Mastering Risk: Concentrated Investing Strategies

This chapter examines concentrated investing and the calculated risks that seasoned investors must embrace, highlighting the Kelly formula's role in decision-making. Using real-world examples from gambling and stock trading, it emphasizes the importance of identifying mispriced opportunities and making strategic bets to maximize returns.

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On today’s episode, Clay reviews Mohnish Pabrai’s book, The Dhandho Investor. Mohnish is one of our very favorite investors to study here at TIP as we’ve interviewed him for the podcast multiple times in the past. Since its inception in 2000, Mohnish’s flagship fund has achieved a return of 781% to his investors net of fees versus 378% for the S&P 500.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

05:19 -The story of the Patels, who went from owning nothing in the US, to owning over 50% of the motel industry.

11:33 - The 9 Dhandho investment principles.

14:24 - How Dhandho investors are able to earn outsized returns with minimal risk.

25:09 - How to identify bargains in the market.

32:17 - The relationship between investing and gambling.

39:17 - Clay’s analysis on Mohnish’s largest US equity holding today.

49:46 - Mohnish’s investing checklist he uses prior to purchasing a company.

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members.
Tune into the recent We Study Billionaires' episode covering The Little Book of Valuation by Aswath Damodaran or watch the video.
Listen to the episode on Warren Buffett's Money Mind or watch the video.
Related Episode: Listen to Investing in Stocks w/ Mohnish Pabrai - TIP442, or watch the video.
Related Episode: Listen to Berkshire's Purchase of TSM & Meta "Doomsday" Analysis - TIP508, or watch the video.
Mohnish Pabrai’s book: The Dhandho Investor.
Follow Clay on Twitter.

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