Some key points from an interview with Mohnish Pabrai by DNA India (full interview here):
- Make few bets, make big bets, and only bet when the odds are heavily in your favour.
- You are buying a business, not a stock. Ask if you are willing to buy the whole business at that price.
- Understand how the business makes money and how it will do in the future.
- Look at cash flows. Buy only when the price is far less than fair value (e.g. half).
- Shorting stocks is an emotion rollercoaster with limited upside and unlimited downside.
- An investor is a gentleman of leisure. Do not feel compelled to act. You get paid for being right, not for activity.
- Toll bridges in the commodities space are worth owning. For example, there is no way for China and India to satisfy their consumption demand without buying commodities (e.g. corn, soybean) from Latin America.
- Some professors in Ohio found that if a person bought a stock that Buffett bought on the last day of the month that the information became public, and then sold the stock after it became public that Buffett started selling the stock, the person would make more than 20% annual returns.