Collection: Mohnish Pabrai - #22 'Investment Tools'
[Transcript]
MOHNISH PABRAI 00:08
And you know besides Warren and Ted Weschler and stuffs. Several other analysts and several other tools mostly available at zero, close to zero cost that are quite exciting and quite interesting for me to use and leverage.
And so first I will start with you know, some of these things are coming up on the screen. Let's start with the Value Investors Club. So how many of you in the room are familiar with Value Investors Club, you could just maybe raise your hand?
We have – Arvind I'm deeply disappointed in what you've taught them so far. How come you kept them away from the Value Investors Club? Oh, okay. Sorry. Maybe I'm not seeing the full classroom.
So anyway you know, I don't know if you guys know the history of Value Investors Club. But you know, it was set up by Joel Greenblatt and – And Joel and his partner, John Petry. Basically, they – many years back, I think this is going back to the early days of the internet.
They had a – They've done an analysis of some business that they were, you know making an investment in and I think they were on some Yahoo message board related to the public companies. And on that Yahoo Message board, they saw one particular poster put up a extremely detailed analysis of that business that they were looking at and the analysis was actually superior to even what they had come up.
And this person did not work at a hedge fund or a mutual fund. He was just an amateur investor investing word puzzle account and they were just really surprised that you know out in the transcend if you will was this you know, islands of incredible talent.
And so they thought about how can you get – how can we kept this talent? And so they came up with this idea of the Value Investors Club and what they decided is that they would invite anyone on the planet who has an interest to become a member of the club. And to become a member, you have to submit an investment idea.
And of course, they would review the idea and see it was good enough to admit you into the club. And then once you go into the club, you were required to submit I think two ideas a year. And I don't think you could submit more than four ideas. So they wanted to limit how much you could submit.
And then every week they awarded $5,000 to the person who came up with the best idea. And so you know, they basically said that you know for about a quarter million dollars plus the cost of running website.
They will get this amazing information flow and cut out all the nonsense that you get in Yahoo message board because they would – Basically, curated site that about what you posted on. And actually, if you go on Value Investors Club, you will see in general that the average write up is quite high quality. And many of the folks who are posting write-ups and such are not professional investors.
In fact, there is a person who has a handle on Value Investors Club called 'Charlie479.' So you can do a search on Charlie479 and you know, it'll pull up all of the ideas that he submitted. I don't know he's been activate today's date? But, his ideas are so good.
The other thing that Joel Greenblatt and John Petry did was that if they were truly impressed with what people came up with. Then they talked to them and they set them up in the investment business.
They basically, seeded the money to manage, took a stake in the general partner and introduce them to other people who might want to invest with them. And so they – I don't know the number, but I know I personally know several funds that was set up by people who originally came on Value Investors Club just as amateur investors.
If you will – Anytime, I look at investment idea let's say you know – In fact, like for example, last June I noticed – In fact, it was before that actually was in the first quarter of 2012 when the Berkshire's 13-F that came out for the first time they listed General Motors as a holding of theirs.
And of course, you know, I hated the car business; tight CAPEX, it's got unions, it got all these you know, consumer tastes vagaries. And you have to make all these passive investment upfront and such.
And so for many reasons I never had any interest in the car business and I immediately you know, looked at the idea of Berkshire's model and rejected it. And then you know, then the second quarter of 2012 13-Fs came out I noticed that General Motors is also a top holding of David Einhorn and I said you know, why would David Einhorn and Berkshire Hathaway both take these large stakes in this pathetic company called General Motors?
And so I decided to do a drill down on the business and usually when I do a drill down the first thing I do, I looked to see if that idea is posted on Value Investors Club. I'm not sure I found anything there or not. But that's usually what I do is that's the first place I usually go after I just looked at the you know, Google Finance or something on the company.
And of course, I did a way thorough drill down on GM. And it dawned on me that there were a number of reasons why an investment in GM made all the sense in the world. And that led me to actually take a position in GM.
And you know, we owned that position I don't have much to say about it except that went up I don't know, more than a 100 to a 120% so far on that position. So thank you Berkshire and thank you David. You know, you're just fantastic analyst, I might have to send you bonus or something. And so, you know Value Investors Club is fantastic.
Sumzero is something like that, It's another website where again is a community of mostly amateurs who are posting their best ideas. Gurufocus is another good website where they have created a list of gurus. And again there were all kinds of data on what their top holdings are what they are buying, what they are selling and so on.
The Manual of Ideas (MOI) is not free. It's – I think it's about $900 a year or so, but I think it's exceptional. You know, $900 a year is a little less than what you might pay an analyst every year. And what Manual of Ideas does is, it make my job even easier so I don't even have to go through 13-Fs every quarter.
John Mihaljevic he was a good friend of mine now who starts the Manual of Ideas. Basically, put out these very nice booklets with, you know, a couple of pages on each funds if you will and what they've been buying and what their top holdings and all of that. You know, much more easier to digest format than the 13-Fs. You can get the same data from 13-Fs, it just takes a little bit more work and time.
So that's another great tool, there's a message board called "The Corner of Berkshire & Fairfax" which is also exceptional. And again, when I look at you know, when I find ideas to research I looked at Value Investors Club, I also looked at Corner of Berkshire & Fairfax.
And of course EDGAR-Online by the SEC, you know, I pay them I think 10 bucks a month and that gives me access to all the filings in nice format and such. There may be a way to get that stuffs for free but that's just makes a little easier.
And then you know, there are various newsletters like the Graham And Doddsville which is the newsletter from the students from Columbia Business School. And so these tools are actually quite valuable. And I think I found them very useful.
In fact, if I look at our portfolio currently, I can think of only one stock that we owned that is not a clone position. That means it was not picked up from somewhere else. And so I should really called the fund the 'Clone Fund'. But let's try to keep this between us and let's not tell my investors about it. They might object to the outrageous fees, I'm charging them.
And so with that why don't we do this – why don't we play that video? And that's about two and a half minutes and then we'll start Q&A and such.
(Source: https://youtu.be/ot6pzc9ZwfU)
