Top positive review
Fantastic book for all investors and especially value investors.
Reviewed in the United States on July 17, 2017
Pabrai has written a great book for value investors. Like Pabrai, I have followed Buffett/Munger for decades and attempted to emulate their investing style and philosophy. In this book, he goes through several examples of his investment strategy which includes finding stocks where if you are wrong you don't lose much and if you are right you win big, very big. He tends to make large and infrequent bets. Similar to Buffett he waits for the big fat pitches to come along and then swings for the fences with sizable bets on them.
If you have studied Buffett and Munger you will find a lot of his investment philosophy familiar of course but it is a good refresher and Pabrai communicates these principles well. I found the book an easy read and enjoyable. Other investment books sometimes I have to force myself to push through them but Dhandho was a breeze.
One big thing I learned from Pabrai that I either never picked up or internalized properly was the idea of making big bets. Over the years if I had a high conviction stock I would make an equal size bet on it. I might hold 30 to 50 stocks that make up the bulk of my portfolio. If one got too big I'd pare it down if my conviction on it was lower in order to keep diversification and lower overall risk. In hindsight, this was likely a mistake on my part.
Pabrai introduced me to the "Kelly Formula" which is a betting formula that gives you an idea of how big a bet you might want to make on a particular investment. Using this formula I found I probably should have made bets that were 10% or at times 20-30% of my total portfolio. In reality, most of my original stock investments never exceeded just 2% to 4% of the total portfolio value. As a result, I watched some higher conviction positions become multi-baggers over the years that would have had a higher impact on the portfolio had I simply bought more.
Of course, everyone says "I should have bought more of "xyz" but I look back and know there were some safe stocks I bought to be diversified with low risk and others that I had a higher conviction on that also came without undue risk. I simply did not apply the formula and bet as big as I should have.
I highly recommend this book to any investor and especially value investors. I wish it was written a decade ago or more and that I had found it. I'm sure with the knowledge I have gained from Dhando Investor I would have mostly likely beaten the markets by an even larger percentage.