Mohnish Pabrai is a former tech entrepreneur and managing partner at Pabrai Investment Funds, a family of funds for high net worth individuals.
Pabrai was born in India and moved to the U.S. to attend South Carolina’s Clemson University. He worked at Tellabs for five years starting in 1986, before founding an IT consulting company, TransTech, Inc. He funded the company with money from his 401(k) account and credit card debt. Nine years later, in 2000, he sold the company for $20 million.
Pabrai used that money to start Pabrai Investment Funds, a family of hedge funds which are structured in a similar way to Warren Buffett’s original partnerships. The Pabrai funds are specifically targeted toward individual investors with a long-term time horizon. The minimum investment is $2.5 million, and money can only be redeemed once a year. These limitations are in place to discourage investors who may want to withdraw capital during a market downturn. Pabrai’s actual performance is not disclosed, but it’s believed his funds returned 30% on average per year between 2000 and 2010.
In 2004 he published, Mosaic: Perspectives on Investing, which distills the Graham and Buffett investment philosophy into a holistic approach to company analysis. In 2007 he published, The Dhandho Investor: The Low-Risk Value Method to High Returns. The book lays out a framework for value investing specifically for individual investors.
In 2008, Pabrai and another investor paid $650,000 to have lunch with Warren Buffet after winning a charity auction. He is quoted as saying the experience was “worth every penny.”
Pabrai and his wife, Harina Kapoor, started the Dakshana Foundation which helps gifted students from underprivileged communities in India attend higher learning institutions.
Value Investing for Everyone
Pabrai is rapidly developing a cult-like following, and many have called him the next Warren Buffet. One of the reasons for his large following is that he grants interviews more often than many other investors, and even publishes thoughts and ideas on his own blog. The other reason is that he has consistently outperformed the market since 2000.
Pabrai believes investors should only invest in companies they understand, that have solid management and that have a competitive moat. He also invests in tech stocks, something Buffett hadn’t done until recently. His funds are very concentrated, and each fund often holds just five positions. Although the funds are called hedge funds due to their partnership structure, Pabrai does not hold short positions.
Mohnish Pabrai has created a checklist that he uses to filter potential investments. The checklist has over 100 criterion divided into categories including leverage, durability of the moat and management quality.