Heads, I win; Tails, I don’t lose much
(for details pls visit www.OptionPundit.net)
I love this philosophy and that’s what I try using at OPN. OPN’s portfolios are based on statistical probability advantage.
Let me introduce a great book that I finished reading over the weekend. The book is by Mr. Mohnish Pabrai (The “copy cat” of Mr. Warren Buffet). To briefly introduce Mr. Pabrai, let me share with you his achievements first- Pabrai’s hedge funds, Pabrai Investment Funds, have outperformed all of the major indices and over 99% of other managed funds. $100,000 invested with Pabrai in 1999 was worth over $659,000 by 2006-an annualized return of over 28% after all the fees and expenses.
“The Dhandho Investor” (TDI) is a new book by Mohnish in value investing arena. An excellent book that is easy to read and understand. Written in plain simple English vs. complicated financial Jargons, TDI has distilled the very best thoughts of Warren Buffet, Benjamin Graham and Charlie Munger.
Dhandho (Pronounced as dhun-doe) is a Guajarati (One of the Indian languages) word that comes from Sanskrit root word “Dhana” meaning wealth. Dhan-doe, literally translated, means “endeavors that create wealth”.
Now let’s dive into why you should be spending less than $20 bucks on this great book.
- Before Pabrai dives into “The Dhando Framework”, he gives excellent examples. The first one being how a small Indian section created over $40 billion in motel assets, pay over $700millions in taxes to the US government and employ nearly 1 million people, all within a span of nearly 35 years (from nothing). His examples vary from all sorts of “Dhandho investors”, not necessarily those who were “forced” due to struggles but also “cool dude” like Sir Richard Branson. He also talked about how he himself created his own fund with “The Dhando Framework”.
- The 9-step “Dhandho Framework” is not hugely different from what you may have read on “Value investing” from thousands of books. But there are 3 new things that I learned from his book- 1) Focusing on arbitrage, 2) a perspective on “Low risk, high uncertainty” business and that 3) it’s better to be a copycat than an innovator (now u know why I mentioned him as copy cat of Warren Buffet). I call it “reapply”. You have to read the book to comprehend all the 9-steps.
- It also has a chapter fully devoted to “exit” which I found quite interesting and worth considering as an objective when drafting a trade plan for value investing.
- I found “9 ponds”, where I can fish for value investing, to be truly helpful. And I don’t hesitate in saying; it made “search” process easier. Of course one has to do due diligence in analyzing “business” before investing. Beside these 9 ponds, there are so many resources listed throughout the book that if I were to find myself, it would have taken huge time.
- Lastly, reading quotes and words of wisdom from well known investors, at appropriate places, was an icing on the cake. Simply beautiful!
Now let’s put your investment in this book in the Dhandho framework. Heads, I win; Tails, I don’t lose much (less than $20)!
Enjoy reading, profitable trading, OP
Disclaimer: My investment in this book has paid-off after finding this wonderful company from one of the resources (free btw) that I plan to use option strategies on.