Mohnish Pabrai conducted an interview with DNAIndia.com which I just found this week thanks to Gurufocus. Mohnish Pabrai manages about $500 million in assets Mohnish produced returns of 26% per annum from 1999-2006. 2008 was a bad year for the fund down over 60%, but the fund had a large rebound of over 100% in 2009. Mohnish is the author of two great books on investing and operating a business; The Dhandho Investor: The Low – Risk Value Method to High Returns and Mosaic: Perspectives on Investing
I had the opportunity to interview Mohnish several months ago, and look forward to hearing him speak at the upcoming Value Investing Congress
Below is the interview:
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How did you get into investing business from information technology?
Around 1994 I heard about Warren Buffett for the first time accidentally. The first couple of biographies about him had just been published a year or two before that. I read those books and I was quite blown away by some data points that were coming out about him and the industry and so on. I didn’t have any experience or even education in the investment business. But I was very intrigued by it.
I started to invest in the public equity markets using Buffett’s model in 1994 and basically did extremely well, north of 70% a year, till about 1999. I was getting more and more interested in investment research and securities analysis and made a decision to leave my company. I brought in an outside CEO and decided that I would spend more time on investing and at the same time some friends of mine wanted me to manage their money for them. It started as a hobby in 1999 with about a million dollars from eight people. About a year later the business (TransTech) actually got sold, I wasn’t running it anyway, but I was completely cashed out. And then I thought that let’s make my hobby a real business, try to scale it up and get investors. We now manage about $500 million — ten years later.
How did you narrow down on Warren Bufett and value investing?
Basically in 1994, when I read about Buffett, there were two things that stood out. One was that he had compounded money at a very high rate. If you are compounding at a high rate, even if you have a small amount of money — let’s say a million dollars — in thirty years you could have a billion dollars. So the idea of compounding at a rate above the market rate is an extremely fine notion because it can lead to enormous wealth creation. That was the first thing.
The second thing was that the way Buffett was compounding money at a rate higher than the market was based on a core wisdom which he stood for. If you are physicist, whether you believe in gravity or not, it will always impact you. Just like there are laws of physics, laws of gravity, there are laws of investing.
The rest of the interview can be found at the following link-Monhish Pabrai Interview- We Will Never See Another Warren Buffett