcpa
Sureshcpa - 3 weeks ago    Report SPAM

Sir ji, Please recommend some Indian stocks. Regards

sameerabrol
Sameerabrol - 3 weeks ago    Report SPAM

Mr. Pabrai-

I want to Thank you for being a great teacher yourself. I have few questions:

1) You've rightly cloned a lot of best practices from Mr. Buffett and Mr. Charlie Munger (Trades, Portfolio). I'm curious to know why haven't you yet or do you plan to clone their move into owning more Operational businesses rather than being in money management.

2) What was your hardest or most challenging part of your investment journey?

3) Which is one Mental Bias that you still struggle with and how do you overcome it?

Thank you.

damansinghsd
Damansinghsd - 3 weeks ago    Report SPAM

What's the best market to invest in 2019-2025?

skhanna
Skhanna - 3 weeks ago    Report SPAM

Hi Mohnish -

Very generous of you to share your wisdom in the footsteps of your mentors - Warren and Charlie. Thank you. Your journey to value investing is fascinating. You are a self-taught value investor with typical credentials of MBA, CFA, CPA or previous i-Banking/investing experience. Which is great and inspiring for us who are in the same boat as when you started after selling TransTech, Inc. to Kurt Salmon Associates.

You eschew the use of excel. You say that if you have to use excel then its already too difficult a hurdle and you pass on the idea. The fact that you can do a quick back of the envelop intrinsic value calculation is amazing in itself. Can you please walk us through step by step, in as complete and through way as possible, an actual back of envelope calculation using a very specific example of a public company so that we can follow along? So we can learn and replicate the same approach when we evaluate companies? Shameless cloning is the best compliment.

Qualitative analysis you explain so well and so often in your talks and in your excellent book, The Dhandho Investor. I get it that it’s the more important and valuable part of the analysis. I have also read your post on The Yellowstone Factor and “mota hisaab” but have not come across where you do a actual step by step and complete back of the envelope calculation of intrinsic value.

So to be clear, I am specifically requesting a walk-through of an actual back of envelope valuation and any quantitative financial analysis you do to calculate intrinsic value (and any other values/calculations). I am not asking about qualitative analysis aspects of value investing such as moats, quality of management etc.

I also understand you're 100% in India wiht zero US Holdings. How are you managing INR/USD currency risk? Currency depreciation alone over the long run can wipe out a big chunk of returns.

Thank you.

yjain0004
Yjain0004 - 3 weeks ago    Report SPAM

Sir its very difficult to find and own good stock with long term vision but it is also very difficult when to sell that stock and book profits, I want to know that how to catch time which is idol as per you when one should get out or exit a stock.

jmloftis
Jmloftis - 3 weeks ago    Report SPAM
Thankyou for your generosity Mohnish,

I've continued to improve my ability to invest in solid companies the past 25+ years following key principles layed down by investment legends like, Warren Buffett (Trades, Portfolio), Charlie Munger (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Peter Lynch, Sir John Templeton, you, etc...

As much as possible I try to buy into companies I can hold for a long time. Examples: I've held Nike and Hermes Int'l.for very nice returns over almost two decades. Due to the distruptive nature of technology and societal /demographic (and other) changes, "buy and hold" must be watched much more closely these days. Even Buffett has had a few surprises with WFC & KHC. My current example is that I've had a very good return with UNH, but the US healthcare environment could change dramatically for such a stock. I am watching carefully these days.

First Question: What is your strategy for investing in and holding long term positions in today's environment? Key point is holding solid companies (love FCF, ROE & ROIC with low debt), but even solid moat companies sometimes will not work out as well as hoped at 5 -10 years.

Being an American, I've also tried to not be centered only on the US Market. So I have a few international companies that I've bought over time when they were relatively cheap, like Baidu (recently), Ping An Insurance and I dipped into Tencent. I wish there were reasonably priced solid company ADRs for India. I never found IBN or HDB priced cheap enough. SZKMY is probably a better choice than TTM due to how it is managed, but I do not really want a heavy CAPEX company. Softbank is too speculative for my taste. I did dip into CTSH a long time ago and it has done well (I could not buy TCS.NS, and I preferred CTSH over INFY). I am not really a top down "Macro" stock picker, but India's rising tide should lift many boats. I know India will continue emerging with winning stock opportunities, but there are few ADR options compared to China.

Second Question: Any suggested angles for an American based investor to uncover hidden gems in India?

Thank you for your patience to read through the above.

Warmest regards,









erik
Erik premium member - 3 weeks ago

Dear Mr. Pabrai,

I would like to ask, if you were managing today a small portfolio of up to 100.000 USD, would you use the same strategy of buying great businesses for fair prices or you would better choose a strategy of buying small mispriced companies for wonderful prices ?

Thanks. Regards, Erik

ramneek
Ramneek - 3 weeks ago    Report SPAM

Hi Mr. Pabrai,

Thank you for teaching us a lot - through your books, speeches and blog.

I understand you don't talk about specific stock picks, but Rain Industries has been there in your portfolio for a long time. Like you, I see immense value in Rain. Even after paying off it's $1Bn debt, I think Rain is trading at its Asset Value of Equity. How much negative impact will the Supreme Court ban do you think will have on Rain's numbers and do you see Jagan Reddy's resignation as an MD a corporate governance issue? To what extent do you think these factors are ailing the stock?

feltonfu
Feltonfu - 3 weeks ago    Report SPAM

Dear Mr. Pabrai,

You have been investing for several years now. What would you say was a mistake that you have routinely made over the years that you have recently (within the last 3 years) corrected?

Additionally, Munger speaks about changing old ideas. What was your most recent "old idea" about investing that you changed within the last 3 years?

JAvZZe
JAvZZe - 3 weeks ago    Report SPAM

How does the Berkshire change impact your cloning approach?

Benoit7
Benoit7 - 3 weeks ago    Report SPAM

Hi Mohnish,

Are you confident FCAU and RAIN will soar back to their highest price levels? Are you planning to hold FCAU for a long time?

What it the reason they both tanked so much since their highs?

Are you planning to hold MU for the long term?

Kind Regards,

Benoit Defreyne

koschman
Koschman premium member - 3 weeks ago

Hi Mohnish, let's assume for a minute you're 35 again, but you don't have the insight into India that you have today. In other words, you feel very confident in your approach, but most of your investments will need to come from the US exchanges. Would you start Pabrai Funds again? I'm asking for a friend, and it has nothing to do with that fact that I'm a 35yr old American that just launched a small investment partnership :). Thanks Mohnish! Huge fan!

Kyle O.

johnbarber
Johnbarber premium member - 3 weeks ago

Monish - I enjoyed the Dhando Investor very much.

#1 - Seems to me that Warren B and some others advocate for concentrated portfolios arguing that you should concentrate your $$$ into your very best ideas. Disruptive technology has quickly changed the value many industries and companies. Can you give a rule of thumb to how much concentration is appropriate for an experienced investor? Do you personally limit the size of holdings as a % of your account?

#2 - Do you have preferred mental models that help you find companies trading less than their fair value? Perhaps a preferred situation that ends in the mispricing of securities? And do you find that having a catalyst to reach fair value is important (if so an example please) or is patience simply a virtue?

P.S. I can save you $650k on lunch if you are ever in San Diego....my treat!

matej.urbasik
Matej.urbasik premium member - 3 weeks ago

Hello Monish, I am a big fan of yours
I like that you are copying Buffett and doing most of your investments in India, which I do not understand and do not even try to understand. But I would like to use your services. Is there a way for the little guy like me to invest with you in India (I do not have 500000$ or whatever the terms for hedge funds are).
Thanks!

jigar_saraiya
Jigar_saraiya - 3 weeks ago    Report SPAM

Hi Mohnish,

Thank you for sharing your wisdom. Could you please advise

: - in one interview you have mention that if you buy stock after Warren buffet buy and sell after he sells still you will beat S&P 500 return. Is it still valid? Still recommend doing that.

: - which one of your portfolios you prefer most? Uber Cannibals or Shameless Cloning or Spinoffs.

Thank you

Jamoo0525
Jamoo0525 - 3 weeks ago    Report SPAM

Do you write any shareholder letters or hold any general shareholder meetings? If so, how do we get access to them?

Nicola Guida
Nicola Guida - 3 weeks ago    Report SPAM

Dear Mr. Pabrai,

I really admire you as an investor and as a human being.

Of course everyone makes a mistake from time to time (and great people like you learn from them!)

Which is the worst mistake you did when acquiring Horsehead Holdings Corp some years ago and why did you overlook it?

How did you adjust your investment approach/checklist after that event?

Thank you in advance for your answer

Kind Regards,

Nicola Guida

BradGosh
BradGosh premium member - 3 weeks ago

Mr. Pabrai,

Thank you for taking the time to answer my question. I am wondering if there is any good technique to detect fraud or dishonest management while investing in emerging markets, e.g. India and China?

Best,

Brad

Matthew Sipos
Matthew Sipos - 3 weeks ago    Report SPAM

Mr. Pabrai,

If you knew that the stock market will close for the next 30 years, which sectors and markets would you pick stocks from? Thank you!

michelc
Michelc - 3 weeks ago    Report SPAM

Mr. Pabrai,

my question is about buying wonderful companies at a fair price.

From your understanding of C. Munger and W. Buffett investment philosopy, what would you say is the maximum limit one should be ready to pay for shares of a wonderful business? Or in other words, up to what percentage of your estimated intrinsic value would you be ready to pay to purchase shares of a wonderful business? Thank you.

Swetha g
Swetha g - 3 weeks ago    Report SPAM

Hello Mohnish

First of all i would like to thank you very much for all your teachings. I like your honesty style.

Couple of questions i have:

1. Other than quarterly and annual reports what are the other resources for researching a company?

2. Can you point to a good resource which can be used to arrive at the instrinsic value calculation of a company?

Thank you!

Swetha

tokyowalker
Tokyowalker premium member - 3 weeks ago

Dear Mr. Pabrai,

Can you give us an example of an indian company that you liked and bought with the reasoning and valuation behind that purchase, Thank you.

bbatts
Bbatts premium member - 3 weeks ago

Hello Mr. Pabrai,

With today's endless information about any company at our fingertips, what advantage/edge does the retail value investor have over others with the same information? Is it just a willingness to wait longer?

towens1854
Towens1854 - 3 weeks ago    Report SPAM

Mr. Pabrai -

How did you convince your first investors to part with their money, since your background was technology, and not investing?

Thank you Holly and GuruFocus.

Cheers,

towens1854

vgm
Vgm - 3 weeks ago    Report SPAM
Hi Mohnish,

You said in the past that Charlie Munger (Trades, Portfolio) suggested to you three approaches to investing:

1. Investigate spin-offs;

2. Investigate cannibals (companies buying back stock);

3. Investigate 13Ks of top class investors

Do you use these guidelines? Are they still relevant? Which investors' 13Ks are your favorites?

Thanks for taking our questions.

Victor

IshanSharma
IshanSharma - 3 weeks ago    Report SPAM

Hello Mr. Pabrai

What range of market capitilization have you found most success in? Small caps? Large caps?

Thank You,

Ishan Sharma

rbayer319
Rbayer319 - 3 weeks ago    Report SPAM

Mr Pabrai,

Thank you for fielding questions from retail investors.

What are your thoughts about the threat of an inverted yield curve? It appears immenent. How certain is this indicator that a recession is to follow? 80% certain? 90% ? Within 12 months or 24 months?

Thank You, Roberrt Bayer

govindar
Govindar - 3 weeks ago    Report SPAM

Dear Mr. Pabrai,

I noticed you bought shares of MU last quarter. What are the main reasons you bought this stock? What do you consider the biggest risks to owning this stock? Do you consider China a serious competitor in DRAM and Flash in the future? Thanks so much for your wisdom and willingness to share your thoughts,

Govinda

Henryhk
Henryhk premium member - 3 weeks ago

Dear Mr. Pabrai,

What are your views on the China autocycle? Seeing that car per capita in China is multiple times lower than the US and other developed countries, there seems to remain much more structural growth left. At the same time, there also seems to be a cyclical decline due to China's economic slowdown. China also has one of the biggest targets for EVs in the future. How do you think these three trends ultimately coincide?

dvdkwok
Dvdkwok premium member - 3 weeks ago

Dear Mr. Pabrai,

What do you think the average return on equity adjusted for float is for Berkshire Hathaway going forward 10-30 years?

Does BRKB's current market capitalization give you reason to avoid it considering the law of large numbers? At what point in the future do you think Berkshire will start regularly buying back its shares?

Thank you.

ramneek
Ramneek - 2 weeks ago    Report SPAM

Hi Mr. Pabrai,

I have asked you a question earlier about Rain, if that is more specific for you, I understand if you wouldn't answer that. Like you and Warren, I would like to compound first and give away a lot of my financial wealth later.

So, I would like to ask general question.

Nifty's average earnings growth has been 8% in last 10 years while the nominal GDP has grown 13%. Like in the US, is Nifty Index Fund like UTI with 0.1% Expense Ratio one of the best ways to invest in India as well, considering the fact that Nifty only has 50 stocks? If yes, what is the annualized return can we expect through a SIP route over a period of 30-40 years?

My next question is - I find some good opportunities in Small Caps in the US. In India, I have an Interactive Brokers Account as recommended by you, how should I think about the currency risks if thinking for 5-10 years of capital appreciation since bank charges and spreads can be a drag on the returns?

Thanks a lot!

Slava Vershkov
Slava Vershkov - 2 weeks ago    Report SPAM

Mr Pabrai,

You have stakes in companies that are regarded as cyclicals (like auto manufacturers and chipmakers). They have weak moats (if any) and are very dependant on prevailing market prices for their products so the E parts of their low P/E ratios are almost certain to diminish. Why don't you buy them at the bottom of the cycle when earnings are depressed? What are your thoughts on that?

Thank you!

nnuyenmd
Nnuyenmd premium member - 2 weeks ago

I've seen your videos on Youtube, traveling everywhere having fun. I admire what you do as a money manager. I don't have as much fun in my work. I'm wondering what kind of work week you have. Is it 9 to 5 or does it take much more time than that?

ashkan.tryhard
Ashkan.tryhard premium member - 2 weeks ago

thank you for educating us small investors.

i was wondering what is your take on companies having Indemnity Agreements with executive and directors of the company.

thank you.

Bcarlsen
Bcarlsen - 1 week ago    Report SPAM

Hi Mohnish,

Thank you for participating in this interview and answering our questions. Could you compare and contrast your assessment of the capital allocation abilities of both Mike Manley (of FCAU) and Sanjay Mehrotra (of Micron Technology)?

Brian Carlsen

badal.khem19
Badal.khem19 - 1 week ago    Report SPAM

Hello Mohnish,

Excited to learn from you again.

Question: What are your suggestions , for a value investor who has concentrated portfolio of 4-5 well undervalued and moat oriented stocks in a single country, say like India, and then due to high market volatility, the portfolio has significant price drop in all stocks. Is it advisable to hold and invest more as they are on discount with good fundamentals or take a exit considering that it may take time to recover. The best example of this scenario if NBFC crisis in India owing to IL&FS and DHFL.

P.S: Both of these stocks were never in the portfolio.

Thanks.

skhanna
Skhanna - 5 days ago    Report SPAM

How can an individual investor who is American citizen buy stocks listed in India? (not ADR's) Thanks

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