Collection: Mohnish Pabrai - #7 'Cloning Warren Buffett'


Video Link: https://youtu.be/iBoWIIhlDb4


In this episode, Mohnish Pabrai explain how he clone from other great investors in his investment fund and why you should clone from other great investors too?


In this episode, you’ll learn:

  • A research study on cloning Warren Buffett from 1975 to 2005.

  • Why is cloning a very powerful notion?

  • Why should you clone from great investors like Warren Buffett?

  • How Mohnish Pabrai clone from great investors such as Warren Buffett?

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

[Transcript]

MOHNISH PABRAI 00:12

So number one, I do not throw darts to pick stocks. pinch numbers in case I was not clear so I do that. In case, I was not clear so I don't do that. So let me give you some data points that might be useful.


They were a couple of professors in the US, I think one guy at the University of Nevada another guy is in Ohio State. They wrote a paper when they looked at every stock Warren Buffett bought for 30 years from 1975 to 2005, 30 years period.


And what he did is they did an analysis they said that okay, if you bought what Buffett bought and you bought it after it was publicly known that he has bought it. And you bought it on the last day of the month that was publicly known that he had bought it. And you bought it at the high price of the last day of the month so the highest price it traded on that day.


Which means that you go and find the worst possible broker on the planet and say please give me the worst possible price you can get. And I want to buy it at that price and then you held it till Buffett started selling the stock it was known publicly that he was selling it. And you sold it on the last day of the month that it was public and the price you got that you sold it was the lowest price on that last day of the month.


And you did this for every stock that he bought and sold for 30 years. If you did that you beat the index – the S&P500 – by 11.5% a year on average. And the S&P has done about 10% historically so you were doing about 21.5% a year with no ISB degree required.


And so again you know you can walk out of the room right now and you can put strategy to work because I approached so many business school students about the strategy and so far nobody has set up a fund to do this. And even like you were saying why are they not replicating it exactly why are they replicating? So it's still not too late you can start a fund tomorrow which does this.


And what you do is you take a villa and go up and you just go on vacation every day.And at the last day of the month, you back from the swimming pool. Just look at – okay, has Warren Buffett bought anything? Oh okay, he bought IBM. Okay, we buy IBM and then you go back to your ocean surfing and swimming and whatever else you're doing and go on till the end of the next month.


And you know, you're done so the bottom line is that cloning which I talked about is a very powerful notion. Unfortunately, no business school professors have ever written any books on cloning that I'm aware of that are any good and there are a few books on cloning but they don't, they miss the point I think.


So bottom line is that so if you take what Buffett did in what these professor said we should do what Warren Buffett did. You are already beating the S&P by 11% points a year.



Now, most of what Pabrai Fund has done at least for last several years. In fact, when I looked at my portfolio almost everything that we own was copied from other great investor. But, please don't tell anyone. Let's keep it a secret, okay? Are we recording this, [Inaudible] are we recording this? Okay, we just keep for internal use alright don't throw it on the web, we only want ISB to have an edge.


Okay, so anyway – so the thing is that if you were to. So basically what I'm doing, you can said is a slight tweak to the paper that these professors wrote. Well basically, if you set up a fund and all the fund does is clones the idea of other great investors.


But at the only layers I add to that is I don't buy everything that the other greats are buying. I look at what they are buying and then I look at the ones that I can understand and the ones that I can understand and figure out yes these is really undervalued.


I think he is right about buying [Inaudible] and that's it. And basically, limited to two or three decisions a year, that's it. So not much else required.

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