Mohnish Pabrai, an acclaimed value investor and disciple of Warren Buffett, has built his investment strategy around simplicity, patience, and focus on undervalued assets. His approach emphasizes the importance of investing in businesses that have a durable competitive advantage, skilled management, and clear potential for long-term growth. Pabrai often refers to his investment style as cloning, where he studies successful investors like Buffett, Charlie Munger, and others, and applies their proven principles. A core aspect of his strategy is minimizing risk, which he describes as avoiding permanent capital loss rather than short-term volatility. He stresses the importance of focusing on a small number of high-conviction bets, often citing the “20-slot punch card” analogy, where investors should treat every decision as if they had only 20 opportunities in a lifetime.
Pabrai also adopts a contrarian mindset, seeking opportunities in areas overlooked or undervalued by the broader market. His investments often target companies with strong cash flows, little debt, and a margin of safety—ensuring the stock is bought at a significant discount to its intrinsic value. He prefers to hold onto his investments for extended periods, allowing the power of compounding to work its magic. Furthermore, Pabrai avoids over-diversification, focusing on a concentrated portfolio of no more than 10-15 stocks at any given time. He also highlights the psychological aspects of investing, encouraging discipline, emotional detachment, and the ability to endure market fluctuations. By sticking to these principles, Pabrai has achieved significant success in replicating Buffett’s methodology while maintaining his own unique edge in the world of value investing.
