Collection: Mohnish Pabrai - #62 'Picking Stocks'



[Transcript]

MOHNISH PABRAI 00:00

You know if you have held a company like now its Hero Mobil right? It changed. Pardon?


AUDIENCE 00:10

MotoCorp.


MOHNISH PABRAI 00:11

Now it's Hero MotoCorp? Okay.


So if you held let's say for 20 years or something, what would be your return? Like what would be the –


AUDIENCE 00:21

[Inaudible]


MOHNISH PABRAI 00:23

Okay, so like 45x? 50x or something.


AUDIENCE 00:28

[Inaudible]


MOHNISH PABRAI 00:30

Okay, 100x or something. (Laughter)


Yeah so obviously the thing is that one of the things that happens in terms of human psychology, is that if I've owned something and I just told you should look for long runways right?


And if you look at company like Hero MotoCorp, so many advantages you know, motorcycles are better in rural areas than scooters, cars. And they have all the distribution network, they got this huge installed base, they got all the brand, equity and all that. So to – For someone else to approve that it's not easy right?


So there are all these positives but you know, capitalism is brutal. That's the nature of capitalism would be people who aspires to take your moats away and such.


And I think that if a person is holding on to Hero Honda (Hero MotoCorp) because of the past that may not be as robust as holding on to it because of having some views of the future. So future has a way of unfolding differently from the past.


So if you are able to – If you understand the business within circle of competence then you can look out 5, 10, 15 years from now and see that those aspect of the motor coming intact and you know, what the valuation of the business would be.


So again, what's the Hero MotoCorp market cap? Do you know? Pardon?


AUDIENCE 02:14

60,000 crore.


MOHNISH PABRAI 02:15

60,000 crore?


AUDIENCE 02:17

10 billion (US dollar).


MOHNISH PABRAI 02:17

Okay, 10 billion that's it.


So the question I would ask you know, someone is buying the stock today is that you know, how does it get to 120,000 crore? And how long does that take? Or how long does it take to get to 200(000) crore? 200,000 crore you know, how long does that take?


And what are the circumstances? And does it [Inaudible] to get that or it's just – It's going to get there because of all these natural gains. And so but I would say you know, holding on to it because you know, dividend is more than cost, I think that's irrelevant.


[Inaudible] I think the thing is that you look at it as if – [Inaudible]


Of course to India you don't have the same dynamic which the US gives significant tax issues.


Long term gains? Yeah, so you have no tax obligation and that's the beautiful place to be. (Laughter)


And so I think that if you have a view that this is a business that is going to double or triple or quadruple in value in the next 5 or 10 years. You know, it's a great place to be.


And should be there – And if you have a view that for whatever reasons that may not be the case or the odd are low then you ought to look at something else.


But I would say just identifying those long runways and being – I would say non-emotional about [Inaudible].


(Source: https://youtu.be/oC_xjoUo89E)

 

[YAPSS Takeaway]

Invest in company with high growth potential and ask yourself how long does it take to double or triple the market cap and under what circumstances?