The Dhando Investor

Book Title: The Dhando Investor
Author(s): Mohnish Pabrai
Rating: $$$$





Author’s Bio (from the book’s jacket or elsewhere):

Mohnish Pabrai is the managing partner of Pabrai Investment Funds, an investment group modeled after the original 1950s Buffett Partnerships. Since its inception in 1999, Pabrai Funds have delivered annualized returns of over 28% (net to investors). He has been favorably profiled by Forbes and Barron’s and has made guest appearances on CNBC and Bloomber TV and Radio

Review:

If Buffett were to write a book, it would certainly have themes very similar to that of “The Dhando Investor”. By bringing in Buffett, I have no intentions of suggesting that Mohnish has come up with any masterpiece or classic, on the contrary, Mohnish’s writing lacks flamboyance and is usually devoid of flavor like humor, interesting anecdotes, intellectual musings or philosophical wrapping. The construction and delivery of the message is pretty simple and straightforward. Though not exciting, the book could still be completed in one or few sittings because of its concise form.

The principal argument of the book runs contrary to popular wisdom that one has to assume higher risks to achieve high returns. To make his point, Mohnish has presented case studies of successful businessmen/communities who have generated great returns with minimal risks. His list of businessmen who made it big with the low-risk – high-return strategy includes the Patel community (of Indian origin) who controls a large chunk of the hotel/motel industry in US, steel magnate Lakshmi Mittal, Virgin’s Richard Branson, etc. What’s most refreshing about this book (vis-à-vis any other book from the value investors’ club) is the use of examples from ordinary businesses (read non-investment) to lay emphasis on Graham’s idea of “Margin of Safety”

For those in the Wall Street who misconstrue uncertainty as risk and risk as SD, Mohnish has some very interesting analysis:

“Wall Street sometimes gets confused between risk and uncertainty, and you can profit handsomely from that confusion. The Street just hates uncertainty, and it demonstrates that hate by collapsing the quoted stock price of the underlying business”

The book references some interesting web sites and is replete with Buffett and Graham quotes. In short, the book will help you reinforce your faith in “Value” principles (if you do!) and makes a very light and quick reading.