Video Link: https://youtu.be/eoQ2K501KMI
In this episode, Mohnish Pabrai was asked how does he factor macro into his evaluation of commodity-based businesses?
In this episode, you’ll learn:
What are the macro factors that you need to know in evaluating a commodity-based business?
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MOHNISH PABRAI 00:07
It's a good question, actually when you're looking at commodity businesses that – I think you have to understand cost curves. You have to understand where they are on the cost curves.
You have to have some understanding of – kind of what are normalize commodity prices and some commodity prices on the different scenarios. So I think you have to understand those facets of macro.
But you don't need to understand the whole lot beyond that. I mean, I think that you know in my investment in ZINC for example, I understand cost curves well and I have some understanding of what drives zinc price and such.
But I don't have a very good understanding of that. So I think that there is a decent chance in the next few years that we might get significant movement upward in zinc prices. But thesis doesn't rest on it.
You know, if that happens we will make out quite well, but I think our investment probably works out even if that doesn't. And so that was fine, the more you're depending on a rise in prices, the better your understanding used to be on why that is absolutely assure to have it.