Looking to speculate in stocks with long-term value? Veteran investor Mohnish Pabrai has two books to recommend.
Chatting with CNBC Pro Talks, Pabrai — a worth investor and disciple of billionaire Warren Buffett — said that “100 to 1 within the Stock Market” is an “extremely well-written” book.
Authored by Thomas Phelps and originally published 50 years ago, the book teaches about find out how to increase wealth one hundredfold through buy-and-hold investing.
Buy-and-hold is a passive investment strategy that involves purchasing stocks and holding them for a protracted time frame, even when there are short-term fluctuations.
The founding father of the Pabrai Investment Funds, which has grown from $100,000 in 1999 to $1.2 million in revenue as of March this 12 months, was discussing his playbook on what to purchase and what to avoid.
One other book for those on the lookout for “competitive advantage or ability to earn superior returns,” he said, is Christopher Mayer’s “100 Baggers” – which talks about corporations that returned $100 for each $1 invested.
Does the business earn very high returns on equity? Can it grow and prosper without the usage of debt? … Can this business reinvest the high returns and equity back at high rates?
founding father of the Pabrai Investment Funds
Investors needs to be asking themselves a number of questions, he said.
“Does the business earn very high returns on equity? Can it grow and prosper without the usage of debt? … Can this business reinvest the high returns and equity back at high rates?”
Find out how to know if an organization’s a ‘homerun’
As an instance his point, Pabrai gave the instance of Starbucks.
“Once they open a store within the U.S., they get their a reimbursement in two years. Once they open a store in China, they get their a reimbursement in 12 to fifteen months,” he said.
These are “astronomical returns on capital,” the veteran investor said, adding that Starbucks had the flexibility to “get their a reimbursement really fast.”
“The business is getting more efficient because most of us don’t go and lounge around Starbucks. We pre-order, just pick our latte and go. And that is much more profitable [for them].”
Pabrai summed up his idea of a “homerun” – he said it’s with the ability to see a transparent “10-, 20-, 30-year runway.”
“What I’m attempting to say is that if I discover a business where the the they’ll grow without the
use of debt, … at a not expensive looking price, then you definitely got yourself a homerun.”
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