Mohnish Pabrai talks to ET Now and his new focus on India
GrizzlyRock Value Partners was up 34.54% net for 2021. The fund marked 10 years since its inception with a 198% net return, resulting in an annual return of 11.5%. GrizzlyRock enjoyed 14.8% long alpha against the S&P 500 and 26.9% against the Russell 2000. Q4 2021 hedge fund letters, conferences and more The fund's short Read More
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It's great to be on your home turf. Just saying yes. And just this isn't the first time that you're going to end of course highlighting that this is but this is the tip. The timing of the trip is really apt because there's so much happening in the world that somebody was based in the U.S. This is right and the beginning you know drawn from their perspective and insight and perhaps join the dots and put a gun to it and ask you what is your market for you know that's a standard question you have to ask. Well the answer might disappoint you but I don't have one. So I mean I think for for most for most investors you're better off not trying to answer difficult questions.
I think I think investing is difficult enough when we try to figure out what is the future of one business. If you try to say we're the future of an entire market our country and so on. You've got too many variables sometimes. But but I will tell you that in general we've got a lot of tailwinds in India and we've got a lot of very smart entrepreneurs running a lot of great companies. And so I am in India.
Lots of follow up questions for you but then didn't you were discussing interesting you know point a couple of days ago that if you look at the great investor's profit just hitting 100 billion dollars of cash read us going out in the open and said that 2013 could be a year of transition. George Soros who is talking about the mini meltdown in Europe. Everybody is not very optimistic about the shape of the VOIL marks is not excited about valuations. What does your take in general. Is this a good environment for investors to invest in pick up bargains. Yeah so I think I think we have to slice a little bit. So like in the case of Warren Buffett it's actually last time I checked 116 billion here and it's increasing by about four or five hundred million a week because of all the operating earnings. And Warren does not have the cash because he had a view on the market. He has the cash because nothing interesting has shown up to buy.
So you know whatever the markets are doing when they go higher they go low. If tomorrow a deal shows up for a particular business to be bought. What's happening in the market today very little impact on what Berkshire Hathaway would do. And so that is I think a great way even for investors to think about things so in the long run. If you're right on the business and the prospects of the business that is what's going to drive your returns versus what is happening with markets and economy and those other things simpler do you think that the challenge still lies for long term investors.
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I mean with his attempt to buy stake taking everybody's wondering you know if it's getting tougher Mr. Buffett realize value and he's going into areas where he's never traditionally been in the past what does that mean for bargain hunting in this sort of a market. Yes so the overall deal as I understand it was a convertible debt deal. It would have been about 3 3 billion or so. So it's not exactly in favor of them buying a business and they're not taking a really bullish stance and over because they're not going on the equity. So I think I think the thing is that if if we were privy to all the deals that showed up in Omaha and what happened to each one of them we would see hundreds and hundreds of them that didn't get consummated here and there we hear what some of them it's just the nature of the piece and price is very important. So when we're looking at buying an asset obviously we want a quality asset but we have to have price discipline.
So at some point if that price discipline or the price is not being met either when you're buying stocks we didn't buy whole businesses you you've got to back up back off before you were domiciled invest if you're making more trips to India. Does it mean that you're finding it easier to find bargains in India than you know a mature market like that you are so you know I manage about a billion dollars and we only have less than one million dollars at this time invested in the U.S. zero point one percent of my portfolio. I never thought in my lifetime I'd ever get to having something like that small a stake and I don't have macro views.
I don't know what macro view that the in fact I'm bullish on the U.S. and generally says that things aren't heavily mispriced and underprice at the same time India has increased quite quite dramatically it's gone from basically less than 100 million to three years ago to over 400 million. And so so you know we have all of that happen because I'm able to find opportunity here and I'm not able to find. Forty percent of your portfolio is invested in it. That's correct. So what we've done is done. This is not about profit. This is all about you and about your investments. I've been following you ever since.
After that you know buffet lunch I read this book and we'll talk about this book's like later what we have. Whatever glazed over the years and what I've really understood and what has inspired me about your investments Tullan one thing which stands out for me is that you want this concept of checklist which is also centered around the fact that you like to buy high uncertainty and low risk. Yes. Can you just explain. So it's really interesting because stock markets have a perspective that businesses should have extreme predictability.
They should be able to tell us every quarter what's going to happen and they should just march northward every quarter in a straight line. Unfortunately the real world doesn't work like that. The real world is messy and businesses don't go this way. They have their ups and downs and they do that.
So so the the the thing is that when a business has a hiccup or misses a quarter or something the markets think all hell is broken loose when in reality it just might be part of the natural way business runs and so markets hate uncertainty. And so when you have high uncertainty in a business coupled with low risk. The end result is higher returns. So if you have the combination in a particular business where uncertainty is high risk is low. Generally speaking that's a situation you should be worth or willing to dig into. And we had that situation for example in India maybe 15 16 months ago in the real estate space. You know that's an example of it was classically low risk high uncertainty. You know when you met I think this was last year and I've not been to us I've never attended to the AGM but it's been there. You told us that a business which you like in India is actually preambles enterprises and the enterprise enterprises the balance sheet is pretty much like Berkshire Hathaway the balance sheet in terms of disclosure in terms of what they indicate and what they communicate.
I use a business which is very discovered as a business which has potential to be a good great compounded. So there is no uncertainty but there is great potential. So what would you do. Yeah I think I think in a case like Piramal there is some uncertainty. Not a lot. There's some uncertainty around the fact that AJ is going into relatively new areas which he hasn't been before and markets always question. You know is he is he going to have a stumble if you will. But yeah you're absolutely right. A business like Romily the bluechip business it's a very high quality business relatively low uncertainty.
But in that particular case that for me was a low risk high uncertainty bet as much as it was a jockey bet. So Jay has a few strong traits. One of those traits is he's very driven to deliver shareholder value in a very ethical way. And another of those traits is that he's a compounding machine and he cares about those things. So a lot of management teams don't understand capital allocation and compounding and taking care of outside shareholders those are at the absolute center of Piramal. So I think that something like Yeah I think riding on his coattails is not a bad idea. You know.