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. In hindsight, this was likely a mistake on my part. 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. I might hold 30 to 50 stocks that make up the bulk of my portfolio. Over the years if I had a high conviction stock I would make an equal size bet on it. One big thing I learned from Pabrai that I either never picked up or internalized properly was the idea of making big bets. Other investment books sometimes I have to force myself to push through them but Dhandho was a breeze. I found the book an easy read and enjoyable. 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. Similar to Buffett he waits for the big fat pitches to come along and then swings for the fences with sizable bets on them. He tends to make large and infrequent bets. 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. Like Pabrai, I have followed Buffett/Munger for decades and attempted to emulate their investing style and philosophy. Pabrai has written a great book for value investors.
Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals. Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy-to-use format. 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. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger. 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. In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. A comprehensive value-investing framework for the individual investor.
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