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TIP517: Mohnish Pabrai's Dhandho Investment Framework

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Jan 22, 2023

Dive into the fascinating world of Mohnish Pabrai’s Dhandho investment framework! Discover how the Patel family transformed their fortunes in the motel industry through strategic investments. Unpack the nine principles that guide low-risk, high-reward investing. Learn how to identify market bargains and the connection between investing and gambling. Get insights on current market investments like Micron Technology, and explore the power of leveraging competitive advantages for substantial gains.

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ANECDOTE

Patel Motel Success

The Patels, an Indian immigrant group, achieved remarkable success in the US motel industry.
Despite being a small minority, they came to own over 50% of motels within 35 years.

ANECDOTE

Pabrai's TransTech Story

Mohnish Pabrai started TransTech with minimal capital, leveraging arbitrage and India's tech expertise.
He sold it for millions, turning $30,000 into a 150-bagger in 10 years.

ADVICE

Dhandho Principles

Focus on buying existing, simple businesses in slow-changing industries.
Look for distressed businesses with durable competitive advantages (moats).

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In this book, Joel Greenblatt provides a straightforward and accessible guide to value investing. He introduces a 'magic formula' that helps investors identify and purchase good businesses at below-average prices. The formula, explained using simple math and humor, has been extensively tested and proven to be effective in beating the market and professional managers. The book also explores why success often eludes individual and professional investors and why the formula remains viable even after widespread knowledge of it. Updated editions include data and analysis from the recent financial crisis and model performance through 2009[2][3][4].

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The intelligent investor

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Benjamin Graham

Written by Benjamin Graham, 'The Intelligent Investor' is a seminal work on value investing that has inspired millions since its original publication in 1949. The book emphasizes the importance of distinguishing between investing and speculation, calculating the intrinsic value of companies, and maintaining a margin of safety. The revised edition includes updated commentary by Jason Zweig, who provides modern examples and insights to help readers apply Graham's principles in today's market. Warren Buffett, a disciple of Graham, has praised the book as 'the best book about investing ever written'.

The Dhandho Investor

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The Dhandho Investor presents a powerful framework for value investing, drawing from the principles of Benjamin Graham, Warren Buffett, and Charlie Munger. It emphasizes strategies like buying existing businesses at discounted prices, investing in simple industries, and leveraging arbitrage opportunities. The book offers practical advice on achieving high returns with minimal risk through a disciplined investment approach.