Concentrated Value Investing

Mohnish Pabrai, the Managing Partner of the Pabrai Investment Funds, has outperformed market indices over the last nine years by consistently believing in concentrated value investing. Pabrai likes to hold fewer stocks positioned in industries that he understands well, paying attention to two key variables: the intrinsic value of a business and its current price.

Q:  What is your investment philosophy?

A : Our investment philosophy is derived from the value investment philosophy first developed by Benjamin Graham and later successfully applied by Warren Buffett, Charlie Munger and others. Simply said, I believe in concentrated value investing, which basically translates into buying assets for less than what they are worth and selling them at or close to what they are worth.

Following this philosophy, one does not buy hundreds of stocks, but only a few of them, maybe 10 to 15 to construct the entire portfolio. You feel comfortable holding these positions for multi-year periods, which is what the timeframe might be for the market to recognize the value gap.

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