Notes on a recent Pabrai chat with Harvard business school:
12:15 Keep the risk down
Focus on downside protection. Buy hated, unloved, oversold stocks - stocks worth more than their price, which are subject to what Ben Graham called "under-speculation" or to undue pessimism because of a shrinkage in earnings.
27:30 Basic businesses at low multiples
During the dotcom boom, Pabrai invested in basic businesses (funeral homes, steel and coal companies, etc.) selling at low multiples of earnings - with outstanding results.
35:00 Value investing still untaught
It seems a quirk of human nature that value investing either clicks immediately with people or never does - thankfully it offers a safe and profitable method to make a living.
41:00 Turkey fear
Investing in Turkey still sounds hairy - but Pabrai's success is an illustration of the stock market being an avenue where wealth is transferred from the active to the inactive.
1:20:15 Let the winners run
This is where most of the outperformance is.
1:33:30 No need to lever
The margin of safety is sufficient for satisfactory performance. Having a good defence is more than half the battle in investing.
We seek low leverage even in the businesses we invest in - generally they're expected to face headwinds and a lack of leverage increases their chances of survival. As a bonus, excess cash gives them valuable options in a downturn. Join today to access our stock ideas.