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Heads, I win; Tails, I don’t lose much

August 27, 2007

(for details pls visit www.OptionPundit.net)

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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.

4 Comments

  • dayton says:

    Book is great, but leaves the reader wondering how he can value invest in a business on his own. For that there is no information in the book. In other words the book withholds the very essence of valuing a business and applying that to stocks. For that, you would perhaps have to become a Pabrai investment lackey and invest in his fund.

    I would highly suggest, one should learn to fish on his own. You cannot rely on others. But such knowledge is hard to come by. Therefore you need to buy this book, it tells you exactly how you can go about valuing a business just like Warren Buffet , and how to simply research everything from MSN money and Internet, and know if its a business/ stock that you want to value invest and buy. This book is also written by a Warren Buffet devotee, and is named after Warren Buffets Rule#1.

    PHIL TOWNs – RULE#1 Now AVAILABLE in paperbacks

    Phil is a great guy and he delivers what Dhando investor witholds.

  • OptionPundit says:

    Dayton, thanks for sharing this. I haven’t read this book yet so I can’t comment much. From the website though it seems there is some value in it.

    Cheers and profitable investing, OP

  • dayton says:

    Dhando Investor is a great book, but its seriously disqualifies itself when it doesn’t reveals how a business is valued.

    It doesn’t matters what Sir Richard Branson did or how the Patels made out, what matters most, how do I make out in this world of investing? I am sure every reader would like to know that answer. That is where the book ends, leaving you holding an empty bag.

    PHIL TOWN comes off giving you the goods first and than telling you how to survive with Technical trading, how to value everything yourself based on Warren Buffets methods. He is a great guy, very giving indeed.

  • […] where I would like to use the term “Heads I win, Tails I don’t lose much” as made popular by Mohnish Pabrai . As of this writing, EGPT (Market Vectors Egypt Index ETF) that represents Egypt stocks market is […]

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