Should Value Investors Change their Style? Tom Russo vs Mohnish Pabrai

Should Value Investors Change their Style? Tom Russo vs Mohnish Pabrai
By Fabarsi (Own work) [<a href="">CC BY-SA 3.0</a>], <a href="">via Wikimedia Commons</a>

The tech and real estate bubble bursts in the past decades have led to changes in investment styles, and ways of risk assessments. While there are some investors who learn from the changing times, and shape their future thesis accordingly, there are others who are more ideological and their opinions rarely diverge. The classic example of a long-term investor is Tom Russo. Yes, we know Warren Buffett has said on one occasion  “Our favorite holding period is forever”, although the particular scenario is hard to achieve, but this quote pretty much makes up about half of his investing theory.

Should Value Investors Change their Style? Tom Russo vs Mohnish Pabrai

But, we are discussing Tom Russo here, partner in Gardner Russo & Gardner. This value investor has some serious long term holdings that he has held onto for decades. His positions include names like Nestle SA (PINK:NSRGY) (ETR:NESR), Unilever plc (LON:ULVR), Philip Morris International Inc. (NYSE:PM), Berkshire Hathaway Inc. (NYSE:BRK.A (NYSE:BRK.B), Wells Fargo & Company (NYSE:WFC), Altria Group, Inc. (NYSE:MO), Heineken Holding NV (AMS:HEIO) (PINK:HINKY), and a number of others. He believes that one does not have to be as active and poised for action any-time in value investing, as everyone thinks.

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He has chosen companies that are based on consistent consumers and a demand that is unlikely to just shake with every move in the market. Another major theme of his approach is the vast investment in the regions other than the US. Non-US investments make up 60-65 percent of his portfolio. Russo also likes family-owned businesses, and thinks that such setups can be more protective of their products and their strategy, and are therefore more preferable in cases where capitalism fails.

Contrary to Russo, there are a number of investors who diversify their portfolios every quarter. Then there are some like Mohnish Pabrai, of Pabrai Investment Funds, who change their ways of implementing investing ideas with changing times. He redid his style after the crisis of 2007-08, and then he reverted back after some time. Pabrai thinks that before running towards a new opportunity, or before making the decision to dump a stock, a checklist of prerequisites should be complied with at all times. He agrees with Charlie Munger that a diversified portfolio can be achieved with just four different stocks, but he thinks that is nowhere near enough. Diversification in the portfolio is a key to Pabrai’s strategy.

Interestingly, both Mohnish Pabrai and Tom Russo are dedicated followers of Warren Buffett, and truly idealize the famous investor, which is evident from the interviews they have given in the past, and from the fact that Pabrai spent $320,050 to get a dinner meeting with Buffett.

In terms of the answer to the question, it seems it is up to the individual.

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