Think about Dendreon (NASDAQ:DNDN) and the ups and downs associated with the trials of Provenge.
We have to take risk to earn a higher return. I think one reason we do this is because we've been taught that higher risk is the way to generate higher reward.
Pabrai says, not when it comes to investing! The title of Chapter 10? "Few bets, big bets, and infrequent bets." What kind of fun is that? Pabrai isn't looking to make investing fun - he's looking to make you a better investor. We want every day to be filled with activity. Unfortunately, as humans, we're not wired that way, and we haven't really been taught to think that way. As an investor, Pabrai says stick to opportunities that have huge return potential with as little risk as possible. Low risk, high return That's how he does it. These may not be household names, but when you read the book, you'll see why Pabrai likes them as investment opportunities. Independent energy company Harvest Natural Resources (NYSE:HNR) and financial services company Fairfax Financial Holdings (NYSE:FFH) round out the top three. Steel producer IPSCO (NYSE:IPS) makes up 18.4% of the portfolio. He manages Pabrai Investment Funds and, since 1999, has "delivered annualized returns of over 28% (net to investors)." With a track record like that, he's worth listening to.Īs of March 31, 2007, Pabrai registered 13 holdings in his portfolio. Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals.Before we begin, let's learn a bit about Mohnish Pabrai. Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy–to–use format. Readers will be introduced to important value investing concepts such as "Heads, I win! Tails, I don′t lose that much!," "Few Bets, Big Bets, Infrequent Bets," Abhimanyu′s dilemma, and a detailed treatise on using the Kelly Formula to invest in undervalued stocks. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents how they can be applied successfully to the stock market. A comprehensive value investing framework for the individual investor In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing.
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