Mohnish Pabrai on How to compound at 26%?

 

Portfolio strategy by Mohnish Pabrai:

1st 75% of cash ----minimum 2x in 2 to 3 years

Next 10%          ----minimum 3x in 2 to 3 years

Next 5%            ----minimum 4x in 2 to 3 years

Next 5%               ----minimum 5x in 2 to 3 years

Last 5% of cash----excess of 5x in 2 to 3 years

 

Do not invest in anything that does not look like a 2-3x in 2-3 years.

 

If a stock trades at 10. It is a pass (i.e. we do not invest) if intrinsic value is 13 or 14 or 17 or even 19.[fair value of business is say 19 and it is traded at 10. Then 19/10 = 1.9x, which is less than minimum 2x. Thus he doesn’t buy]

 

You just need to find 2-4 businesses annually that meet above criteria.

 

How Did Pabrai Achieve Incredible Investment Results?

Here is how Pabrai summarized his presentation:

·                Accept one idea and focus on it seriously

·                Remember the magic and power of compounding

·                Clone from the best investors

 

 

For Examples:

If one compound at 26%, then the money is going to double roughly every 3 years, so in 30 years one will get 210 =1024 = 1000(say).

 

If one invests $1,000,000 then in 30 years one add 3 more 000 to it (multiply by 1000) and one gets roughly $1,000,000,000.

($1m to $1B)

 

If one invests $1,000,000 then in 20 years one add 2 more 00 to it (multiply by 100) and one gets roughly $100,000,000.

 

If one invests $1,000,000 then in 10 years one add 1 more 0 to it (multiply by 10) and one gets roughly $10,000,000

 

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If one compound at 15%, then the money is going to double roughly every 5 years, so in 30 years one will get roughly 26 =66.

 

If one invests $1,000,000 then in 30 years one multiply by 66 and one gets roughly $66,000,000.

 

If one invests $1,000,000 then in 20 years one multiply by 16 and one gets roughly $16,000,000.

 

If one invests $1,000,000 then in 10 years one multiply by 4 and one gets roughly $4,000,000.

 

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If one compound at 12%, then the money is going to double roughly every 6 years, so in 30 years one will get roughly 25 =30.

 

If one invests $1,000,000 then in 30 years one multiply by 30 and one gets roughly $30,000,000.

 

If one invests $1,000,000 then in 20 years one multiply by 10 and one gets roughly $10,000,000.

 

If one invests $1,000,000 then in 10 years one multiply by 3 and one gets roughly $3,000,000.

 

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If you go for the Index fund, you cannot beat the Index. So in order to get 26%, you have to be different from what the index is doing.

 

Basically, you make few investment, very big investment, infrequent investment, and you make investment when the investment is in your favor.

 

In investing you can be wrong some times, but if you are convinced of one’s strategy over the long term it will be OK.

 

Be a Cloner. Clone from the best like Warren Buffett.

 

Pre-investment Checklists by Mohnish Pabrai

 

Using the Checklist - Berkeley Law

 

 

PRE INVESTMENT CONVERSATION WITH A PEER INVESTMENT MANAGER. Discuss with another investor, like Warren Buffett and Charlie Munger pair.

 

 

See the following:

 

Mohnish Pabrai - Columbia Business School Presentation

https://cbs360.gsb.columbia.edu:8443/ess/echo/presentation/670921b2-4bad-4843-8dc5-4026360f1369

 

CFI@ISB - Compounding is the 8th wonder of the world - Mr. Mohnish Pabrai

https://www.youtube.com/watch?v=tt2TfdI0fFE

 

Indian School of Business Presentation July 13,2013 Part 1

https://www.youtube.com/watch?v=xa1CH2nK1cM

 

Indian School of Business Presentation July 13, 2013 Part 2

https://www.youtube.com/watch?v=z2YhBr_HRCw

 

Indian School of Business Presentation July 13, 2013 Part 3

https://www.youtube.com/watch?v=sh1I7ojlJLM

 

 

 

http://www.cornerofberkshireandfairfax.com/

 

http://www.valueinvestorsclub.com/

 

http://www.gurufocus.com/

 

https://sumzero.com/

 

http://www.edgar-online.com/

 

http://www.manualofideas.com/

 

http://www.grahamanddoddsville.net/

 

http://www.sec.gov/  (us securities and exchange commission)