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A comprehensive value investing framework for the individual investor In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents ho A comprehensive value investing framework for the individual investor In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents how they can be applied successfully to the stock market. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger. Readers will be introduced to important value investing concepts such as Heads, I win! Tails, I don't lose that much!, Few Bets, Big Bets, Infrequent Bets, Abhimanyu's dilemma, and a detailed treatise on using the Kelly Formula to invest in undervalued stocks. Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy-to-use format. Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals.


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A comprehensive value investing framework for the individual investor In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents ho A comprehensive value investing framework for the individual investor In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents how they can be applied successfully to the stock market. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger. Readers will be introduced to important value investing concepts such as Heads, I win! Tails, I don't lose that much!, Few Bets, Big Bets, Infrequent Bets, Abhimanyu's dilemma, and a detailed treatise on using the Kelly Formula to invest in undervalued stocks. Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy-to-use format. Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals.

30 review for The Dhandho Investor: The Low-Risk Value Method to High Returns

  1. 5 out of 5

    Tyler

    “The Dhando Investor” is a stripped-down recap of Warren Buffet’s investing principles. But then again, all Warren Buffet claims his ideas to be- are a recap of the “value investing” principles first espoused by his mentors Graham and Dodd. Different from Pabrai, however, Warren Buffet is incredibly articulate. In giving the ideas of Graham and Dodd new relevance, primarily through his unparalleled investment track record, as well as his ability to communicate complex ideas in clear ways, Buffet “The Dhando Investor” is a stripped-down recap of Warren Buffet’s investing principles. But then again, all Warren Buffet claims his ideas to be- are a recap of the “value investing” principles first espoused by his mentors Graham and Dodd. Different from Pabrai, however, Warren Buffet is incredibly articulate. In giving the ideas of Graham and Dodd new relevance, primarily through his unparalleled investment track record, as well as his ability to communicate complex ideas in clear ways, Buffet can rightly claim part of these principles as his own. Mr. Pabrai, however, lacks not only the instant credibility that Mr. Buffet’s track record affords him, but- and perhaps even more importantly- he lacks Mr. Buffet’s knack for analogy, euphemism, and distilling difficult ideas into digestible, deeply rich sentences. “The Dhando Investor” we are told in the “Acknowledgements” section is a “synthesis of ideas [Mr. Pabrai] has encountered in [his] readings, interactions with friends, and various experiences...”, and contains “very few original ideas.” This is perhaps a more harsh and honest criticism of his own book than anyone could provide. His ideas are not original, which by itself is not reason to castigate anyone’s literary efforts. My only wish was simply that Mr. Pabrai went lighter on the recapitulating of others’ ideas, and heavier on how he applied the ideas of others to his own career as a fund manager. The “Dhando” in the book’s title, as we come to learn, is a “Gujariti word...” that “literally translated, means ‘endeavors that create wealth.’” Pabrai goes on, across the course of the book, to relabel all the ideas of Mr. Buffet and his predecessors as “the Dhando Way.” “Now, folks, this is really good stuff- they don’t teach this at the Harvard Business School,” we are told. The thing is- “value investing” principles are something that business schools teach all around the country. Mr. Pabrai’s use of folksy vernacular, in instances such as these, comes across as diluted and misinformed. Mr. Pabrai’s idea curation- reworking of older philosophies into a newer framework and language- is no different than what Nicolas Nassim Taleb (in “The Black Swan”), or any successful philosopher or writer for that matter, has done before him. Mr. Pabrai’s curation, however, lacks some of the intellectual acuity, clarity of language, application of first-had experiences, as well as academic rigor as the work of some of his peers (i.e. investment managers turned authors). For a very pre-cursory look at some of the ideas that have motivated investing icons, like Mr. Buffet, in a format that is easily and quickly digestible, this book offers value. For anything more, you may be better served looking elsewhere.

  2. 4 out of 5

    Rohit Enghakat

    This is a good book on investing fundas in the equity markets from a very well known name in the American capital markets. I had first come across the author's name when he became famous in 2007 for buying dinner with Warren Buffett along with his partner at Buffett's annual charity auction. Enamoured more about this event than by the author, I had written an amateur piece on value investing on my blog (value investing). So when I came across this book written by Mohnish Pabrai, I just couldn't This is a good book on investing fundas in the equity markets from a very well known name in the American capital markets. I had first come across the author's name when he became famous in 2007 for buying dinner with Warren Buffett along with his partner at Buffett's annual charity auction. Enamoured more about this event than by the author, I had written an amateur piece on value investing on my blog (value investing). So when I came across this book written by Mohnish Pabrai, I just couldn't resist myself. The author is a self-confessed fan of Warren Buffett and Charlie Munger and needless to say there are few innovative original ideas in the book. But the whole idea of value investing was propounded by Benjamin Graham in his book "The Intelligent Investor" which is considered to be the bible of every value investor and popularised by Buffett. The author has lifted examples, quotes and anecdotes from Buffett's life. In fact, his fund Pabrai Funds itself is structured similar to Berkshire Hathaway, as revealed by him. Coming to the core of the book, this is totally based on American capital markets. The analogy of the Patel community given by the author is interesting but for an Indian it is not at all new. The title contains the word "Dhandho". Any Indian reader would more or less expect some advice in the context of Indian stock markets (ok, so this is about value investing...still !) but there is no reference at all to any other emerging market except the US of A. Also almost a whole chapter is dedicated to financial websites for the American investor which can be useful titbit for investment tips. I wish the author had done some more research in the context of Indian capital markets. It is a tad disappointing when the reference point are the Patels. Readers are expected to have a basic knowledge of equity markets and financial jargons like present value of future cash flows, intrinsic value, earnings per share etc. Then it becomes enjoyable, especially for the American reader.

  3. 4 out of 5

    Scott Dinsmore

    Why I Read this Book: Pabrai has proven his application of value investing to be hugely successful. I wanted to learn what made it real for him. He has been a great teacher. Review: I just finished The Dhandho Investor for the second time, and doubt it will be my last. A quick and inspiring read that will have anyone believing value investing is the only true way to amass significant wealth in the market over the long run. At 18.8% a year since 1999, the author has the track record to prove it. I h Why I Read this Book: Pabrai has proven his application of value investing to be hugely successful. I wanted to learn what made it real for him. He has been a great teacher. Review: I just finished The Dhandho Investor for the second time, and doubt it will be my last. A quick and inspiring read that will have anyone believing value investing is the only true way to amass significant wealth in the market over the long run. At 18.8% a year since 1999, the author has the track record to prove it. I have had the pleasure of spending time with Mohnish on two occasions, first in Omaha this year and the most recent being his annual shareholders meeting in Huntington Beach, CA. First off, no I am not a Pabrai Funds shareholder, but as one of the many demonstrations of Mohnish’s appreciation for people and helping them in their quests for success, he extended me an invitation. As a value fund manager, relatively new to the professional space, attending the meeting was an incredible experience. Since I first began reading about Mohnish a few years ago, I have been in awe, first due to his intense love for life and the people around him, and second for his incredible achievements as a businessman and value investor. In the investment space he is one of my most admired mentors. He has taken an approach that has been proven more successful than any other over the long term and knocked it out of the park. This approach is focused long-term value investing inspired by the likes of Warren Buffett and Ben Graham. You’d think mimicking this approach would be a common occurrence. Especially given that we know how powerful modeling someone more successful than you has proven in the past. But for one reason or another, few have really followed in Buffett’s shoes. My guess is it has a great deal to do with the lack of excitement and activity that goes with his strategy. When it comes down to it, most would prefer the excitement of gambling than to conservatively investing in great businesses over the long term. Not the case for Mohnish. He wrote The Dhandho Investor to describe it how he’s experienced it. The beauty of the book is that he writes in a way that is simple and understanding enough for any everyday person to digest, which makes this a great place for even the newest investor to start learning. Throughout the book Pabrai does a superb job of using examples from his India culture to subtly get the basic points across to us. The main thesis is finding investments that put the investor in a scenario where, as related to a coin toss, “Heads I win. Tales I don’t lose much”. The constant reference to this point through his various examples from life and the famous businesses of our day, hammers home the novel idea that there is a way to get satisfactory returns in the market without having to put yourself at high risk. Traditional investment has always taught that if you want a higher rate of return, you have to settle for a higher level of risk. Mohnish shows us that with value investing, that is not the case. Warren Buffett has proven this for decades as he invests with the number one rule of “don’t lose money”. Sounds pretty ridiculous and most people tend to just dismiss it. But the truth is that you can do your homework and find businesses that have a ‘durable’ competitive advantage, have proven themselves through years of profitable business and have strong assets and the future ability to make great money. And it is when these great businesses are selling at a low and attractive price, that this low-risk/high-return scenario becomes available. These characteristics bundled up all in one business are not necessarily easy to find, but they are out there and the patient investors like Pabrai are out there to find them. The average person, or even a savvy investor would be blown away at some of these low risk opportunities that present themselves from time to time, especially in wild markets like today’s. It is very possible to find a great company with a stock price significantly below the sale value of its assets alone. Just recently I came across a retail business that owned real estate worth 2-3 times the value of its stock. Now that is a margin of safety. Worst-case scenario, the company could sell the real estate and double or triple its value. Chapter by chapter, Mohnish goes through the characteristics of his investment style and how it has worked so well for him over the past nine years. Keep in mind the guy has averaged 18.8% a year since 1999 when the markets have returned close to 1%! He even spends time showing the reader where to find these businesses, what resources to use and the simple calculations used to value them. He does everything short of giving you his latest investment picks. But after this book you find those on your own. Second to incredibly valuable investment knowledge, this book screams generosity and gratitude both to those who have taught him and to those whom he is now teaching. Pabrai knows that life is not just about making great money but more importantly about spending the time with those he loves and giving back the knowledge that was so graciously given to him by the investment greats who have put him where he is today. Humility is a strong and rarely appropriate word. It also happens to be a core ingredient to lasting success and fulfillment. We can all learn a great deal from Mohnish. Read a copy of Dhandho to become a great investor and leave with a great feeling of how to become a better person. Dhandho gives you the tools needed to find great businesses and beat the market, now it’s on you to put it to use. I certainly know I have. -Reading for Your Success

  4. 4 out of 5

    Sid

    Pabrai writes a great book, with relevant examples and lucid writing , that deeply enhances value investing .

  5. 5 out of 5

    Abhijeet Singh

    Never got around to read 'The Intelligent Investor' which has always been in my to-read list. This book supposedly summarises it's basic principles, at the same time being a short read. This book taught me a few things and introduced me to some more. Worth a read for someone looking to brush up on individual investing. Never got around to read 'The Intelligent Investor' which has always been in my to-read list. This book supposedly summarises it's basic principles, at the same time being a short read. This book taught me a few things and introduced me to some more. Worth a read for someone looking to brush up on individual investing.

  6. 5 out of 5

    Univpurpose

    The book is nice and I understand the thought process with the margin of safety etc. So that ways, it tells some nice things. But I think I have read far too many books to understand the same concept. I was thinking (to hoping) gain better insights around the Pabrai thought process and while the book did explain that, I felt I was reading the same stuff as Warren Buffet newsletters which I can get for free - buy with moat, margin of safety, durable competition, etc. What I did like though were h The book is nice and I understand the thought process with the margin of safety etc. So that ways, it tells some nice things. But I think I have read far too many books to understand the same concept. I was thinking (to hoping) gain better insights around the Pabrai thought process and while the book did explain that, I felt I was reading the same stuff as Warren Buffet newsletters which I can get for free - buy with moat, margin of safety, durable competition, etc. What I did like though were his Patel examples and certain case studies but not elaborating them, made me feel slightly disappointed again. Maybe Mr. Pabrai does not want to divulge too much, and understandable, but nevertheless, my ratings reflect how "satisfied" I felt after reading the book, after reading a number of other "value investing" Graham / Buffet style books. So the 3 stars could just reflect my lethargy of reading the same concepts vs. My expectations of seeing more detailed case studies, example (s) etc, something Sanjay Bakshi does in his writings. To conclude, a good book if you are an early reader into these concepts, else it is Buffett newsletters are. Similar, but then WB is WB.

  7. 5 out of 5

    Monish Vora

    Two key takeaways- 1. maximise your returns by maximising rewards and minimising risks. Make few bets, big bets and wait for the right pitch while doing so. 2. all knowledge is cumulative. aim to read voraciously, wait patiently and swing big but infrequently.

  8. 5 out of 5

    Mike Adeleke

    I read this book in one sitting. It blew my mind. I seemed to have highlighted half the book. It has now become a guide.

  9. 4 out of 5

    Jonathan

    I first heard about Monish Pabrai in Guy Spier's book the education of a value investor. Considering how much praise he received and bearing in mind the famous WB lunch, I got curious to learn more. This book is a useful reminder that value investing is about seeing things everywhere in life as risks vs rewards. When the reward of taking action is much greater than the risk, it makes sense to do it. Heads you win, Tail you don't loose much. It is true in investing. It is true in entrepreunership I first heard about Monish Pabrai in Guy Spier's book the education of a value investor. Considering how much praise he received and bearing in mind the famous WB lunch, I got curious to learn more. This book is a useful reminder that value investing is about seeing things everywhere in life as risks vs rewards. When the reward of taking action is much greater than the risk, it makes sense to do it. Heads you win, Tail you don't loose much. It is true in investing. It is true in entrepreunership. The guy had a job and used his savings to build a company on the side. If it succeeded he could afford to leave his job. If not, no regret he didn't spend much anyway. WB explains value investing in terms of not loosing money. I think the public might get the message better if it were explained in terms of the quest for the absolut free lunche nirvana ie: buy something that has upside potential but if it fails you get your money back. My main random takeaways are the following. Bet on mondain products that everyone needs. Bet on industries with ultra low rate of change. Look for low risk, high uncertainty businesses. Wait for the fat picth and hit hard. Few bets, big bets, infrequent bets. Focus on simple businesses. Remember what Einstein said were the 5 levels of ascending intellect : smart, intelligent, brillant, genius, simple. Don't confuse risk of permanent loss with uncertainty. Buy at the point of maximum pessimism. Innovation is hard, costly, risky. Proven ideas that can be scaled and optimised offer more reward to risk. Thank you Guy Spier for recommending this book.

  10. 4 out of 5

    Milan

    This book by Mohnish Pabrai describes the concept of value investing in the simplest terms. Even a person new to investing could get a good idea of how value investing really works. He is honest enough to say that he has very few original ideas. He is an unabashed admirer of Warren Buffet and Charlie Munger. Where this book lacks is that he has not discussed the mistakes that he has made and how he has learnt from them. He does not go into the detailed analysis of the cash flows of the companies This book by Mohnish Pabrai describes the concept of value investing in the simplest terms. Even a person new to investing could get a good idea of how value investing really works. He is honest enough to say that he has very few original ideas. He is an unabashed admirer of Warren Buffet and Charlie Munger. Where this book lacks is that he has not discussed the mistakes that he has made and how he has learnt from them. He does not go into the detailed analysis of the cash flows of the companies he is selecting. The overuse of the phrase "Heads, I win; tails, I don't lose much!" could be annoying to the readers. Overall, a very good introduction for people who are new to value investing.

  11. 4 out of 5

    Amit Kumar

    This is a brilliant book. It is an introductory book on investing. It takes an example of small businesses to make you understand the complexity of investing. Book emphasize the principle of investing in a simple business which you clearly understand. Book also talks about investment strategies of Pabrai Investment Funds which is very much influenced by Warren buffet ideologies. Overall it's a good read. This is a brilliant book. It is an introductory book on investing. It takes an example of small businesses to make you understand the complexity of investing. Book emphasize the principle of investing in a simple business which you clearly understand. Book also talks about investment strategies of Pabrai Investment Funds which is very much influenced by Warren buffet ideologies. Overall it's a good read.

  12. 5 out of 5

    Paul Szydlowski

    The author compares motel owners who migrated from his native India as a metaphor for value investors. I don't get the connection between people willing to eat, sleep and live in their own properties to make ends meet and a person buying undervalued stocks. Some valid points, but the premise is questionable at best. The author compares motel owners who migrated from his native India as a metaphor for value investors. I don't get the connection between people willing to eat, sleep and live in their own properties to make ends meet and a person buying undervalued stocks. Some valid points, but the premise is questionable at best.

  13. 4 out of 5

    Richard Knapp

    Down to earth Pabrai tells of the Indian domination of the small hotel market across the US. He then uses stories from that culture to make his investment points....and he is right in his observations.

  14. 4 out of 5

    Zadignose

    Sounds like total bullshit. I'm sold! Actually, I'm not going to read this book. Sounds like total bullshit. I'm sold! Actually, I'm not going to read this book.

  15. 4 out of 5

    Bradley

    Excellent book on how to get started with investing and thinking about your financial future.

  16. 5 out of 5

    Muhammad Munir

    This is a wonderful book that breaks the myth "heavy risk, heavy return" instead it corrects the mantra as "low risk, heavy return". One may ask that if risk is low (such as in fixed deposits), how return could be high? The book answers to invest in venues with high upside (in profitable business directly or through stocks) only at the time when odds are in your favor. The one liner formula is, "Few bets, infrequent bets, heavy bets". The point established by the author is that when a great busi This is a wonderful book that breaks the myth "heavy risk, heavy return" instead it corrects the mantra as "low risk, heavy return". One may ask that if risk is low (such as in fixed deposits), how return could be high? The book answers to invest in venues with high upside (in profitable business directly or through stocks) only at the time when odds are in your favor. The one liner formula is, "Few bets, infrequent bets, heavy bets". The point established by the author is that when a great business is at steep discount due to temporary adversity, you must put most of the money into it for high returns later. However to do that you must have complete prior understanding of the business and keep bull's eye on its value. In simple words, keep watching a business and the day it's at steep discount and situation translates as, "heads I win, tails I don't lose much" and possibility of heads is huge, buy it heavily. Unlike "the lean start-up", the author suggests to buy a running business having some customers and known margin of profit so that its potential could be analysed. The book is full of examples and worth reading.

  17. 4 out of 5

    Vibhor Dhote

    Dhandho Investor by Mohnish of the Pabrai funds fame is a very good primer on value investing and its principles for anyone not too familiar with the topic. The author is a self-proclaimed admirer of Warren Buffet and uses Mr. Buffet's quotes extensively throughout the book. He gives many examples of how the 'High Risk - High Return' rule taught in business schools is not necessarily true, and instead urges readers to follow his 'Heads I win, Tail I don't lose much' approach to investing (in oth Dhandho Investor by Mohnish of the Pabrai funds fame is a very good primer on value investing and its principles for anyone not too familiar with the topic. The author is a self-proclaimed admirer of Warren Buffet and uses Mr. Buffet's quotes extensively throughout the book. He gives many examples of how the 'High Risk - High Return' rule taught in business schools is not necessarily true, and instead urges readers to follow his 'Heads I win, Tail I don't lose much' approach to investing (in other words, 'High Risk - Low return'). He provides 9 rules as part of his framework: 1. Focus on buying an existing business 2. Buy simple businesses with an ultra-slow rate of change 3. Buy distressed businesses in distressed industries 4. Buy businesses with durable competitive advantage 5. Bet heavily when odds are overwhelmingly in your favor 6. Focus on arbitrage 7. Buy businesses on big discounts to intrinsic value 8. Look for low risk, high uncertainty businesses 9. It's better to be a copy cat than an innovator

  18. 5 out of 5

    Manoj

    A must read for anyone interested in understanding the basics of investing. This is probably the book you should start with. In simple language (no greek) , Mohnish explains how to go about zeroing in on one investment among the sea of options. There is even a chapter about how/when to get out of an existing investment. Believe me, this part is difficult, as it was for Abhimanyu. Highly recommended reading for everyone. The younger you are when you read this, the better. Cheers and Happy investing A must read for anyone interested in understanding the basics of investing. This is probably the book you should start with. In simple language (no greek) , Mohnish explains how to go about zeroing in on one investment among the sea of options. There is even a chapter about how/when to get out of an existing investment. Believe me, this part is difficult, as it was for Abhimanyu. Highly recommended reading for everyone. The younger you are when you read this, the better. Cheers and Happy investing.

  19. 5 out of 5

    Gaurav Parab

    Good, useful read If you have read the Snowball, you will find this to be a simplified version using an example we can all relate to. Wish, this had an edition for the Indian context as well.

  20. 5 out of 5

    Moaz Khan

    This is the first book I read on value investing. It covered many ideas and was a great introduction.

  21. 4 out of 5

    Paresh

    This book is full of great advice. Highly recommend.

  22. 5 out of 5

    Tirthankar

    A very easy read covering the fundamentals of value investing. A good part of the book talks about Buffet and his investment ideology.

  23. 5 out of 5

    Divesh Gurung

    Good piece of information on what, why, how, where to invest ... excellent financial education . Thank you pabrai for the master piece .

  24. 4 out of 5

    Andrew

    Enjoyed this book as it went over some important notes to keep in mind for value investing. Wish it was more quantitive though. Below are my notes for each chapter: 0. Intro Influence from Buffett and Munger 1. Patel Motel Dhandho - quality business expands with heads win tails don't lose much Dhandho = wealth endeavors (street translation = business) All about minimizing risk and maximizing return Half of all motels are under Patel ownership Forced to leave Africa, some went to the US and went in motel Enjoyed this book as it went over some important notes to keep in mind for value investing. Wish it was more quantitive though. Below are my notes for each chapter: 0. Intro Influence from Buffett and Munger 1. Patel Motel Dhandho - quality business expands with heads win tails don't lose much Dhandho = wealth endeavors (street translation = business) All about minimizing risk and maximizing return Half of all motels are under Patel ownership Forced to leave Africa, some went to the US and went in motel business Immigrants copy what each other do - people followed into motel Along with role models have an effect - people see that and wanna do the same Recession from high gas prices led distress motel sellings which Patel kids who entered the US picked up Once one was successful they would give it to another Patel Then they would keep costs low and get full occupancy and drive out other business and get cash flow and expand to next Patel Not a risk free bet ut a low risk bet => head i win, tails I don’t lose much 2. Manilal Dhandho - Wait for the best opportunity for heads win tail don't lose much Manilal is not a Patel, but is first cousin Lived simple lives and worked around the clock Wanted to buy a business and after 9/11 travel was hit so he bought a best western Siblings started running motels too with money from first best western He worked hard and waited for the best investment in which it was head i win and tails i don’t lose much Took advantage of the 0/11 situation where hotels were depressed 3. Virgin Dhandho - low initial investment protects downside Two stories above are good but no one wants to live with their family and work 100h a week This person is not a patel - Richard Branson (from england, and likes to live life) but they think about business endeavors the same way Dhandho on steroids - start any business with minimal capital and pretty much no risk Got a proposal for an airline to europe from america He called up seeing if he could get a ticket but did not get an answer - either bad business or a lot of demand - opportunity there Airline business - low working capital - as he gets paid for ticket before flight and pays for wages and gas after flight + also got a lease from the airplane He pretty much started the business with not much capital - hence you can do so by just thinking about creative solutions COMMON Pattern - little money invested means heads I win tails I don’t lose much Other examples in other brands like Virgin Mobile VC/startup firms should look at the Virgin model as no money is put in in the beginning 4. Mittal Dhandho - low risk in a tough industry Mittal - third richest person in 2005 He invested in a terrible economies business - steel mills (unlike Microsoft) Not control over raw material costs and product costs Capital intensive, unionized workforce He bought a plant that was distressed (cheap) and make it better He wants all his invested capital returned in dividends in less than 3 years Once they get their money back their principal investment is worth what they invested in it = ultra low risk bets 5. The Dhandho Framework Nine principles: Focus on buying an existing business Less risky than doing a startup Buy a simple business in industries with an ultra slow rate of change Change is enemy of investments Buy distressed businesses in distressed industries Never count on making a good sale Have the purchase price be so attractive that even a mediocre sale gives you good results Entrance strategy is more important than the exit strategy Best time to buy is when prospects are murky and the business is hated and unloved Can prob get a deep discount to underlying value Buy businesses with a durable competitive advantage - the moat Key is not looking at how much the industry is going to affect society or how much it will grow but rather determine the competitive advantage of the company and how durable it is Examples - low cost operator or brand Bet heavily when the odds are overwhelmingly in your favor Look for a mispriced gamble = value investing Watch a lot of the time and when they see a good bet they bet big Focus on arbitrage Can start business small and grow it if it is good Even thought higher returns fall being first allows you to get clients which may be sticky Buy business at big discounts to their underlying intrinsic value Want to minimize downside risk Margin of safety Look for low-risk, high uncertainty business It's better to be a copycat than an investor Innovation is a crapshoot 6. Dhandho 101: Invest in Existing Businesses Over 100 years stock are the best asset class performance wise 7. Dhandho 102: Invest in Simple Businesses Complex business are hard to think about, understand and project Long history of business Buy simple business with simple thesis Write thesis down, if it requires excel thats a red flag 8. Dhandho 201: Invest in Distressed Businesses in Distressed Industries Value line posts stock that lost value in the13 weeks Portfolio reports lists 10 most recent picks by PMs Look for distress firms for cheap 9. Dhandho 202: Invest in Business with Durable Moats How do we find a hidden moat? Answer in financial statements Generate high returns on invested capital Balance sheet tells us the amount of capital deployed Other two show earnings off capital Of the top 50 companies in 1911 only one is in business today (GE) shows power of competitive advantages The Living Company - average life of a firm is 40 to 50 years Takes about 25-30 years to get a spot on the fortune 500 Should not have DCF go to infinity 10. Dhandho 301: Few Bets, Big Bets, Infrequent Bets Kelly formula > % of bankroll = edge (= expected value) / odds (what you win if you win) Have two bets - 1) for first bet and 2) if first bet does not work to go again “The wise ones bet heavily when the world offers them an opportunity” - Munger Thorp - MIT prof who found strategies to beat black jack - wrote book called beat the dealer - went to do options - rumors say he knew black scholes before it was created Set up hedge fund with low volatility and good returns Investing is all about the odds When odds are in your favor bet heavily In short term stocks may go down but market bounces back in the long term Firm will eventually trade around intrinsic value American express example Buffett invested 40% of Berkshire in Amex Average mutual fund has 77 positions + top 10 holdings rep 25% of fund Does not do big bets Dhandho places fe big infrequent bets Kelley formula supports hypothesis Kelly formula maximizes wealth and minimizes time Investing is just like gambiling - it's all about the odds 11. Dhandho 302: Fixate on Arbitrage Traditional commodity arbitrage Correlated stock arbitrage Merger arbitrage Dhandho arbitrage - heads he wins tails don’t lose much Geico does not have local offices like state farm and allstate hence they have 15% less costs - gives them a better spread - will disappear over time though Offering gap business solves Author notices at strip mall all business would come and go expect hair salon and auto insurance = recurring revenue Dhandho arbitrage spread = moat Moats can disappear over time 12. Dhandho 401: Margin of Safety - Always! Intelligent investors has three main ideas Ch 8 - mr market analogy - he offers you wild prices day to day A stock is a piece of a business Ch 20 - margin of safety - buy a business for way less than you think its worth When we buy an asset for less when reduce downside risk The bigger the discount the lower the risk and higher the return! Times of extreme distress makes rationality go out the window 13. Dhandho 402: Invest in Low-Risk high Uncertainty Businesses People get confused between risk and uncertainty Wall street loves low risk low uncertainty but not the other possibilities Dhandho like low risk high uncertainty Tech is rapidly changing - tough space 14. Dhandho 403: Invest in the Copycats rather than the Innovators Most business ideas did not come from inside management but where either copied from competitors, acquired, or from a franchise business Examples; microsoft and mcdonalds A small investment team size is important Bigger team less chance everyone agrees on a buy In 1973 buffet bough washington post and saw price drop in half Stocks with lowest price to book ratios outperform Most hair on them businesses Hard to convince team Real business change takes months - should be comfortable with 1 year valuation marks For investments ignore the innovators look at models that work 15. Abhimanyu’s Dilemma - The Art of Selling Previous chapters focus on factors that make a good investment But you also need to focus on buying and selling Selling is harder than buying Have a clear exit plan before we ever think about buying a stock Questions to ask: Do i know the intrinsic value Is there a discount Would i be willing to invest a large portion Is downside minimal? Does the business have a moat Is it run by good management Business go through ups and downs like humans Best to give firm some time to adapt to change Any stock you buy cannot be sold at a loss with 2-3 years of buying ti unless you have a high degree of certainty its trading at a high value now Should really only need 20 good ideas in a lifetime and make big bets 16. To Index or Not to Index - That is the question Out of all the stocks have to above average and half do below average while index is the middle Frictional costs make the active managers underperform Buying an index may be a good option for some people - as its average Not a huge difference in performance between the best and worst bond fund - Yale moved out of bonds Index good for investors that don’t want to look at securities Magic formula good place to look for .50 dollar bills More areas to look: Value investor club Value line - bottom lists Portfolio reports Guru focus 17. Arjuna’s Focus: Investing Lessons from a Great Warrior So many investing options Dhandho investor only does simple businesses they get - eliminates 99% of options Don’t look at five business at once Best way to learn is to teach

  25. 5 out of 5

    Vinayak Mahbubani

    A very crisp and analytical note on value investing - explained with simple examples and theoretical concepts. The book covers aspects of stock investing from stock selection, entry, holding period and exit - making a holistic strategy in its own right. Enjoyed case studies of the Patels, the Mittals, Steward Enterprises and a simple barber shop!

  26. 5 out of 5

    Ali

    This book was recommended by Phil's Town. I was not able to gain much from this book. Perhaps if i was a multi millionaire or something i might get even more nuggets from this book. For normal person i would recommend just read first few chapters, that's where the gold will be found This book was recommended by Phil's Town. I was not able to gain much from this book. Perhaps if i was a multi millionaire or something i might get even more nuggets from this book. For normal person i would recommend just read first few chapters, that's where the gold will be found

  27. 4 out of 5

    Sahli Ayoub

    Resourceful for people who want some basic insights to get in the world of investement. I found this book a bit simplish (one of the guidelines given by this book is to buy when the stocks/business is cheap and sell when its value is higher than the initial price, really ???) ... or maybe I have placed my expectations very high given the ratings the book has. It was not a waste of time for me at all: I found out that investing in stocks is not made for me, at least for now.

  28. 4 out of 5

    Prakarsh Saxena

    Makes you look at investments in a new light and is particularly a fruitful read if you have some basics of Financial analysis brushed up

  29. 5 out of 5

    Rohan Shevate

    Simple, easy to understand and most invaluable lessons to generate wealth using Dhandho approach. Must read for everyone !!

  30. 5 out of 5

    Oliver Sung

    I've been a big admirer of Mohnish for years. Not only for his incredible achievements as an investor, businessman, and philanthropist but largely due to his uncommonly successful approach to how he lives his life and conducts relationships. He's a master at enjoying life to its fullest and is one of the main reasons why I myself decided to avoid a long-term career in the conventional financial industry to start my own businesses and read, write, think, and invest independently. I recently quit I've been a big admirer of Mohnish for years. Not only for his incredible achievements as an investor, businessman, and philanthropist but largely due to his uncommonly successful approach to how he lives his life and conducts relationships. He's a master at enjoying life to its fullest and is one of the main reasons why I myself decided to avoid a long-term career in the conventional financial industry to start my own businesses and read, write, think, and invest independently. I recently quit my job as portfolio manager to pursue this kind of life. In The Dhandho Investor, Mohnish distills the "Dhandho way" into four overarching lessons: 1) Look for Dhandho arbitrage: a situation that allows businesses to earn above-normal profits for a limited time before competitors or substitutes enter and destroy these higher returns. Determine the spread and duration of that arbitrage. 2) Look for low-risk, high-uncertainty situations: The market tends to confuse the distinction between high uncertainty and high risk. But these are exactly the kinds of situations where the market discounts businesses below intrinsic value, and where value investors can come in reap sizeable rewards. 3) Look for copycats, not innovators: One should ignore the innovators and invest in the copycats run by people who have demonstrated their ability to repeatedly lift and scale. The Dhandho way is to invest in a proven idea and run with it. 4) Buying is the easy part of the equation. Master the art of selling: Only when you enter an investment will the real struggles or fruits present themselves. In the last part of the book, Mohnish provides some invaluable resources for value investors to dig into and find opportunities. He ends the book by underlining the point about how investors need to focus on their circle of competence, and if they try to calculate everything and be everywhere, they're very likely to do poorly. Once an opportunity appears within the circle of competence, one should study it closely, vet it, and make sure it's trading at a discount. I wish no one read The Dhandho Investor because it would make my investing competition much more intelligent. But I just can't help recommending it. Read my entire summary and key lessons from the book here: https://junto.investments/books/the-d...

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