How Can We Learn To Follow In The Footsteps Of Buffett And Munger? – Mohnish Pabrai

How Can We Learn To Follow In The Footsteps Of Buffett And Munger? – Mohnish Pabrai

One of our favorite investors here at The Acquirer’s Multiple is Mohnish Pabrai. Pabrai is the Founder and Managing Partner of the Pabrai Investments Funds, the Founder and CEO of Dhandho Funds, and the author of The Dhandho Investor and Mosaic: Perspectives on Investing?.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Also read:

  • Hedge Fund of funds Business Keeps Dying Every Year
  • Emerging Hedge Funds: Can They Outperform?
  • Baupost Letter Points To Concern Over Risk Parity, Systematic Strategies During Crisis
  • AI Hedge Fund Robots Beating Their Human Masters

This Top Value Hedge Fund Is Killing It This Year So Far

Stone House Capital PartnersStone House Capital Partners returned 4.1% for September, bringing its year-to-date return to 72% net. The S&P 500 is up 14.3% for the first nine months of the year. Q3 2021 hedge fund letters, conferences and more Stone House follows a value-based, long-long term and concentrated investment approach focusing on companies rather than the market Read More

One of the best Pabrai interviews was one he did with our good friends Preston and Stig at The Investors Podcast. During the interview Stig and Preston asked some great questions on all things investing, here are a couple of them:

Stig asked Pabrai:

Despite your massive success, you humbly call yourself a “cloner” of other fund managers. How can we learn to follow in Buffett and Munger’s footsteps?

Pabrai’s response was:

Warren and Charlie have been very generous as they have shared a lot of their wisdom in the public domain. The first question for people that want to follow the footsteps of Warren and Charlie is are you wired for it? The psychological template of who you are as a person is determined by genetics and early childhood experiences, which cannot be easily changed. If you are wired to be a high-speed trader, you are probably not going to be happy with Warren and Charlie’s style of investing. Figuring this out is not easy as it takes effort to evaluate the choices of how you spend your time and the amount of satisfaction you get from doing certain activities. Warren and Charlie have an intense passion for reading and learning new things. If that is also a part of your intrinsic personality, then you are on the right path of following Warren and Charlie. It is not a path for everyone, but people can certainly pick up great habits to align with their approach.

Here’s Part 1 of the interview:

Stig also asked Pabrai:

You said in an interview that you do not like to have analysts. I suspect that the reason might be because one would unconsciously be influenced to invest in a company simply for the sake of investing not necessarily because it is the right decision.

Pabrai’s response was:

Before starting my own investment funds, the only models I was aware of were those of Warren Buffett and Charlie Munger. Their models made a lot of sense to me, so I cloned them. There are several aspects to the way Warren and Charlie run their business. What I discovered only several years later was that their rules were not random. Rather, they were thought through intensely. One of the rules they hold is that they have no analysts and even today, Buffett does not have analysts.

This might seem odd for a huge company like Berkshire Hathaway. I used to assume that this decision was based on keeping costs low and focusing more on performance. Later I realized that it is advantageous to not have an investment team because having analysts means you are missing out on learning about the businesses you are investing in. Buffett has said previously that no part of the investment process should be outsourced. A young analyst has once told me that he was assigned to study U.S. railroads. The problem with this is that the question should not be which railroad company is the best to invest in. It should be which companies are the best investment options out of all the possibilities of various different industries.

Here’s Part 2 of the interview:

Article by Johnny Hopkins, The Acquirer's Multiple

Updated on

The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”
Previous article The World’s Most Powerful Bank Issues A Major Warning
Next article Hurricane Irma May Make Miami Area Uninhabitable For Months

No posts to display