The Oracle of Omaha Warren Buffet recently praised NRI value investor Mohnish Pabrai. Pabrai tweeted a letter sent by Warren Buffett praising him for his philanthropy initiative Dakshana, commenting 'I must be in heaven".
The letter read, "I remain incredibly impressed by what you have done, are doing, and will do at Dakshana. It is simply terrific - far more impressive than what business titans, investment gurus and famous politicians ever accomplish. I'm glad my annual report doesn't get compared to the Dakshana annual report."
In July 2007, Pabrai and his friend Guy Spier, another hedge fund manager won a charity auction for a ‘power lunch’ with the ace investor for their $650,100 bid.
Other than his accomplishments at Dakshana, Pabrai is also the founder and CEO of Pabrai Investment Funds and Dhandho Funds. He also authored the book ‘The Dhandho Investor’ and 'Mosaic: Perspectives on Investing'.
As per Dakshna's website, its mission is to deliver world-class education opportunities for exceptionally gifted children from an improvised poor background in India. The portal claims to have invested ₹130 crore in quality education.
"I am glad my annual report does not compare to the Dakshana annual report," the Buffett letter read.
About Pabrai
Pabrai founded his hedge fund business, Pabrai Investment Funds, in 1999 just as the dot-com bubble gripped stock markets and most investors were investing in new-age tech stocks.
Following the footsteps of Warren Buffett and investing in value stocks when they were beaten down, Pabrai limited his losses when the bubble burst.
As of October 21, 2021, his total net worth was ₹1,360 crore. He has a stake in six Indian companies and follows Buffett’s strategy of ‘few bets, big bets.' Last year, in the September quarter, he bought a 6.3 percent stake in Edelweiss Financial Services for about ₹468 crore.
"Very few businesses have the qualities that can help them grow year after year. So, it makes sense to hold on to the ones that do. Capitalism is destructive and very brutal. It can be challenging to keep up with every business and try to figure out what is around the corner," Pabrai wrote in a letter to investors.
He further added that a value investor will not be willing to pay over the odds for a business just because it looks as if it will do well in the future.
He gave the example of Snowflake in his letter. "For this stock to produce high returns, which might attract a value investor, it would have to have the potential to generate a five to 10 times return. To get from its current $83 billion valuations to $830 billion, it would need to be generating cashflows ranging from $20 billion to $200 billion a year. That suggests revenues would have to rise from $500 million to $500 billion."
He noted, "I'd rather fish in other ponds." As per Pabrai, the market is now factoring in such unrealistic growth prospects, it has become virtually impossible for these businesses to grow into their valuations, thus changing definitions of growth and value investing.
