Mohnish Pabrai has made a career out of mimicking the investing style of Warren Buffett. Recently, the managing partner of Pabrai Funds, CEO of Dhandho Funds and author of several books (including “The Dhandho Investor” and “Mosaic”) was interviewed on Benzinga’s PreMarket Prep. The following quotes are excerpts from that interview.
5 Important Questions
1. What was it like when you discovered Warren Buffett, and how did that affect your life and impact your investment strategy over the years?
I would say, looking back, it was a profound moment in my life, and I made a number of changes in how I was living my life after I heard about Warren Buffett. Including, a few years after hearing about him, actually going into the investment business. You know, I am a techie and computing engineer by training, so I saw a lot of unusual behavior and approach in the way Warren Buffett invested, and I saw the industry didn’t really approach things that way.
And to me, the way he was doing it made a lot more sense than the rest of the industry. So I said, “You know this looks like a field with a lot of opportunity to apply this approach.” I started first doing it with my own money and that worked really well and subsequently set up Pabrai Funds and so on.
2. How do you look at companies that you’re thinking about investing in?
One of the most important things that you know Buffett talked about is that stocks are not just pieces of paper. They are fractional ownership of a stake in a business. And one should not buy a single share of stock if one were not willing to buy the entire business if your net worth was a few times the market cap. So, this is a profound kind of separation between Buffett and almost all the rest of the industry.
Where the rest of the industry kind of thinks of these as rapid fire trading in-and-out vehicles, you’re better off thinking of stocks like farmland or a privately held business where you go into it if you think it’s undervalued and if you are happy owning the business for a long period if the stock market for example shut down.
For example, sometimes people will ask me what do you think about Apple Inc. AAPL? And I’ll ask them the first question, I’ll say, “What is the market cap of apple?” They have no idea. They know the stock price, but they don’t know the market value. How can you proceed to buy a business without knowing what it’s selling for? Image Credit: Screenshot from https://www.linkedin.com/in/mohnish-pabrai-2827a910/
3. What do you think about the future of infrastructure as an investment?
I think this is a really good time for the United States to embark on some significant infrastructure spending. Our interest rates are really low, so even if we were to take on debt to fix our infrastructure, that would be great. And you know, there are many things many of us don’t like about President Trump, but one of the things to like about him is, first of all he comes from a construction background—he’s builder. He’s on record saying he wants to fix our airports, fix our bridges and fix our infrastructure and I believe he will execute on those and I believe Congress will support him. So those are, in my opinion, really positive things for us.
4. What is your morning routine?
My morning routine is pretty simple, I’m drooling on my pillow when markets opens. I’m not an early riser, if you will. Pretty much there is nothing unusual about it, I just roll out of bed when I’m ready to roll out of bed and get ready and get to work. That is pretty much my basic morning routine, nothing special or unusual. I Listen to NPR usually in the shower, which is always good.
In fact, my modus operandi is if on Monday morning I’m not fired up to go to work, I do two things. First is I don’t go to work, and the second is I hit the reset button. There have been a few times in life when I’ve had to hit that reset button, and each time it’s worked out for the better.
5. Do you invest in private companies?
I try to avoid those, because generally speaking, industries with rapid change are the enemy of the investor. That’s why you notice I’m on the stodgy car and airline business. But these stodgy businesses I think from our August buys in Southwest Airlines Co LUV, I think the stock is up like 60 percent or something. So you know the stodgy ones can do quite well.
You can listen to the full interview with Pabrai in the clip below.
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