It is desirable to learn vicariously from other people’s failures, but it gets much more firmly seared in when they are your own.” Over a lifetime the ROI is somewhere in the region of 1,667 times return. The foundation spends $3,000 on a scholar, enabling the student to raise their annual income from $14,000 per year to over $70,000 per year in six years. Pabrai actually estimates his ROI per student. Its graduates are virtually guaranteed employment and success. The IITs are a group of the nation’s most prestigious engineering and technology universities. The idea behind Dakshana was to find some of India’s most brilliant and poorest kids and prepare them for the rigorous entrance examination for the Indian Institutes of Technology. Unable to find an organization that met his value-investor’s need for efficiency and ROI, he decided to simply start his own The Dakshana Foundation.
Growing up in New Delhi and Mumbai, Pabrai was surrounded by both extreme poverty and wealth. Mohnish Pabrai’s primary source of investment ideas is the 13F SEC filings from other value managers he admires. There is also a fourth set of miscellaneous items, such as unions and labor relations, or is it’s current success due to temporary factors? Pabrai can can tick most of the boxes in twenty minutes.
A third group looks at the quality of the company’s management. A second group relates to the durability of the business’s “moat” - how hard is it for new businesses or competitors to duplicate their product or service. The checklist items are grouped into categories. Mohnish Pabrai ended up with more than hundred checkboxes on his investment checklist. He built this studying the public record of the investors he admired and deconstructing the mistakes they made. Mohnish Pabrai uses a checklist of what not to do in the markets. Mohnish Pabrai spends a large amount of time analyzing investments where he lost money for his partners, or talking about investments that didn’t fare as well as expected. Investing is a field where you can have a high error rate so you must learn from mistakes so they are no repeated. Mohnish Pabrai does not gloss over mistakes. Key to his whole method is the examination of every trade that doesn’t work, and trying to figure out what went wrong. The companies selected are usually deeply distressed.īuying and waiting is only half of Mohnish Pabrai’s strategy. Since Mohnish Pabrai is targeting big returns his fund is usually highly concentrated with around ten holdings. Similar to the strategy of fellow value investor, Seth Klarman, Mohnish Pabrai likes to keep cash on hand in order to take advantage of a distressed situation when he can deploy this trove at the valuation he wants.
His current preference is to keep a cash store of between 10%-20%. He says that if he can find a couple of investment ideas a year, that’s plenty.
Mohnish Pabrai believes that once the opportunity is found, the money is made not in the buying or selling but in the waiting. If he doesn’t think the opportunity is blindingly obvious, he passes. He is angling to make five times his money in a few years. He has no interest in a company that looks ten percent undervalued. Mohnish Pabrai looks at a stock not as a piece of paper but as the ownership of a business. 43% for the S&P 500 Index since inception in 2000. Mohnish Pabrai’s long-only equity fund has returned a cumulative 517% net to investors vs. In 1999 Mohnish Pabrai founded the Pabrai Investment Funds, which he still runs today. He sold the company in 2000 for US$20 million. with about US$30,000 from his own 401K account and US$70,000 from credit card debt. In 1991 Mohnish Pabrai started his IT consulting and systems integration company, TransTech, Inc. He worked for Tellabs between 1986–91, first in its high speed data networking group, and then in 1989, joined its international subsidiary, working in international marketing and sales. in 1983 to attend South Carolina’s Clemson University. Born on Jin Mumbai, India, Mohnish Pabrai moved to the U.S.
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