हिंदी – How to pick stocks like Mohnish Pabrai

Hello investors, my name is Sagar and in this video we’ll learn how to pick stocks like Mohnish Pabrai If you aren’t familiar with him , Mohnish Pabrai started his IT company in 1990’s. and in 1994 , he received 1 million $ for selling part of his assets. He decided to invest that money in the stock market after reading books of Warren Buffett and Charlie Munger. He decided to invest in the stock market for 30 years and try to achieve 26 % CAGR So why 26 % CAGR ? Simply because 26 % CAGR every three years will double your money. and the next three years , you will double it again so you can see how the compound interest machine works . So he tried doing that and as his results were very good , he started his funds as well and they have been performing very well So how does he pick his stocks ? Let’ start with the first point , which is how he gets his ideas. He always says that you should focus on cloning and that means you should copy ideas from other investors. In India , that’s very easy because when any investor or fund makes a big transaction , you come to know about about it the same day There are many Twitter accounts and websites that can help you track these movements but why does he like to copy ideas ? Let me explain. Mohnish Pabrai doesn’t invest only in India , he also invests in Us and China that means that there are a lot of stocks to cover but he won’t have time to check each one of them so need to apply some filters so at the end we can concentrate on very little stocks So, Mohnish Pabrai likes to see where other investors are investing. In the case of India , it’s very easy because you get to know the same day of transaction. He’s not telling you to blindly follow anyone but it’s a good way to get new ideas. There is also some logic behind this. Let’s imagine that a big investor decides to invest in a company. Unlike a retail investor like you and me , a big investor dedicates all his time to stocks so they have more time to do their research together with experience . That doesn’t mean that they won’t make mistakes but we know that they will do their research Something similar happens with funds which have many research analysts who can help them take decisions So, the first reason is research but there is one more reason. Every investor and fund has their own criteria. Let me give you an example. Let’s imagine that Rakesh Jhunjhunwala is reading about a stock and he goes through his criterias Maybe he likes to see profit growth of 10 % in the last 5 years together with their revenues so, in this case , he reads about the company and applies his filters and he decides to invest in that company So , that was the first filter and then I notice that he has invested in this company and I start reading more about it If I decide to invest in this company , this means it has gone through 2 filters now. The first one was Rakesh Jhunjhunwala’s and the second one will be mine maybe I like to see 10 % growth in free cash flows . So now we have sales and profit filter from Mr. Rakesh Jhunjhunwala and free cash flows with my filter that’s why when you copy ideas , you know they have done their research and they have applied their filters. This doesn’t mean that you should copy them blindly. Now, let’s talk about the second point which is the type of stocks he likes to invest in. If you see investors like Warren Buffett, he likes to invest in financials and consumer companies and he doesn’t like tech so much. So , if you check the past record of Warren Buffett in banks , it has been very good and that’s simply because he knows he understand them really well but if you see the tech sector , he doesn’t like to invest in that. Keep in mind that in the last decade , some of the best performing stocks have been in the tech sector like Amazon and Netflix but Warren Buffett likes to stay away from these. In the case of Mohnish Pabrai it’s bit special and let me explain why It looks like he doesn’t have any favorite sector, he has invested in various sectors such as financials , real estate and tech and that’s simply because if you want to achieve 26 % CAGR , you can’t just invest in 1 or 2 sectors ,there is always some sector which is cheap and you can take advantage of it This was the second point , which was basically which sectors does he like but now let’s talk about the third point , which is his investing strategy You might have heard him saying : you should invest in p/e of 1 stocks . So what does this actually mean ? Let me give an example. You may already know that he has invested in Rain Industries. When he invested in Rain Industries , the market cap was around 1 000 Crores and he thought that after some years, the company will be able to earn 1 000 crores So if we take the price of 1 000 crores and divide it by the earnings of 1 000 crores , it gives us p/e of 1 He always mentions that if you find such companies , you will get great returns. Now , let me give you another example. The second company is Fiat Chrysler and it’s a US company Fiat had a market cap of around 4 – 5 billion $ when he decided to invest in it but he thought that after some years , Fiat will be able to earn 4 – 5 billion $ . So if we take 4 – 5 billion dollars of price and divide by 4 – 5 billion of earnings , it gives us p/e of 1 but why is this strategy so good ? Usually you won’t lose money in those situations and if everything turns out well , you can make up to 500 or 600 % returns . Keep in mind that his goal is to achieve 26 % CAGR and that means you need to find stocks , where the earnings are going to grow rapidly. Many people get confused with this concept , so let me explain. If you look at any company , you won’t find it at the current p/e level . You need to keep that in mind. What happens is that you will be able to find a company with a market cap of 1 000 crores and it will earn 1 000 crores after 4 to 5 years p/e of 1 means that it’s future earning will match the current market cap. Let me give you another example. Let’s say we find a company with a market cap of 500 crores and we think that after 5 years , the company will have 500 crores of earnings so if we divide 500 crores of price by 500 crores of earnings , we get a p/e of 1. This is a classic example. Of course , you need to check the business quality and management as well. The numbers is not everything. but keep in mind that these stocks are not easy to find , you will have to do your research Maybe you might find one stock every 2 to 3 years but you will make a lot of money with that stock I want to add one bonus point here , which is valuations . Every investor has his own technique to value stocks. In the case of Mohnish Pabrai , he follows the same technique of Warren Buffett. Let me explain that. I have made two videos on them so I will leave a card above. Basically , you want to understand how much will the company earn in the future , also known as free cash flows. The reason is very simple. If we decide to buy any business, the only thing we want to know is how much money will go in our pocket at the end of the year. Also keep in mind , that he has his own checklist. When you study any company , you need to read a lot of documents such as analysts reports or interviews but if you have a checklist , you will never forget something important of course, the list will get bigger and bigger as you learn but at least you won’t forget the most important points don’t forget to subscribe for more videos

100 thoughts on “हिंदी – How to pick stocks like Mohnish Pabrai

  1. Excellent communication skills looking forward to work with you and learn from you this valuable information.

  2. Bhai How can i invest foreign country market where can i get demat account?
    I do FNO in zerodha..can i use zerodha for long term is it safe? Or shall i go with Hdfc or kotak securities?

  3. yes. I also want to know what was your journey like from 1st investment and exactly what dis u do to learn all these things.make a video on that.

  4. Sagar me khadim india me fasa hua hu what should I do hold or exit buying price 750 per share I have 20 share

  5. Sir aaj kal quess corporation ki kya problem hai jo lagatar downside chal rha h and plz make an video on quess corporation about its bussiness model etc

  6. Here is one Question
    Lets say we are talking of PE =1 in 5 years but my question is if a company’s market cap is 500 cr and if it makes an earning of 500 cr in 5 years wouldn’t it change the stock price of the same company forcing the market cap to go up. In ideal case PE= 1 can never be achieved

  7. He also gets stock idea from us like you and me. As he says "open source" !. Anyone can mail to him suggesting a stock with proper research report. If he finds it worthy, he may get back to you.

    By the way, i'm a member of this channel from the very beginning. You are doing such a great job and a big thanks for that. Your channel is undervalued now but it will record a all-time-high than your peers!

    Best wishes!! ☺

  8. As alway an excellent video Sagar. But the best part was the explanation of PE 1 stocks. Means, I did listen to Pabrai's many videos but was not exactly understanding this concept. Now it's crystal clear to me. Thanks once again. Dr. Vikas

  9. Aapko kaise pata chalta hai ki konsa investor invest karne ke liye strategy banata hai please give a detail information

  10. Ur videos are very informative. Can u make a video on biocon shares. They are falling even after announcing bonus shares.

  11. Sir P is present market capitalization and E is estimated profit after around 5 years. This ratio should be 1 ?

  12. You can get a lot of PE of 1 in Cyclicals like Metals, Cement too and those of PSU Banks. It is not easy to invest in PSUs or Cyclicals and not easy to get them right entry n Exit. I am very impressed by Basant Maheshwari, he kept buying Bajaj Finance even when it hit 2100 last year, and he said "we own BajFin upto our throat" and I was like why? It is still at 9,10 BV, but look at it now, he simply targets high growth Large Cap companies. Question for Sagar what else he owns apart from BF, DMart and Titan, could you help ??

  13. Great videos!
    Do you know the easiest way for a US retail investor to get access to India stocks (not traded via ADR)?
    QFI? Is there an easy way? Thank you.

  14. സാഗറിന്റെ മലയാളി ഫാൻസ് ആരൊക്കെ ഉണ്ട് ഇവിടെ. 👍👍👍

  15. Sir, since electric vehicle industry is growing can you please review the following stocks. Electrotherm manufactures Yo bikes and Olectra Green Tech manufactures Goldstone buses partnered with BYD.

  16. In today's time. You get a lot of stocks of pe 1 or less. Soon these stocks will become pe 0. These are yes bank. Reliance comn, suzlon and the list can go on and on. Stock market is a gamble and nothing else. If retail investors could pick stocks then what is the need for mutual funds. There is a old saying of the financial world:"if u think u can beat the index then u r in the wrong profession". So dont fool youself, u can do as much research u want but will still never learn the murky dealings of companies behind closed doors. All reports can be fabricated, auditors can be bought, results can be distorted. After all u can do ur research from data available in the open domain or what the company takes out. Invest only thru mutual funds. At least u will not loose ur principal, hopefully. And if u still feel u can be the next warren buffet then my heartfelt condolences to u in advance because fools rush in where even angels dont dare to tread.

  17. Dear sir,
    I really hope that you have reason to make my next stage of bestest thinking level in investment market with the good long and short term returns accordingly. I hope please accept my very small thank you. I appreciate you volunteering your time and energy. I really appreciate all your hard work. God bless you.

  18. Hey Sagar, just wanted to say something. The cash flow metric which Mohnish checks is not FCF but ALWAYS the Operating Cash Flows, I have correlated his interviews and purchases a billion times. This is because FCF is what's left after financing and investing from OCF. But here OCF is the real metric, because theoretically the company can tweak the financing & investing cash flows and thus majority of the OCF will be retained and the company can go to the bank laughing.

  19. How to find stock ? I mean exactly what is the method to filter stocks among sectors which will be more or less pe 1

  20. If we are choosing a company having market cap of 500 crore today and we think in 4-5 years it will deliver an earnings of 500 crore so as earni gs increases with time it's share price will also increase which in turn would appreciate it's market cap so we can never get a PE of 1 don't u think????

  21. Good Content Sagar! You have a nice way of delivering content – to the point, simple and short. Thanks for these videos. Although I know most of these ideas but I still like to watch your videos. 😄

  22. Mohnish has been a disaster in IndiA…..he has lost money in most if his buys in India looks like he is playing some dirty games now knowing a large number of people clone him. Some of his deals were very shady like KRBL, HCG beaware

  23. I like ur videos much because u give simple logic behind any decision of buying or selling stock, stock picking. I sincerely want u to share ur views on idea of direct SIP in shares. Regularly buying shares at fixed intervals.

  24. In India PE1 or much smaller PE stocks are many.. Penny stocks!! sure way of loosing money without any effort. these will be operator driven as well

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