Tuesday, October 02, 2007

Pabrai's Annual Meeting at Chicago Sept 2007

These are some of the things that Mohnish Pabrai said during his annual meeting.


Pabrai was asked about possibility of investing in commodities, such as gold.

He responded by quoting Buffett, saying, "If Martian were to to observe the activity of human beings for many many years, they would not understand what these humans were doing. They are digging the gold out from the ground, proccess them and put them in the vaults and never touch them again."

He only wants to invest in companies with businesses that Martian could understand.

Another question was what he thought about relationship between volatility of the market to stock market valuation.

His response was.... "You have asked the wrong person, you should ask Chicago Business School." What a great response. Plenty of applause from the crowd.

Understanding his investment in Ipsco.

When he invested in Ipsco, 1/3 of its market cap was cash. It was selling at 2X free cash flow. It has high visibility of earnings for 2 years, but uncertainty after that. Mohnish's thinking was after 2 years of investment, the total amount of cash generated and those on the balance sheet would be equivalent to the total worth of the company at the time of investment. Thus, he would get the steel business for free.

Despite not knowing the intrinsic value of Ipsco at the time of purchase, it was a high uncertainty, but low risk bet. Ipsco was eventually bought out and he earned over 100% of return. Dhandho!

Understanding his investment in Lear Corp.

Duopoly business. The other automotive seat maker is Johnson Controls. High ROIC and has been growing revenue 13% per year for the last 10 years. Problems started in 2005 when commodity prices increased and they were unable to pass the costs to its clients. However, as contracts were running out, Lear could renegotiate its contracts and pass the price increases to clients.

Mohnish sold his position when Icahn offered to buy out Lear. As the deal fell through, Lear is still a listed company. Mohnish mentioned that he might be interested in buying Lear again if price falls below $25/share. So, keep an eye on Lear.

Would he ever hire an analyst?

No. Mohnish said that Buffett, despite managing billion of dollars, is basically one man business. The more brains get into investment, the worse the performance would be. He also quoted Munger for saying.."Nothing useful comes out of a committee."


I was very grateful to have the chance to ask Mohnish a few questions that are relevant to me.

One of the questions was... prior to setting up his fund, has he thought of working for anyone else besides Buffett?

His answer was no. Buffett is the best. He has not thought of working for anyone besides Buffett.

As I don't have any business background and is a self-taught value investor, I asked him what he thought of CFA?

He told me I can skip the CFA. :)


All the above are recollection from my memory, so they might not be the exact words of Mohnish.


If you are interested in seeing some of the photos I have taken at Mohnish Pabrai's meeting, please visit: Mohnish Pabrai 2007 AGM at Chicago


Jango said...


Nice summary & pics. Can anyone attend Pabrai's AGM or just the ppl who have invested in his fund ?


Rabbitisrich said...

Thanks for the report. I've been getting a lot of the same career advice from the people I most respect:

1. Don't worry about degrees, just keep working and learning.
2. Don't ask me for a job. Do it yourself.

Meenu said...

Nice recap, David. The Q&A was absolutely, totally, positively phenomenal. Each and every word from Mohnish was like gold !! I was humbled and felt privileged to be there.


This blog is intended to be a reservoir for my thoughts on investing and a dumping ground for my ideas and mistakes. said...

Actually, Benjamin Graham was one of the earliest advocates of a certification in security analysis. In my opinion, every situation is different so there is not a one size fits all answer to your CFA question. Certainly, taking the CFA doesn't mean anything if one doesn't have the right temperament to be a successful investor.

Vikas Agarwal said...

Hi David
Thanks for the summary. I too have admired Buffet for several years but it is in last six months since I have realized my passion in investing. Like many budding investors I too consider him my guru. I too have been thinking about CFA for a while. Thanks for asking the CFA question to Pabrai.


martin said...

Did anyone ask Pabrai about his investment in Delta Financial?

bs said...

not everyone is a buffett or pabrai..although it is very very useful to learn from them...as buffett has also said remember who you are..understand urself first..i am pursuing the CFA and i think its great in terns of the content and the recognition..

Game1980 said...

Hi I am a Singaporean doctor who is of the same age as u
I am also very into value investing

Pls continue to share yt thoughts.

Price is what u pay.
Value is what u get.