The Dhandho Investor- ‘Heads I win, Tails I don’t lose much’.
The Dhandho Investor- ‘Heads I win, Tails I don’t lose much’ – Book Review
Recently, I was traveling from Pune to Mumbai, a 3+ hour journey by bus. It was a beautiful journey with good scenery by the window seat and a decent road. But what made it even better was re-reading one of my favorite book on Investing- The Dhandho Investor’ by Mohnish Pabrai.
I choose to read this book because it is just 208 pages long and I was sure that I can read the book completely in one sitting. The book is very insightful and one cannot put it down once he had started reading this book.
In this post, I’m excited to give you the review of the same book- ‘The Dhandho Investor’ by Mohnish Pabrai.
About the author:
Mohnish Pabrai is an Indian-American Investor, businessman, and Philanthropist.
He is the Managing Director of Pabrai Investment funds, an investment fund based on the similar model to that of Warren Buffett’s Partnerships in the 1950s.
Since inception in 1999, this investment fund has given an annualized return of over 28% and hence has consistently beaten the S&P 500 Index.
What is ‘Dhandho’?
Dhandho is a Gujarati word, which means ‘Endeavour that creates wealth’. In simple words, a dhandho investor is a ‘wealth creator’.
“LOW RISK, HIGH RETURNS”
Moreover, Mohnish Pabrai’s idea to invest in businesses with low risk and high returns makes perfect sense. Isn’t the main aim of any investment is to get the maximum returns with minimum risks?
Mohnish Pabrai explains this concept with the help of a few case studies in the first few chapters. Here, he explained different successful investor who followed this low-risk framework to get the highest returns.
The case studies include the stories of Patels (who own over $40 billion in the motel assets in the United States), Richard Branson of Virgin Company, Laxmipati Mittal of ArcelorMittal- world’s largest steelmaking company and few more. These stories presented in the book are really inspiring and broadens the reader’s eyes towards low-risk investing.
The Dhandho Framework:
In the book, Mohnish Pabrai describes 9 principles of the dhandho framework for low risk and high returns. Here are the principles:
- Focus on buying an existing business
- Invest in simple businesses
- Invest in distressed businesses
- Always invest in business with durable moats
- Few bets, big bets, and infrequent bets
- Fixate on arbitrage
- Margin of safety – always
- Invest in low-risk, high-uncertainty businesses
- Invest in the copycats rather than the innovators
I won’t go into detail about these principles here, as it will kill the fun of reading the book. Nevertheless, you have already got the basic idea of this framework.
What did I like about the Dhandho Investor?
The principle that I liked the most is ‘Few bets, big bets, and infrequent bets’. Here, Mohnish Pabrai suggests that every once in a while, you’ll encounter overwhelming odds in your favor. In such times, act decisively and place a large bet. These are the adjacent scenarios of “Heads I win; tails I don’t lose much”.
The Dhandho Investor is an amazing book to deepen the basics of value investing principles. The book is quite simple to read and complex investing principles are simplified in an easy-to-understand manner. The Dhandho framework mentioned above helps in investing in low-risk businesses with high returns.
Overall, it’s a great read. I will highly recommend you to read this book to learn the principle of ‘low risk and high return’. You can buy this book on Amazon here.
That’s all. I hope this book review on ‘THE DHANDHO INVESTOR’ by Mohnish Pabrai is useful. Happy Investing.
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Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting