In recent weeks, I reviewed my portfolios. In a future post, I will present my checklist. I have altered by checklist for evaluating potential and existing investments. Pabrai's book is a nice supplement to some notable books on value investing. be a copycat (see what other value investors are doing).buy businesses at big discounts to their intrinsic value.focus on arbitrage (a variant of the preceding bullet).buy businesses with a durable competitive advantage.buy distressed businesses in distressed sectors.buy business in sectors with a slow rate of change.invest in simple businesses which are understandable.invest in existing businesses as they are more knowable than new ventures.Pabrai devotes most of his attention to the process of selecting potential investments. Like Buffet and a few other successful managers, Pabrai restricts the number of holdings in his portfolio in order to maximize returns (this as opposed to realizing small gains overall based on the stellar performance of holdings which constitute a small portion of a large portfolio). On the other hand, a overly large portfolio (as seen in a great many mutual funds) starts to approach market indexing with the disadvantage of higher frictional costs. One the one hand, conventional wisdom dictates that one should have a well-diversified portfolio in order to minimize risk. I have given a great deal of thought as to how many stocks I should have in my equities portfolios. I have featured one of them in an earlier edition of The Financial Passage Maker:В Joel Greenblat, author of the wonderful The Little Book That Beats the Market.) (For that he provides links to other value investors with stellar records of success. He writes at a conceptual level as as opposed to getting bogged down in a swamp of superfluous detail. Pabrai extends the Ddhandho analogy to the field of investing and through story telling, illustrates how investors can take a similar approach. The book is worth the read for that alone.

It's a story of a few pioneers setting the example and others following the model of investing in small motels (often sold at fire sale prices during recessions), minimizing costs, and above all, entering into businesses only when the risks were low and the rewards high. Pabrai attributes their success to 'Dhandho' (approaches which generate wealth), specifically, the low risk/high return approach to making business and investing decisions. and gradually emerged to be prime players in the American hotel industry. The Patels, immigrants of Indian origin arrived four decades ago in the U.S. I always wondered why I encounter so many Indian hotel/motel operators on my cycling trips.

Unlike many of its ilk, this book is written clearly and directly - elegantly even.

Pabrai is the manager of the Pabrai Investment Funds ДЇor a peak at his most recent activity, take a look here: Recently, I read The Dhandho Investor: The Low-Risk Value Method to High Returns by Mohnish Pabrai (John Wiley & Sons Inc., 2007).

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