If someone offered you a bet, winner take all for $10,000 in a game of golf would you take it? What if you could substitute Tiger Woods to play for you and drastically increase your odds of winning? This is what you are doing when you clone the best investors.
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TURN PHONE HORIZONTALLY IF USING A MOBILE Listen to old men in a profession where men die young. Fish where the fish are. “When you only basically buy ideas that other great investors have already bought after studying them, the error rate you will have will be a small fraction of what you would have if you went out on the prairie on your own. If you go out on your own and look at 10,000 stocks and pick ten – trust me – your error rate will be off the charts. But if you pick ten out of the 40 that great investors have bought and you have looked into why they bought them, it’s like bowling with bumpers…Never bowl without bumpers when they offer you bowling with bumpers. ”— Mohnish Pabrai
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I used to be skeptical when Buffett said he never used spreadsheets, or math above basic algebra to valuate a company and that he performed all of his calculations in his head or on paper. After researching and watching videos of Li Lu and Pabrai going through quick valuations in their head I realized that it is in fact true. They use the valuations as filter to determine if they need to look further into the company. It usually takes about 60 seconds. If the numbers don’t pop out at them as a complete no brainer then they move on. This allows them to filter through thousands of stocks.
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It is not only near impossible to beat the market, but difficult to just keep up with it.
Continue reading “The Arrogance of Investors”
Concentration does not increase risk. Risk comes from the purchase price and equity selection.
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These are a “1 pg.” case studies of Mohnish Pabrai’s PE 1 and even one from Seth Klarman
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There is a lot of misconception that the process of cloning means following a superinvestor blindly into a position. Even Mohnish Pabrai, the great shameless cloner, advises against this.
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The Rational Cloner 