Is NRI Mohnish Pabrai Another Buffett Wannabe
-annualized gain of 26.2% net to investors

LA, July, 03, 2007
Gary Singh

NRI Mohnish Pabrai, who runs Pabrai Investments in California, ponied up $ 650,100 in partnership last week for an upcoming charity lunch with legendary investment guru Warren Buffett. But at the end of what's arguably history's most expensive meal, it's the man known as the Oracle of Omaha who may be eating his heart out.

Since inception in 1999 with $1 million, Pabrai Funds has grown to over $300 million in assets under management. A $100,000 investment in Pabrai Funds at inception in 1999 would have been worth $539,900 as of Sept. 30, 2006, an annualized gain of 26.2% net to investors

He structured his hedge fund exactly like the original Buffett partnership of the 1950s and '60s. Basically, there is no management fee and a 6% hurdle before a 20% performance fee is collected. Prior to starting his fund, Pabrai actually wrote to Buffett in early 1999 and asked for a job so that he could learn from the master, but he was turned down. After getting over his disappointment, he started his hedge fund.

• From 1986 to 1991, Pabrai worked in R&D at Tellabs for over two years in their high- speed data networking group. Pabrai joined Tellabs’ fledgling international subsidiary in 1989 and worked on a wide range of assignments including joint ventures, international marketing and sales.
  
• In 1990, he quit his job working as an engineer for Tellabs in Chicago and abandoned his master's thesis at the Illinois Institute of Technology to launch TransTech. He was the Founder/CEO of TransTech, Inc., an IT consulting and systems integration company.
  
• TransTech was funded with $30,000 from Pabrai’s 401(k) account and about $70,000 in credit card debt. The company had grown to over $20 million with over 160 people when it was sold to Kurt Salmon Associates in 2000. TransTech was recognized as an Inc. 500 company in 1996.
  
• Pabrai is the winner of the 1999 KPMG Illinois High Tech Entrepreneur award given by KPMG, The State
  of Illinois, and The City of Chicago. He is an active Member of the Young President’s Organization (YPO)
  and a charter member of The Indus Entrepreneurs (TiE).

He was interviewed in the April 5, 2006, issue of Barron's, and in it he describes how he looks for "hated, distressed, thrown away businesses that are mispriced" with an average market cap of around $500 million. Not making big bets on large-cap stocks is one of the few places where Pabrai differs from Buffet.

He studied the oil shipping business and discovered that small Greek shippers with near-obsolete single-hulled tankers were being hurt more than Frontline and were selling their ships for scrap. So he knew that when oil demand next surged, Frontline would be able to command premium rates. Months later, Frontline was charging $50,000 a day per tanker and Pabrai made a killing.

Once he bought massively into funeral-home operator Stewart Enterprises at a time when the company had a $500 million debt payment coming due in a couple of years. He figured they owned enough funeral homes to handle the debt. The investment paid off handsomely.

Call it the Patel Principle- Pabrai’s secret?

In his new book titled "The Dhando Investor," Pabrai examines the low-risk, high-return approach to business of the famed Patels from India who have quietly begun to dominate the motel industry in the US Gujaratis will recognize the word – a variation of the Hindi "dhanda" – the creation of wealth.

Building on the Patels’ innate sense of "dhando" and the principles of his value investing gurus such as Benjamin Graham, Warren Buffett, Charles Munger and others, Pabrai calls one of his chapters:

• "Heads, I win! Tails, I don't lose that much!"
• Another chapter is titled, "Few Bets, Big Bets, Infrequent Bets."

The secret to investment success, Pabrai argues, is not to confuse activity with productivity. In a 2002 article in the online journal Motley Fool, he elaborated on this by quoting the 17th century French scientist Blaise Pascal, best remembered for his contributions to pure geometry and inventions such as the syringe, the hydraulic press, and the first digital calculator: "All man's miseries derive from not being able to sit quietly in a room alone."

Mohnish Pabrai CNBC Interview - May 2007---> Video Clip:

 

 

NRI Mohnish Pabrai, who runs Pabrai Investments in California.

He was born im Mumbai, India.

His new book- The Dhandho Investor: The Low - Risk Value Method to High Returns (Hardcover)
by Mohnish Pabrai