Collection: Mohnish Pabrai - #43 'Japanese Stocks and Baskets of Stocks'


Video Link: https://youtu.be/lonYUntsabc


In this episode, Mohnish Pabrai was asked does he often buy baskets of stocks because previously he bought baskets of commodity-based companies and Japanese stocks?


In this episode, you’ll learn:

  • Does Mohnish Pabrai often buy baskets of stocks?

  • What is Mohnish Pabrai's comment on his Japanese investments?

  • When should you buy Net-Net Stocks?

To check out all Collection: Mohnish Pabrai <click here>

[Transcript]

(Source: https://youtu.be/ot6pzc9ZwfU)

MOHNISH PABRAI 00:08

Yeah no, I mean, I think – okay so our Japanese investment idea. Most of all that was one of my non-cloned ideas. It was actually an original thought, God forbid which came from my brain and it did not work. So it reinforced for me not to come up with my own ideas because they all suck.


So the – yeah, so the Japanese basket, I think we ended up like a 2.5% return and it took a lot of work to buy all those different names and then sell off those different names. And so the good news was we didn't lose money, we didn't make money. And as long as we don't lose money, I think I'm fairly happy.


So we were in and out with slightly above money markets returns so that was okay. Yeah, I mean I think that my preference is not to do these baskets and things like that is to really owned a particular business and understand the dynamics of the business and you know different competitors in the industry and pick the one that I think has the best prospects in terms of return and such.


And so I think the baskets have been kind of few and far between in our history, they are mostly anomalies.


And you know, really want to focus much more on – I'm not – I think sometimes we get to the point where we get some aha moments like in 2008 with commodities, the aha moment was that cost curves matter. And there were whole bunch of first quartile cost curve companies available at throwaway prices. So I said okay, we can just go and do all of it and that worked.


The second aha moment was that Japan was, you know, the net-net capital of the world you know, all these cheap below cash companies.


And that aha moment didn't worked you know, because the only way where I would really invest in those businesses because I couldn't understand them, most of the bilingual in Japanese and so on.


Was to just do a basket, the way Ben Graham did a basket. And that didn't work and one of the reasons that didn't work is that – what Graham's says is that the ideal time to buy these net-net is not when the market is really cheap or the market is really expensive.


And he said that if market are really cheap, if you buy net-net, the good businesses will end up doing a lot better versus these cheap net-net. And when I bought the net-net basket in Japan, the Japanese market was at multi-decade low. And so it did rally, the market did rally but our stocks really didn't move that much.


So if I actually held a basket of Japanese's Blue Chips instead of the net-net which had been more expensive, I would have had fantastic returns.


And of course, I probably would never have paid up for those that bought that sort of basket so [Inaudible].

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