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meet Mohnish Pabrai

meet Mohnish Pabrai

investor Pabrai’s philosophy of choosing ‘low-risk, high uncertainty helps pick stocks for wealth creation. 
February 19, 2022
4 min read
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meet Mohnish Pabrai

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you don't make money when you buy stocks. and you don't make money when you sell stocks. you make money by waiting. this is the philosophy that value investor Mohnish Pabrai follows. 

the 58-year-old India-born American investor believes that staying invested for the long term is what will generate returns. with a net worth of Rs 1,417 crore as of December 31, Pabrai is an advocate of ‘buy and hold’. this means that you choose stocks carefully and do not tinker with the portfolio. 

through his bookThe Dhandho Investor, Pabrai offers tips on low-risk, high uncertainty investments. these are low-risk bets that have the potential to deliver high returns, even if these stocks come with a level of uncertainty.

software to stocks

born and raised in Mumbai, Pabrai moved to the US for higher education. he started his career as a software engineer but soon switched to entrepreneurship, launching an IT consulting/systems firm TransTech in 1991. this was sold less than a decade later in 1999. 

in the same year, he launched Pabrai Investment Fund to invest in undervalued stocks with an initial corpus of $1 million (Rs 7.5 crore). as of April 2021, Pabrai Investment Funds managed $636.8 million or approximately Rs 4,800 crore worth of assets.

for investors, Pabrai has introduced a yearly Free-Lunch Portfolio where he handpicks stocks depending on the category and business philosophy of the company. the Free Lunch Portfolio is a 15-stock, 12-month ‘set it and forget it’ approach. 

the categories include ‘Uber Cannibals’ or companies that aggressively buy their own stock, ‘Shamelessly Cloned’ which includes copying value stock pickers, and ‘Spawners’ that refer to firms adding and incubating related and unrelated businesses. 

in his 2021 year-end blog, Pabrai recommended 15 companies in the three categories. some of them include Berkshire Hathaway, Starbucks, Alibaba, Tencent, and Navient, among others. 

the key messaging here is simple. take calculated risks and don’t end up losing a lot of money. Pabrai’s ‘Heads I win, Tails I don’t lose much’ theory makes sense.