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Collection: Mohnish Pabrai - #13 'Moat Investing'



Well, Buffett is a multidimensional investor. And I would say dozens of Investments if not, you know, 50 plus, 100 or 100 investments he made where it's not moat based.

So to give you an example, I think maybe around ten years back he bought – He bought the debt of Finova Capital, Finova is a – Like a subprime lender in the US that was going bankrupt. And so he bought the debt and it bought a lot of the debt.

So he basically gone into a position where he could participate in the restructure of the business. And that business not a much of moat. What he wanted to do was just, they had portfolio and there was certain, you know, statistics of lost that you had in a portfolio.

So he wanted to run that portfolio, just get all the loan pay off, et cetera. And just take the residue. So, there are dozen of investments Buffett has made and continues to make that are not based on moats. In fact, he has done lots and lots of arbitrage deals.

He used to do a lot in 1950s' and 1960s'. So I would say that Buffett prefers to buy moats and I think now the size of the capital he has, the odd are heavy that he will go mostly moat based.

But that's not what he does, he does all sort of things that are non-moat based. And so it's not in conflict I think the cloning thing, you know, you can – You know, lets say you did the following.

Lets say you pick 4 or 5 investors that you thought were exceptional. And let's say you said that I'm going to pick the best with the idea which I can understand within my circle of competence. Even the ones with a moat, et cetera.

You put some criteria on that and so – You know, you can skip the ones that don't have moat, you can skip the ones that you don't understand. So cloning is not in conflict with moats, you know, you could clone saying I only look at the one with moats for example.

But I – my take is that, you know, it's not so much about the quality of the business in my opinion. I think it's more about what you paid for it. To some extent that's part of the equation.

You can actually do extremely well, investing in a business that is "shallow moat." If you paid next to nothing for it. And of course, the ideal situation is to buy a business which have great moat at a great price. Or even a fair price.

And so there is many different ways to skin the investing cat. Moat is the one way to do it.



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