The Dhandho Investor: The Low Risk Value Method to High Returns

( 5 )

Overview

All investors are told that if you want to earn high rates of returns, you must take on greater risk. Of course, the groundbreaking value investing strategies of Benjamin Graham, Warren Buffett, and Charlie Munger have shown that it is indeed possible to keep risk to a minimum while still making a reasonable profit. The Dhandho method takes their successful approach to investing one step further and shows how you can actually maximize rewards while minimizing risk.

Dhandho ...

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Overview

All investors are told that if you want to earn high rates of returns, you must take on greater risk. Of course, the groundbreaking value investing strategies of Benjamin Graham, Warren Buffett, and Charlie Munger have shown that it is indeed possible to keep risk to a minimum while still making a reasonable profit. The Dhandho method takes their successful approach to investing one step further and shows how you can actually maximize rewards while minimizing risk.

Dhandho (pronounced dhun-doe), literally translated, means "endeavors that create wealth." In The Dhandho Investor, Mohnish Pabrai demonstrates how the powerful Dhandho capital allocation framework of India's business-savvy Patels can be successfully applied and replicated by individual value investors in the stock market. The Patels, a small ethnic group from India, first began arriving in the United States in the 1970s as refugees with little education or capital. Today, they own over $40 billion in motel assets in the United States, pay over $725 million a year in taxes, and employ nearly a million people. How did this small, impoverished group come out of nowhere and end up accumulating such vast resources? The answer lies in their low-risk, high-return approach to business: Dhandho. This book will show you how to use that same technique to generate high returns in the stock market.

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 fees and expenses. In this book, Pabrai distills the methods of Buffett, Graham, and Munger into a user-friendly approach applicable to individual investors. Combining their legendary investing wisdom with the business acumen of the Patels, Pabrai lays out the Dhandho framework in an easy-to-use format that will help any investor significantly improve on their results and soundly beat the markets—as well as most professionals.

Pabrai also details each deceptively simple Dhandho concept in a straightforward, entertaining fashion, with individual chapters that explain why you should: Invest in Simple Businesses, Fixate on Arbitrage, Invest in the Copy Cats Rather than the Innovators, and other simple but proven concepts for low-risk, high-reward Dhandho investing.

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Editorial Reviews

From the Publisher
"Today's greatest rising investor"—Motley Fool

"How to invest the way an Indian migrant with little money would do - by looking for companies with little downside…" (Financial Times, Tues 26th February)

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Product Details

  • ISBN-13: 9780470043899
  • Publisher: Wiley
  • Publication date: 4/6/2007
  • Edition number: 1
  • Pages: 208
  • Sales rank: 293,455
  • Product dimensions: 6.30 (w) x 9.02 (h) x 0.83 (d)

Meet the Author

Mohnish Pabrai is the Managing Partner of Pabrai Investment Funds, an investment group modeled after the original 1950s Buffett Partnerships. Since its inception in 1999, Pabrai Funds have delivered annualized returns of over 28% (net to investors). He has been favorably profiled by Forbes and Barron's and has made guest appearances on CNBC and Bloomberg TV and Radio.

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Table of Contents

Acknowledgments.

1. Patel Motel Dhandho.

2. Manilal Dhandho.

3. Virgin Dhandho.

4. Mittal Dhandho.

5. The Dhandho Framework.

6. Dhandho 101: Invest in Existing Businesses.

7. Dhandho 102: Invest in Simple Businesses.

8. Dhandho 201: Invest in Distressed Businesses in Distressed Industries.

9. Dhandho 202: Invest in Businesses with Durable Moats.

10. Dhandho 301: Few Bets, Big Bets, Infrequent Bets.

11. Dhandho 302: Fixate on Arbitrage.

12. Dhandho 401: Margin of Safety—Always!

13. Dhandho 402: Invest in Low-Risk, High-Uncertainty Businesses.

14. Dhandho 403: Invest in the Copycats rather than the Innovators.

15. Abhimanyu’s Dilemma—The Art of Selling.

16. To Index or Not to Index—That Is the Question.

17. Arjuna’s Focus: Investing Lessons from a Great Warrior.

Notes.

Index.

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Customer Reviews

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Sort by: Showing all of 5 Customer Reviews
  • Posted September 30, 2009

    Poorly Applied Behavioral Economics!!!

    This book omits a very much needed fundamental basis within a behavioral economic framework in order to promote its rhetoric. While the author has been a success investing after having started a tech company and redeploying the proceeds in a long-term value approach, (After one Warren E. Buffett), he yet fails to connect the dots between his Dhando approach and that of famed value investors. As a matter of fact, he sites multiple references which are more closely aligned towards an entrepreneur's ambition far more than sound investment principles. Some of which include: Mattels, et. al, and Sir Richard Branson, as well a number of indian immigrants who have parlayed a low cost/ high return policy into wealth by bypassing conventional wisdom and allowing there family to work for sub-par wages in order to secure a healthy profit. This at the end of the eighties savings and loan scandal and during the nineties when real estate was suffering a down cycle. I pressume it is more of a philosophical blueprint to usher ones tendency to be risque' but does little to promote the behavioral aspects outlining investment decisions. Lastly, the author pressumes a hypothetical where as a small time barber opens a barbershop. In town A, their is an oversaturation of barbers, town B is 30 miles away and suffers this same problem. He suggest the person who opened a location in between town A and town B, lets call it town C, inacted a strategic/ competitive advantage by offering hair cuts for a few dollars less in the middle of these two places has a sustained advantage that is likely to be maintained? Thereby applying a Dhando Approach. This is far reaching in my opinion. Many of the persons and stories cited are isolated incidents where the owner enjoyed some advantage for a determinable amount of time. Further, the underlying principle the Dhando framework attempts to put forth is "Heads I win, Tails I don't lose that much." In many ways, this is a watered down speculative blueprint, however in the world of selective contrarian fundamentals, unfortunately the author is never able to close the gap and apply this philosophy to a sound value approach. Atlast, all you have is a cacophony of philosophical discord promoting a philisophical way to uphend risk. Do not read for investment advice, but do read for an expansion of your mental dexterity.

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  • Anonymous

    Posted September 11, 2008

    Good book by a follower of Buffet and Munger

    This a relatively easy read in which Mohnish exposes his investment style in a simple to understand format in which the average investor can learn something. The candor of Monhish is expressed in the easy to understand chapters. Although I beleive he has a high turnover ratio(his investments/investment style) for a disciple of Buffett and Munger. Worthwhile read.

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  • Anonymous

    Posted August 11, 2007

    Learn from one of the world best investors

    Learn from one of the world's best investors. Mohnish Pabrai is one of the worlds best investors. By running a focused value hedge fund, he has been able to earn astonishingly high returns for many years. This well written and entertaining book presents his investment philosophy and characteristics in a simple and easy to follow manner. A 'must read' for any serious value investor. Ask your money manager if he has read this book. If he has not - then fire him.

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  • Anonymous

    Posted January 21, 2009

    No text was provided for this review.

  • Anonymous

    Posted August 10, 2009

    No text was provided for this review.

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