Book Summary: The Dhandho Investor

This is a book on investments by Mohnish Pabrai, the founder of "Pabrai Investment Funds". I have read this book over a weekend and found it to be quite interesting, knowledgeful and entertaining at the same time. This is a 200 page book with examples from various successful enterpreneurs and quotations from investors like Warren Buffet and Charlie Munger. In nutshell the book talks about how you can get good return on your investment(bet) without taking unnecessary risk. The recurring theme is "Heads I win, Tails I don't loose much".
Initial few chapters talk about the investment strategy taken by successful people. It is a very interesting read about how Patels in US own more than 50% of the motel business. How Richard Branson and Laxmi Mittal have made their fortune.
Then he goes on to describe the "Dhandho Framework" (Investment Strategy). I am jotting down the 9 investment principles outlined in the book.

1. Focus on buying an existing business
2. Buy simple business in Industry with ultra low rate of change
3. Buy distressed businesses in distressed industries
4. Buy businesses with a durable competitive advantage
5. Bet heavily when odds are overwhelmingly in your favor
6. Focus on arbitrage
7. Buy businesses at big discounts to their underlying intrinsic value
8. Look for low risk high uncertainty business
9. It is better to be a copycat than to be an innovator

All these points are explained with examples and doing mathematical modeling DCF (Discount Cash Flow, Kelly Analysis etc.). I will admit that i haven't done the mathematical part on my own. That is an exercise for later.

In summary, the author urges you to find out simple businesses which you can understand. Do your due reading, find out what are the factors in that business. If you don't understand, don't invest. Then within that industry find out businesses which are fundamentally strong but for some reason their stocks are trading significantly below the intrinsic value. Of course it means more study and analysis. You should do a rough odds estimate of what are the chances of getting good return and what are the chances of break even , and what are the chances of being complete failure. If the odds are heavily in your favor, then put good amount of money on such bets. You should be patient for a duration of around 3 years. As businesses take time to solve their issues and uncertainties to disappear. This is the strategy taken by author and his 2 idols Warren Buffet and Charlie Munger. Hope it works for you too.