Trader’s Narrative

The Dhando Investor is the sort of book that is easy ignore. The title sounds strange and the cover art offers no real clue either.

To be honest, the only reason I gave it the benefit of the doubt was the author: Mohnish Pabrai. I had heard very good things about him as an astute asset manager so naturally, I was curious.

The book is a very unique take on the old Graham & Dodd “value investing” approach. It is especially valuable when you consider that it isn’t written by a journalist or a professional writer but by someone who has been implementing the investment philosophy he explains.

Like many value investors, Pabrai emulates Buffet. Even going so far as setting up his hedge fund or rather partnership fund, to exactly mimic the legal and fee structure of Buffett’s. He even runs things as a one man team. Exactly the way Buffett did. Thankfully for his investors, the elumation extends to his performance. The Pabrai Funds have gained 28% annual returns net after fees since 1999.

So what is Dhando? It can be summarized as follows: heads, I win; tails, I don’t lose much. It is the business philosophy of the Patels, the Indian caste from Gujarat province, who are reknown in India as businessmen.

I’ve had the pleasure of meeting and befriending a few Patels so I can tell you that the legend is true. They are the original Ferengies. I swear they have business built into their DNA. It seems like they can’t help but make money. It just comes naturally to them. The way, say, chewing gum comes naturally to Paris Hilton.

Anyway, I enjoyed reading Dhando Investor. It not only demystified how the Patels do what they do but it also explained why so many of them own motels in the States. Apparently a quarter of motels is owned by a Patel in the US! In Dhando you also learn about how Richard Branson started Virgin Airlines. Its shocking how little capital it took.

Pabrai also goes into detail outlining his own investment criteria and specific ideas. He takes you on a journey as he first identifies a sector, then zeroes in on one or two securities. In one case he was even a year earlier to the scene than Buffett. I believe that was L-3 Communications Holdings (LLL). Another specific example in the book is Frontline (FRO) a VLCCFs or crude oil shipping company.

In almost all his calls Pabrai is early, leaves a lot of money on the table and still manages to double or triple his original investment.

This is obviously not a trading book but I was surprised at how much I enjoyed it. If you’re interested in investing and want to learn more about value investing, I highly recommend Dhando.