The Dhandho Investor: The Low-Risk Value Method to High Returns

The Dhandho Investor: The Low-Risk Value Method to High Returns

Posted by jack_miller | Published a year ago

With 700 ratings

By: Mohnish Pabrai, Neil Shah, et al.

Purchased At: $34.95

A comprehensive value-investing framework for the individual investor.

In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business-savvy Patels from India and presents how they can be applied successfully to the stock market. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger.

Listeners will be introduced to important value investing concepts such as "Heads, I win! Tails, I don't lose that much!", "Few Bets, Big Bets, Infrequent Bets", Abhimanyu's dilemma, and a detailed treatise on using the Kelly Formula to invest in undervalued stocks.

Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy-to-use format. Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals.

Pabrai has written a great book for value investors. Like Pabrai, I have followed Buffett/Munger for decades and attempted to emulate their investing style and philosophy. In this book, he goes through several examples of his investment strategy which includes finding stocks where if you are wrong you don't lose much and if you are right you win big, very big. He tends to make large and infrequent bets. Similar to Buffett he waits for the big fat pitches to come along and then swings for the fences with sizable bets on them.

If you have studied Buffett and Munger you will find a lot of his investment philosophy familiar of course but it is a good refresher and Pabrai communicates these principles well. I found the book an easy read and enjoyable. Other investment books sometimes I have to force myself to push through them but Dhandho was a breeze.

One big thing I learned from Pabrai that I either never picked up or internalized properly was the idea of making big bets. Over the years if I had a high conviction stock I would make an equal size bet on it. I might hold 30 to 50 stocks that make up the bulk of my portfolio. If one got too big I'd pare it down if my conviction on it was lower in order to keep diversification and lower overall risk. In hindsight, this was likely a mistake on my part.

Pabrai introduced me to the "Kelly Formula" which is a betting formula that gives you an idea of how big a bet you might want to make on a particular investment. Using this formula I found I probably should have made bets that were 10% or at times 20-30% of my total portfolio. In reality, most of my original stock investments never exceeded just 2% to 4% of the total portfolio value. As a result, I watched some higher conviction positions become multi-baggers over the years that would have had a higher impact on the portfolio had I simply bought more.

Of course, everyone says "I should have bought more of "xyz" but I look back and know there were some safe stocks I bought to be diversified with low risk and others that I had a higher conviction on that also came without undue risk. I simply did not apply the formula and bet as big as I should have.

I highly recommend this book to any investor and especially value investors. I wish it was written a decade ago or more and that I had found it. I'm sure with the knowledge I have gained from Dhando Investor I would have mostly likely beaten the markets by an even larger percentage.

- lea_rodriguez

A good book, however I would have liked it if he explained his method of analyzing stocks more clearly. This is more of a general approach to stocks. Don't get me wrong, there is key information here that tells you how to find and analyze worthy stocks. There's a better book out there by Kenneth J Marshall, Good Stocks Cheap if you want to learn a solid method of value investing.

- emmeline_turner

I am writing this review as an expression of gratitude to Monish Pabrai for writing this excellent and informative book. The word dhando, which comes from Sanskrit, means “endeavors that create wealth.” “The Dhando Investor” (DI) is described in detail in this interesting and informative book. The DI’s motto is “Heads, I win; tails, I don’t lose much.” Monish Pabrai describes the type of business that fits the DI. It is simple. It is subject to only a slow rate of change. It is distressed in a distressed industry. And, it has a durable moat. The DI wants to buy this business on sale, specifically half-off. Pabrai explains that Wall Street is confused by the difference between risk and uncertainty. He explains that the DI wants a low risk, high uncertainty business.
Pabrai offers extensive illustrations using the Patels, whose heritage was from Gujarat India, but who had migrated to and succeeded in Uganda, only to be expelled by Idi Amin. Only a few thousand came to the USA in the early 70’s, but now half the motels in the US are owned by Patels. They accomplished this feat using the principles of the DI. Pabrai also uses examples from Branson (think Virgin Airlines), Bill Gates, and his own experience.
How does one find such a business? Pabrai gives specific recommendations for places to search for distressed companies. He also discusses Joel Greenblatt’s “Magic Formula," found in "The Little Book that still Beats the Market," in detail. If you want to be a Dhando Investor Pabrai says, “Read voraciously, and wait patiently.” Monish explains that there is no certainty in investing, but with proper investigation and selection one is prepared to make “few bets, big bets, infrequent bets.” Following his advice you will surely emulate his principle of “Heads I win; Tails, I don’t lose much."
I also want to thank Phil Town for telling me about Monish Pabrai’s book. I strongly recommend both of Phil’s books. "Rule # 1 Investing" eloquently explains the principles of value investing as exemplified by Warren Buffet. In "Payback Time" he goes into further detail explaining how to improve your returns.
In conclusion, thank you Monish!

- xander_morales

And will be reading this book over for years to come. For anyone who really wants to become wealthy, it starts with investing. And to be a good investor it starts with learning and reading books about it. Great book about low risk high return investing. Imagine having a person who’s good at it pointing you in directions to start researching and magazines to start reading and examples. This book is that

- shane_collins

The author has no clue about investing ...he is a good marketer that's all.

- brayson_rivera

I very much like the examples in the book and that anybody can understand it. I am new to investing and it got me curious to learn more. The methods make sense and involve a large effort on your part to actually become a good investor. It tells you what not to do and helps guide you on where you should get started to learn what you need to do. It is a big picture view on a style of investing that seems to be successful. I can’t wait to apply it and zoom in on some of the lessons. Hopefully it will help me avoid major pitfalls and allow me to make wise, well thought out investment decisions.

- alvaro_phillips

This is a pretty so so investment book. For £16 you basically get a rehash of several other value investing books. Nothing against the underlying investment philosophy per se (I follow a similar path) but really asking a PM with a c.7 year track record is pretty odd. I also googled the author and found quite a lot of stuff online about how his performance since writing this book has averaged down quite a bit (one stock went bust) and that he now limits his positions to much smaller percentages. Perhaps someone can confirm this. I did think some of the advocacy of large positions and very high concentration bordering on the irresponsible for a book likely read by mainly retail investors who as we know like a punt...then in the last chapter he almost reverses course and says indexing is okay as well.

- landon_cruz

Normally focusing my reading on "top 10 best ever" books on investing from the likes of Buffett and Lynch, for an intermediate + level I have gained more on how to actually invest than nearly any other book (also recommend You Can Be A Stock Market Genius Too).
The compounding returns from this purchase are through the roof.

- max_ramirez

What is there not to like about Mohnish? For a normal layman like myself, this book is not really designed for me as I do not have the aptitude to pick good singular investments in the form of stocks or whatever. But regardless of this, it is a very interesting read and Mohnish's humility in a position of such success is purely inspirational. Another really good upside to this book is the understanding it gives you on how East Asian culture have helped migrants dominate certain industries abroad, this has opened up as good conversation topics over the years.

- everly_brooks

This is a breezy read compared to many value investing books out there . At its core this is a book about the life lessons of Mr Pabrai and give examples and stories. It refers to multiple other books and tries to give the 1 best idea of each book or investor strategy. I docked 1 star since it feels like it repeats some ideas a few times ( probably to make sure the reader remembers). Overall, good book that offers a shortcut way of learning the best lesson from some of the top value investors but skims the surface in some sense. definitely a good first book to begin your journey into value investing.

- carmelo_cruz

this book is great book on fundamental analysis. the author isn't dry and gives great examples on how to make low risk/high uncertainty investments. if you are looking to start investing, there is nothing worse than investing in a high risk/high uncertainty investmnent - as they usually result in losses. dhando investing comes from the school of buffett and value investing whereby you invest in low risk/high uncertainty stocks. i definetely reccomend this book...

- ramona_castillo

A good introduction to investment, but slightly repetitive

- giuliana_rogers

Pabrai does an excellent job to explain his methodology in an easy fashion. Great insight into a process to understand risk and its impact on potential return. Most insightful is the explanation of the difference between risk and uncertainty and how to capitalize on them

- diana_robinson

It could be due to the fact that Mohnish Pabrai is extremely intelligent, but everything in this book seems simple.
While reading it, and months after, I am only looking around myself and trying to see where Dhandho investing can be applied.
Just because it is simple does not mean it is easy.
Really great read!

- zane_johnson

This book gives many valuable tips and insights into investing. It is written in simple language and is a fairly short book. Well worth reading.

- novalee_johnson

Excellent book. I will recommend it 100% to anybody.

- kairi_cox

A good book for those interested in getting into investment. With simple techniques that the writer himself has used and accomplished with you can be sure that you can trust what you read. Check it out.

- kenzie_cooper

This is a terrific book for any amateur value investor, such as myself. It is a concise book packed with very simple but powerful advice which echoes warren buffett's statement that investing is not about brains but about temperament. I highly recommend it to all and any aspiring value investors.

- aubree_bennet

thank you

- denver_thompson

An amazing read challenging some of the most conventional wisdom passed on in schools. Also a very easy read which makes the book all the more special!

- raina_richardson

Awesome book, everything is explained incredibly well. Very easy read for a beginner. I fully intend to read his recommendations and then re read this book. Only then will I begin to invest.

- madeleine_ortiz

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