MOHNISH PABRAI 00:09
Well, I would say that patience is a big part of the equation.
You know, I think that you can be right about all your analysis, those stocks were just not keep it long enough. And you know, stocks – You know, like – You know, you can study this, stocks had done average 9-10% a year.
But if you study the long history of stocks, its not coming in like clockwork, you know, its very lumpy and so you can have large movement in short period of time, and no movement for a long period of time and all of that.
So patience is big part of it, I think sticking within circle of competence is a big part of it. I think that some other things that are useful is that – You know, one of the reasons why cloning is such a good idea, it's because its already made it through the filter in one's brain.
And if you admire that brain and if things are already made it through that brain – And so important in cloning is that you should focus on cloning the ideas that are the biggest positions of the people who made those bets.
You know, like the top 3 or 4 – If you are looking at the top 3 or 4 or 5 bets that the person has made rather than the 30th bet he has made. The 30th bet is not going to help you that much, but –
So the interesting thing about cloning is that if look at, you know, top-five positions of David Einhorn, top 5 positions of Bill Ackman, top 5 positions of Carl Icahn, top 5 positions of Warren Buffett, top 5 positions of Seth Klarman and so on.
Then you know that those are – that's a really good pond to go fishing in because it's already been through one filter. And so when you starts looking at something that are already been through one filter and you only looked at that pool, then that's a big advantage.
That – you know, there's a – When you go to a bowling alley and if the objective is to get the highest score when you're bowling, how many of you have bowl before? Can you raise your hand?
Looks like we got some bowling aficionado in your class. (Laughter) Maybe you can take them bowling, Arvind.
ARVIND NAVARATNAM 02:53
I will bowl with bumpers though. (Laughter)
MOHNISH PABRAI 02:56
Yeah, there you go. So when you go bowling, if the idea is that you have to get the best score, then you know, you can bowl two ways; with bumpers or without bumpers. So if you could bowl with bumpers or without bumpers which would you choose?
ARVIND NAVARATNAM 03:13
With bumpers, the students are saying.
MOHNISH PABRAI 03:15
Would anyone choose without bumpers? (Laughter)
ARVIND NAVARATNAM 03:20
MOHNISH PABRAI 03:21
Bowling with bumpers is basically like doing cloning of 13-Fs because you know, it's already been through one's idea so the odd that you will have a gutter ball just go down dramatically.
I mean you may still end up with the ball going kind of off to the side when it gets close to the pins. But the odd are very low.
And so I think those are the important thing as you avoid leverage, you be patient, stick to circle of competence. Go away for a long time after you made your portfolio, bowl with bumpers you know, those are all good things to do.
13-Fs of great investors are like the bumpers in the bowling alleys.