valueandprices
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Invest in low-risk, high-uncertainty businesses by (Mohnish Pabrai)

Think safe, boring incredibly successful business.

“we see change as the enemy of investments…so we look for the absence of change. We don’t like to lose money. Capitalism is pretty brutal. We look for mundane products that everyone needs.” Warren Buffett

Some examples of companies that have proven to be low-risk, high uncertainty businesses would be Coke, McDonalds, Disney, American Express, Colgate

Why buy $1 for $.50? That is the Dhando way. You are looking for those discounted bets that you can really buy into. Let’s use an example to illustrate.

An AWESOME company is worth $1 but the uncertainty in the market has dropped the price to $.50. People are afraid and are dumping the company sending it down to $.50, even though the underlying fundamentals have stayed the same. There is the possibility that our friend, Mr. Market could get sick and drive down the price to $.30. So now people are selling $1 for $.3o. Some intelligent investors start loading up on the $1 for $.50. When they see the price drop they load up even more for the $.30.

Now days, months, years go by and little to nothing happens with the stock. Eventually, Mr. Market gets out of the hospital and starts to feel better and more optimistic. People start to notice and buyback the depressed stock. They push the price above the $1, which is higher than it is worth. Through all of this, the fundamentals have never changed.

The intelligent investor now unloads everything and makes a HUGE PROFIT!

 

 

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