Value Investor Pabrai Advocates Long-Term Strategy, Cites Buffett's Success

Mohnish Pabrai, a prominent value investor, recently shared his investment philosophy during a conversation with Jane Liu, an assistant professor of economics at the University of Nebraska. Pabrai emphasized the importance of long-term investment strategies, highlighting that success in investing often hinges on a few critical decisions rather than frequent trading or precise timing. He recounted several instances from his career where he made mistakes, such as selling Ferrari shares too early and missing out on significant gains. Pabrai noted that these errors are common, but the key to investment success lies in making a small number of correct decisions, echoing Warren Buffett's sentiment that their satisfactory performance comes from a handful of truly correct decisions.

Pabrai's journey as a value investor began in 2007 when he and Guy Spier jointly won an auction to have lunch with Warren Buffett for $650,000. This event marked the beginning of a deep friendship with Charlie Munger and a commitment to practicing value investing. Pabrai has since become an advocate for this investment approach, emphasizing the importance of seizing rare, high-certainty opportunities. He cited Berkshire Hathaway as an example, noting that from 1965 to 2022, the company made over 300 key investment and acquisition decisions, but Buffett himself acknowledged that only a few of these decisions truly determined their success. These pivotal investments included well-known companies like Coca-Cola, Apple, American Express, See’s Candies, GEICO, BNSF Railway, MidAmerican Energy, Gillette, The Washington Post, Capital Cities/ABC, and National Indemnity Company, all of which contributed to Berkshire's long-term compound growth.

When asked about finding investment opportunities, especially in the era of artificial intelligence, Pabrai referenced an early anecdote about Buffett. Buffett was known to pick up discarded betting slips at racetracks to check for any overlooked winning tickets. This meticulous approach was later applied to his investment strategy, where he would painstakingly read through Moody's manuals, examining one company at a time, even if it meant sifting through 1,500 pages to find just a few worthy investments. Pabrai noted that Buffett continues to use this method in the AI era, emphasizing the importance of hard work and thorough research. Pabrai himself has adopted a similar approach, spending years reading the Japan Company Handbook, a resource that Buffett also used to identify top investments in Japan. Pabrai highlighted that true value investors are not deterred by tedious work and are willing to repeatedly sift through information to uncover hidden gems.

Pabrai also mentioned that Duan Yongping, the founder of Step High and co-founder of Vivo and OPPO, has adopted a similar investment philosophy. Duan Yongping is known for his advice to managers, emphasizing the importance of patience and thoroughness, stating that "haste makes waste" and that slow and steady progress is key to long-term success. This philosophy aligns with Pabrai's and Buffett's approach to value investing, where patience and diligence are crucial for identifying and capitalizing on rare investment opportunities.