Other[Music][Music][Music][Music] ladies and Gentlemen please join me in welcoming Mr monish P for those unfamiliar monish PAB is esteem investor entrepreneur and philanthropist he's the founder and managing partner of P investment funds a global investment firm known for its value oriented investment approach Mr P is also a close friend of legendary investors like Warren Buffett and Charlie manga and he has authored several books including the dandoo investor and mosic perspectives in investing which have become influential tax in the investment world and Beyond his investment acument Mr Pai is a passionate philanthropies he along with his family has established the D Shana Foundation which provides underprivileged students in India with access to worldclass education empowering them to realize their full potential so please join me in giving Mr
Otherpotential so please join me in giving Mr provide a warm welcome we'll start offprovide a warm welcome we'll start offprovide a warm welcome we'll start off with an opening address by Mr P andwith an opening address by Mr P andwith an opening address by Mr P and we'll follow up with questionswe'll follow up with questionswe'll follow up with questions thereafter
Questionerall right well it's a pleasure to be with all of you thanks for having me and hopefully the time difference works out reasonably well it's not an ungodly hour on your end so I just have kind of one thought I wanted to share with you guys and then probably more interested in what you guys want to talk about and in the first Gladiator movie there's an old King who makes an appearance right at the beginning of the movie very briefly and that's Marcus aurelus and his name comes up a few times in Gladiator 2 but Marcus orelus had a very difficult life he spent almost his entire life on the battlefield lots of injuries lots of illnesses lots of adversities and he came up with a philosophy known as the stoic
Questionerwith a philosophy known as the stoic philosophy and which is now there's a philosophy and which is now there's a philosophy and which is now there's a book he wrote called meditations which goes over that philosophy but you know the essence of what I've gotten out of it is you know like there's a quote by him that to encounter Misfortune and overcome it is good fortune so basically what Marcus or is saying is that anytime we run into adversity in life we need to kind of you know man up and you know deal with it and the reward of basically dealing with it is that subsequently that particular adversity is going to be the kernel that leads to Greater height or greater growths Etc and what I have found in my life and I think you know Charlie manga talks about it as well that basically no matter who you are you are going to have a lot of reverses in life a lot of adversity a lot of Misfortune that shows up in unexpected
WarrenMisfortune that shows up in unexpected ways and so it's not like some people are immune to it I mean the case of Charlie he lost his son to leukemia when the child was 11 years old was very traumatic for him there was a botched cataract operation where he lost one eye when he was probably around 60 years old and then he actually subsequently had issues with the second eye as well where he was there was a good chance he would go blind in that as well in both eyes and Charlie's perspective was you always just Soldier on you know these things are just going to keep happening just keep moving and when I look back on my own life and I look at the the big setbacks that came at different points and I look back on what the impact of those setbacks was I cannot point to a single one that did not lead to Greater growth and
Otherdid not lead to Greater growth and better outcomes in the future so it's webetter outcomes in the future so it's webetter outcomes in the future so it's we cannot see it at the time it's happeningcannot see it at the time it's happeningcannot see it at the time it's happening we also don't know how exactly thiswe also don't know how exactly thiswe also don't know how exactly this Misfortune is going to turn into a goodMisfortune is going to turn into a goodMisfortune is going to turn into a good fortune but my viewpoint now is thatfortune but my viewpoint now is thatfortune but my viewpoint now is that basically just have Blind Faith in it sobasically just have Blind Faith in it sobasically just have Blind Faith in it so basically if I hit some adversity Ibasically if I hit some adversity Ibasically if I hit some adversity I actually now just am pretty laid backactually now just am pretty laid backactually now just am pretty laid back about it in the sense that I say okay Iabout it in the sense that I say okay Iabout it in the sense that I say okay I don't know how this is going to bedon't know how this is going to bedon't know how this is going to be helpful but I know it's going to behelpful but I know it's going to behelpful but I know it's going to be helpful and so I just kind of go withhelpful and so I just kind of go withhelpful and so I just kind of go with that and so far there has not been athat and so far there has not been athat and so far there has not been a single case where that has not been thesingle case where that has not been thesingle case where that has not been the case for me and in an investing contextcase for me and in an investing contextcase for me and in an investing context this happened at least two times therethis happened at least two times therethis happened at least two times there were two major incidents that took placewere two major incidents that took placewere two major incidents that took place in my investingin my investingin my investing career which were major reverses thecareer which were major reverses thecareer which were major reverses the first was uh before just before I hadfirst was uh before just before I hadfirst was uh before just before I had started P funds in kind of the 1998 1999started P funds in kind of the 1998 1999started P funds in kind of the 1998 1999 time frame where you know the boom wastime frame where you know the boom was
Othertime frame where you know the boom was up in a big way the bust of 2000 had notup in a big way the bust of 2000 had notup in a big way the bust of 2000 had not yet come and there was this a big frenzyyet come and there was this a big frenzyyet come and there was this a big frenzy going on and I got carried away in thatgoing on and I got carried away in thatgoing on and I got carried away in that frenzy at as well and I had investedfrenzy at as well and I had investedfrenzy at as well and I had invested about $4.5 millionabout $4.5 millionabout $4.5 million in a startup that would eventually go toin a startup that would eventually go toin a startup that would eventually go to zero out of the 4 half million about 2zero out of the 4 half million about 2zero out of the 4 half million about 2 million was my own money and about 2 andmillion was my own money and about 2 andmillion was my own money and about 2 and A5 million was from Venture capitalistsA5 million was from Venture capitalistsA5 million was from Venture capitalists and other investors and so on and it wasand other investors and so on and it wasand other investors and so on and it was just terrible I mean to to go throughjust terrible I mean to to go throughjust terrible I mean to to go through that lay off everyone and I look back wethat lay off everyone and I look back wethat lay off everyone and I look back we just made so many mistakes but whatjust made so many mistakes but whatjust made so many mistakes but what happened with that experience was thathappened with that experience was thathappened with that experience was that when I later was switching to startingwhen I later was switching to startingwhen I later was switching to starting PAB funds and was going to invest in thePAB funds and was going to invest in thePAB funds and was going to invest in the public markets prri fund started in Julypublic markets prri fund started in Julypublic markets prri fund started in July 99 so we were still about 9 months away99 so we were still about 9 months away99 so we were still about 9 months away from the crash but because of myfrom the crash but because of myfrom the crash but because of my experience with the Doom I was maybeexperience with the Doom I was maybeexperience with the Doom I was maybe just about 6 to9 monthsjust about 6 to9 monthsjust about 6 to9 months ahead of the public markets in terms of
Otherahead of the public markets in terms of knowing that this was a bubble and it was a big bubble and it was not going to end well and so when a BRI fund started in mid 99 I basically did not I my my background until then was all Tech and I basically invested in almost no Tech at the same time in the all these techs and Dooms are becoming very valuable or very overpriced basic brick and motor stocks in the economy were becoming very cheap so if you were willing to look in a more boring benign part of the market there were great opportunities there and so that's kind of what a funds did and my view at that time was that the major indices the NASDAQ the S&P and da Etc were not going to do well for a while and in fact they could go down a lot and so almost the entire portfolio was anomalies you know special situations and things and basically I would say PAB
Otherand things and basically I would say PAB funds in the first 8 years from 99 to 2007 we had no down years we had around mid-30s annualized returns before fees and probably high 20s analyze returns after fees and the NASDAQ had crashed and burned and the S&P was down and the da was down so while we had climbed and done very well all these industries everything had you know gone down so I was by 2007 I was managing 600 odd million and we had made hundreds of millions in in in that approach so if I looked at the 4 and 2 million loss and the hundreds of millions of gain you know it was very clear that that adversity at that time which was very painful actually had a silver lining and kind of helped out and went from there and then this happened again in the financial crisis from 2007 to 2009 for funds went down like 2/3 I mean the markets were down about 40%
Todd Combsmean the markets were down about 40% because we were concentrated Etc we and some just dumb mistakes we were down 65 67% and again basically that adversity led to a lot of rethink and some very great Investments which I wouldn't have made if hadn't happened and again helped me grow as an investor and we did very well after 2009 as well so given the station in life and the position in life you're in right now where you have you know maybe eight decades or something ahead of you I think it's a very good model basically to just have this hack in your mind that whatever bad things show up or bad things happen are going to lead to good things and just like what Charlie says just Soldier on and those good outcomes will eventually reveal themselves so with that maybe I can you know open up to questions and see what you guys want to talk about
Questionersee what you guys want to talk about yeah that sounds good we actually have some prepared questions I think it's it's really act given that you talked about your in initial experience about loss having a silver lining and I think it's really act given the stock market environment we in with deep seat AI actually causing a serious stock market correction we just wondering about your perspective on it do you think it's an overdue correction or do you think it's actually an opportunity to invest into the market
OtherI didn't get the full question are you talking about the current situation
Questioneryeah the current situation
Otherthe current situation I I find I mean I that where markets are at and what markets are likely to do usually is a Fool's errand it's kind of not usually worth thinking too much about that we get to some points in time in markets where it can get obvious at least to
Otherwhere it can get obvious at least to some people so for me it was it was some people so for me it was it was some people so for me it was it was obvious in 99 that this was going to end obviously in 99 that this was going to end obviously in 99 that this was going to end badly I think that was pretty obvious to badly I think that was pretty obvious to badly I think that was pretty obvious to me at that time but for example in 2007 me at that time but for example in 2007 me at that time but for example in 2007 I was clueless about the crash that was I was clueless about the crash that was I was clueless about the crash that was imminent and you know pretty much just imminent and you know pretty much just imminent and you know pretty much just caught blindsided like a lot of other caught blindsided like a lot of other caught blindsided like a lot of other people and I think my current view on people and I think my current view on people and I think my current view on the market is that if I look at the market is that if I look at the market is that if I look at something like the S&P 500 I I would say something like the S&P 500 I I would say something like the S&P 500 I I would say that probably for the next decade maybe that probably for the next decade maybe that probably for the next decade maybe 10 to 15 years I don't think the S&P 10 to 15 years I don't think the S&P 10 to 15 years I don't think the S&P will do more than 3 to 5% a year over will do more than 3 to 5% a year over will do more than 3 to 5% a year over that period and now now whether it goes that period and now now whether it goes that period and now now whether it goes down a lot and then kind of you know has down a lot and then kind of you know has down a lot and then kind of you know has robust returns after that or whether it robust returns after that or whether it robust returns after that or whether it flatlines you know kind of how that flatlines you know kind of how that flatlines you know kind of how that plays out I have no idea and I'm not plays out I have no idea and I'm not plays out I have no idea and I'm not even sure whether my hypothesis of 3 to even sure whether my hypothesis of 3 to even sure whether my hypothesis of 3 to 5% is going to end up being accurate or 5% is going to end up being accurate or 5% is going to end up being accurate or inaccurate or where that ends up I'm not inaccurate or where that ends up I'm not
Todd Combsinaccurate or where that ends up I'm not particularly making bets based on that so the BET The Bets I'm making for for the most part I mean so for example I have no Tech I have nothing related to AI for example and they're very basic bets there I think they should not be correlated much with the market anyway so whether the market goes up or down or flat I think that these businesses eventually will do as well or poorly in terms of returns as the underlying business does and so I think these are undervalued bets and they good bets and sure some of them uh will prove to be incorrect but I think as a basket hopefully we'll be in the right place so that's kind of how I and I think like for most investors and especially for all of you I think it's not just not worth trying to figure out the market it's too complicated to try and do that it's a too many variables right that
Questionerit's a too many variables right that makes a lot of sense uh another question that we had is that traditional value investors have had a difficult period over recent years as large Tech names have contributed most to the market performance and legends and value investing have suffered from prol long periods of underperformance in given that context do you think that value investing Styles should rotate or do you think value investors need to adapt to a new reality
Warrenit is a mistake to classify Investments as value or growth or you know things along those lines so all intelligent investing is value investing and it's every investment you make the intrinsic value of that investment is the sum of all the future cash that business is going to produce between now and Judgment Day discounted back to current dollars at some reasonable interest rate
Warrendollars at some reasonable interest rate and so it doesn't matter whether we're talking about Nvidia or we're talking about some oil company or whether we're talking about Burkshire haway if you have a way to figure out the cash flows of all those three different types of businesses from now to Judgment Day and then discounted back it would become obvious which is the best investment so it's possible Nvidia could be a great value investment it's also possible it would be could be ridiculously overvalued it's all a matter of what those future cash flow streams look like and so you know I mean I think I would say what what we' have seen in the last few years to me at least it seems to indicate that there is plenty of euphoria amongst the large Tech names you know the Magnificent s and so on and my view on those Tech names is that the next maybe decade or so may not be such
Todd Combsnext maybe decade or so may not be such a great place to invest in them but I could be wrong on that and whether they are a great place to invest or not depends on the cash flow streams that come out of those businesses so that's where the rubber rubber meets the road these are very dominant franchises extremely good management teams huge addressable markets so they've got a lot of Tailwinds but at the same time you're not investing in them at three times earnings you know so to me they fall into the too hard pile because I'm not able estimate the future cash flows of those businesses I don't know what Nvidia will produce in cash in 2030 for exam and that would be a pretty critical number try to figure out whether it's worth investing in Nvidia or not so basically the way I approach the problem is I limit myself to businesses where
Todd Combsis I limit myself to businesses where either I can clearly see what the feither I can clearly see what the feither I can clearly see what the f future cash flows are and discount thosefuture cash flows are and discount thosefuture cash flows are and discount those back or they fall into a category whereback or they fall into a category whereback or they fall into a category where it doesn't matter and mostly most of myit doesn't matter and mostly most of myit doesn't matter and mostly most of my investments fall into the latterinvestments fall into the latterinvestments fall into the latter category that it doesn't matter what Icategory that it doesn't matter what Icategory that it doesn't matter what I mean by that is that I may investmentmean by that is that I may investmentmean by that is that I may investment about six years ago in a company inabout six years ago in a company inabout six years ago in a company in Turkey I've talked about this a fewTurkey I've talked about this a fewTurkey I've talked about this a few times a company in Turkey which has atimes a company in Turkey which has atimes a company in Turkey which has a few different businesses but their mainfew different businesses but their mainfew different businesses but their main business is leasing out warehouses verybusiness is leasing out warehouses verybusiness is leasing out warehouses very simple business they're the largest kindsimple business they're the largest kindsimple business they're the largest kind of renter of warehouses you knowof renter of warehouses you knowof renter of warehouses you know landlord of warehouses in in Turkeylandlord of warehouses in in Turkeylandlord of warehouses in in Turkey approximately 11 or 12 million squareapproximately 11 or 12 million squareapproximately 11 or 12 million square foot footprint and at the time I hadfoot footprint and at the time I hadfoot footprint and at the time I had invested the day I first met them theinvested the day I first met them theinvested the day I first met them the market cap was 16market cap was 16market cap was 16 million6 $ 166 million us and I was toldmillion6 $ 166 million us and I was toldmillion6 $ 166 million us and I was told the liquidation value was like 600 tothe liquidation value was like 600 tothe liquidation value was like 600 to 800 million it was relatively easy to800 million it was relatively easy to
Questioner800 million it was relatively easy to calculate the liquidation value because they were like a bunch of warehouses you could pretty much go to any realtor any commercial realtor in Istanbul and probably would not take them that much time to give you kind of valuations on those properties and there was about 200 million of debt so the properties were probably had a value of about a billion I 800 million to a billion and you take the debt out you're like left with 600 to 800 million of equity value and your market cap is 16 million so future cash flow streams of that business first of all were very predictable because they're renting warehouses and they got leases and so one could get some view on that but one didn't even need to get a view on that because we were less than 3% of liquidation value and then I thought that we may not be able to get
Questionerthought that we may not be able to get much stock because this might bequmuch stock because this might bequmuch stock because this might bequ liquid Etc but turkey is a market filledliquid Etc but turkey is a market filledliquid Etc but turkey is a market filled with gamblers the average stock at thatwith gamblers the average stock at thatwith gamblers the average stock at that time and maybe even to today cycledtime and maybe even to today cycledtime and maybe even to today cycled through its entire float in less than 20through its entire float in less than 20through its entire float in less than 20 days so huge trading volumes which meansdays so huge trading volumes which meansdays so huge trading volumes which means that everyone was a renter of the stockthat everyone was a renter of the stockthat everyone was a renter of the stock there were no real owners for about $8there were no real owners for about $8there were no real owners for about $8 million or so we were able to getmillion or so we were able to getmillion or so we were able to get onethird of the company which actuallyonethird of the company which actuallyonethird of the company which actually stunned me and at that time and evenstunned me and at that time and evenstunned me and at that time and even today there was a mass Exodus of foreigntoday there was a mass Exodus of foreigntoday there was a mass Exodus of foreign investors leaving turkey because theinvestors leaving turkey because theinvestors leaving turkey because the currency was so unstable and inflationcurrency was so unstable and inflationcurrency was so unstable and inflation was so high my view on that was that youwas so high my view on that was that youwas so high my view on that was that you know this is Prim land and Istanbul aknow this is Prim land and Istanbul aknow this is Prim land and Istanbul a warehouses land and cement and concretewarehouses land and cement and concretewarehouses land and cement and concrete andandand steel all of those factors are inflationsteel all of those factors are inflationsteel all of those factors are inflation indexed so it doesn't really matter whatindexed so it doesn't really matter whatindexed so it doesn't really matter what the currency is those warehouses have athe currency is those warehouses have athe currency is those warehouses have a value they have kind of a global valuevalue they have kind of a global value
Questionervalue they have kind of a global value so we invested and basically now that business has a market cap of over a billion US Dollars the Turkish leader has been decimated but it didn't really matter to us because I was looking at everything in dollars and I mean the stock has gone up what know 40 50x or whatever and it's still undervalued because now the liquidation value is north of 2 billion that's an example where we didn't really need to invest really kind of figure out the cash flows but that business would have been relatively simple to figure out the cash flows it wouldn't have been that hard I didn't bother to do it because I just said okay discount to nav is so so high that the other metric is not relevant what we want to do as investors is we want to reject all Investments unless they fall into a category where nothing makes sense so when you run into
Questionernothing makes sense so when you run into Investments when nothing makes sense like I would say that our Ras investment when we were making it it made no sense at all why would something like that trade like that why would the Insiders not buy in the stock there were a lot of questions we didn't really understand but when things don't make sense at all and the Dynamics are such that they are likely to work out in your favor that's when you need to go all in because that won't happen very often so I think the experience for Value investors let's say in the last 10 years may not be that great if they were focused on kind of you know non-tech traditional value if you will but as long as there you know those cash flow streams are there and all that is there I mean markets historically have easily gone to 10 20 30 years of doing nothing or
Questioner10 20 30 years of doing nothing or certain ASA classes doing nothing socertain ASA classes doing nothing socertain ASA classes doing nothing so that's pretty much power for the core sothat's pretty much power for the core sothat's pretty much power for the core so we really cannot make any anywe really cannot make any anywe really cannot make any any assessments of some asset class orassessments of some asset class orassessments of some asset class or whatever based on five or 10 years ofwhatever based on five or 10 years ofwhatever based on five or 10 years of data so that's how I look at it rightdata so that's how I look at it rightdata so that's how I look at it right that makes sense and I think it's athat makes sense and I think it's athat makes sense and I think it's a prime example of a thing that you haveprime example of a thing that you haveprime example of a thing that you have which is hits I win Tails I don't losewhich is hits I win Tails I don't losewhich is hits I win Tails I don't lose much I was just wondering um on themuch I was just wondering um on themuch I was just wondering um on the contrary have you ever encountered ancontrary have you ever encountered ancontrary have you ever encountered an investment where this principle hasinvestment where this principle hasinvestment where this principle has filled you and what went wrong in anfilled you and what went wrong in anfilled you and what went wrong in an instance
Questionerwell we have a lot ofInvestments that don't work out in spiteInvestments that don't work out in spiteInvestments that don't work out in spite of our best intentions and in spite ofof our best intentions and in spite ofof our best intentions and in spite of being careful before we invest and sobeing careful before we invest and sobeing careful before we invest and so John Templeton used to say that the veryJohn Templeton used to say that the veryJohn Templeton used to say that the very best investment analyst is going to bebest investment analyst is going to bebest investment analyst is going to be wrong one out of three times and most ofwrong one out of three times and most ofwrong one out of three times and most of us are going to be wrong at least halfus are going to be wrong at least halfus are going to be wrong at least half the time so if I go back and look atthe time so if I go back and look at
Otherthe time so if I go back and look at every thing that didn't work it's a veryevery thing that didn't work it's a veryevery thing that didn't work it's a very long list of course the there is anlong list of course the there is anlong list of course the there is an asymmetry and the asymmetry is extremelyasymmetry and the asymmetry is extremelyasymmetry and the asymmetry is extremely lopsided in Venture investing where whenlopsided in Venture investing where whenlopsided in Venture investing where when you lose money you lose 1X of what youyou lose money you lose 1X of what youyou lose money you lose 1X of what you invested but when youinvested but when youinvested but when you win you might winwin you might winwin you might win 10,000x of what you invested or 100x or10,000x of what you invested or 100x or10,000x of what you invested or 100x or THX so in that Dynamic of ventureTHX so in that Dynamic of ventureTHX so in that Dynamic of venture investing what is importantinvesting what is importantinvesting what is important is not so much avoiding the losers as itis not so much avoiding the losers as itis not so much avoiding the losers as it is to make sure the winners are in youris to make sure the winners are in youris to make sure the winners are in your portfolio I mean that's a I think that'sportfolio I mean that's a I think that'sportfolio I mean that's a I think that's a very difficult game I think for mea very difficult game I think for mea very difficult game I think for me especially I think that Ventureespecially I think that Ventureespecially I think that Venture investing be a very difficult game butinvesting be a very difficult game butinvesting be a very difficult game but there are some firms and somethere are some firms and somethere are some firms and some individuals who are exceptional at thatindividuals who are exceptional at thatindividuals who are exceptional at that game and who do really well at it I meangame and who do really well at it I meangame and who do really well at it I mean uh to give you an uh give you an exampleuh to give you an uh give you an exampleuh to give you an uh give you an example I was watching a video recently withI was watching a video recently withI was watching a video recently with Bill Gurley who's a very successfulBill Gurley who's a very successfulBill Gurley who's a very successful venture capitalist at Benchmark
Questionerventure capitalist at Benchmark Benchmark capital capital and you know they're very focused on trying to get these 10,000 X's or th000 x's in their portfolio and they've got a lot of Acumen which allows them to see that but he said that when the Google guys came to see them and at that time I think Google had less than 20 people on their team they turned down the investment they could see many good things about it but they also had a lot of red flags that were coming up with the Google nuances you know you had two PhD computer science students computer science grad students who both wanted to be CEO uh they weren't interested in bringing an outside CEO they were hardcore nerds they were going to a space where there were a lot of players already Yahoo and alav Vista and all that and on and on and so they said that it wasn't like it was close for them he
Questionerit wasn't like it was close for them he said it was pretty much a no-brainer for our partnership we all looked at each other and said okay this is easy pass and then he said that seoa and John door both invested in Google at that time the pitch that seoa John door heard was the same pitch that Benchmark heard and Bill Gurley says that they were able to somehow sift through all that data in a little bit different way than they did and they ended up with Google in their portfolio and they made the 10,000x and such so when we look at some Venture Capital firms like especially let's say seoa capital for example they've shown an ability to kind of repeatedly be able to do this you know decade after decade it's quite stunning actually they've got some DNA magic DNA which allows them to do that and I think for us in the you know public markets value investing
Questionerknow public markets value investing
QuestionerWorld we're not going to get 10,000 bagers and 100% losses are very expensive so the focus has to be very heavily on trying to minimize the downside because we know we're not going to get massive you know we may once in a while get something which ends up being a 10x or 20x or something but most of the time it's going to be a game of singles and so when I look at PAB funds you know we made a lot of mistakes during the financial crisis 2007 going into the financial crisis I had a significant exposure to levered financial institutions I mean kind of the worst place to be at that time and we had a couple of zeros you know we took a straight 100% loss on a couple of Investments at that time and there's been plenty of losers along the way but you know like Charlie used to say to me that you want to learn from your
Todd Combsthat you want to learn from your mistakes but you don't want to learn too much so you have to look at your mistakes you have to study what happened and then you have to move on so it's not like we're going to get to a situation where I mean when I look at my portfolio today I could not point to a particular stock that I think will not work but I know that as a basket some of them will not work and in due course I'll figure out it'll become obvious which ones but it's not obvious today and so so that's the nature of it and that's why we we need a basket and we kind of take it from there on that note we'll be opening up questions to the audience if there's anyone who has a question please raise your hand and we'll bring the mic to you thank you for taking the time to speak to us today my
Questionerquestion is would you think the most overlooked principle or skill is when it
Questioneroverlooked principle or skill is when it comes to investing what you think people aren't doing enough of now
Questionerwell the number one skill to be a good investor is patience and extreme patience you know so if you are the kind of person who loves to watch paint dry then the investing business is for you and especially in public market investing you know things can take many years to play out even our Ras investing which was so extremely undervalued did nothing for a couple of years I mean you know to have that type of distortion in the market last for all these years is really quite remarkable but that's the nature of Investments is that we're going to see our patients tested and so patience is very important I think the second thing that's really important is that you should be able to have the thesis of your investment in three or four sentences why is this investment
Todd Combsfour sentences why is this investment going to work what are drivers and it should be something that you should be able to explain to a 10 or 12 year old without losing them and without losing their attention span so it's very important to be very patient and it's very important to have extreme simplicity so investment ideas can be complicated but once you've done the work that complexity should be gone and replaced with something relatively simple and you know it kind of becomes easy that way you know sometimes I get asked like Okay so this our investment in Turkey Ras which is now a very large portion of the portfolio how did you have the conviction well it's the easiest stock to have conviction in because my reference point is what's the liquidation value I mean the intrinsic value is higher than that but we haven't even gotten to liquidation value so when
Questionereven gotten to liquidation value so when we get to a full liquidation value then we can look at what is the intrinsic value so it's easy to hold the stock if it's below liquidation value and so the only thing I'm really I need to really do in terms of the business is have an understanding of what liquidation value is and that's it and so the thesis is very simple and conviction to hold it is also very simple because everything is obvious so if you don't have extreme Clarity and extreme Simplicity in your thesis then when the stock drops 50% which a lot of stocks will drop 50% after you buy them you would not have the patience then to hold it because you would start second guessing all kinds of things but if you have a hardcoded you know thesis in your head which you think is high probability and if that thesis is intact after the drop the conviction
Otherintact after the drop the conviction stays intact as well so I think those are the important things is to extreme patience coupled with extreme Simplicity
QuestionerI have a question regarding your funds investment thesis and how sort of evolved over time do you sort of have this conviction of certain attitude invest in and that put time of fun or or sort of dynamic over time sort of the side to change some your thes my mandate
Othergives me a lot of flexibility I mean the the funds don't don't lever themselves they don't go into options or derivatives we don't short anything so outside of that in terms of long only mostly equities or all equities it's a pretty wide mandate and within that mandate there is no strategy it's opportunistic so we look at you know what makes the most sense what are areas of the market that are hated and unloved for example
Warrenare hated and unloved for example generally speaking like like Charlie used to say you should go fishing with the fish are and so don't go fishing where all the fishermen are go fishing where there are no fishermen and a lot of fish and that would be another reason to not spend too much time on the Magnificent 7 because there's a lot of fishermen there so generally speaking you want to be where there's a lot of opportunity and no one's interested and that was the situation and that probably still is a situation in Turkey so that's why we I decide I've been making trips every year to Turkey and we have very happy with the exposure we have there because again it was irrational because of the extreme fear and hatred that was happening still happening there
QuestionerWarren Buffett I like to say has a Swiss army knife approach to investing so even though Charlie Munger
Questionerinvesting so even though Charlie Munger worked on him for several decades to basically buy the great businesses and even pay up for the great businesses which burer does do and it's like the bulk of what they do Warren still enjoys his weird special situations and workouts and all of that so for example when he made the BET of the five Japanese trading companies and the way he made that bet where he borrowed the entire amount in Yen non recourse and the interest rate on that was half a percent a year and these stocks had a 8% dividend yield so pretty much without putting up Equity he was basically you know significantly cash flow positive after interest payments and so on and in fact then after that they doubled their dividends so in fact the yield on his investment original investment went to 15% just dividends you know and then of
Questioner15% just dividends you know and then of course the stock prices doubled as well so it was a huge home run but it's because of his kind of Swiss army knife approach that he's able to look at a lot of things and slice and dice them a different way so I think as an investor being flexible reading a lot looking at what's happening and at some point some things may show up on the radar where you're saying okay this looks truly exceptional there's no fishermen here there seem to be a lot of fish here and it looks like a good bet and so then you can you know go for it so that's the approach there's no strategy as such so I have a question more on uh your your portfolio and how so I understand that you mentioned that for you know individual stocks you look at like the competitive mode and the business itself but across your whole portfolio how do you balance across all your
Questioneryou balance across all your invest and I guess how do you manage invest and I guess how do you manage invest and I guess how do you manage risk across all your Investments risk across all your Investments risk across all your Investments considering that you know in very big considering that you know in very big considering that you know in very big mul manager hge funds now that um know mul manager hge funds now that um know mul manager hge funds now that um know draw down is looked at quite closely for draw down is looked at quite closely for draw down is looked at quite closely for for each like portfolio so how you for each like portfolio so how you for each like portfolio so how you manage across all your investment in the manage across all your investment in the manage across all your investment in the sense
Otheryeah that's a great question and it's actually a dilemma we have faced it's actually a dilemma we have faced it's actually a dilemma we have faced recently in sort of an extreme way so recently in sort of an extreme way so recently in sort of an extreme way so going back to our beloved Turkish Reit going back to our beloved Turkish Reit going back to our beloved Turkish Reit we own a third of of the business but we own a third of of the business but we own a third of of the business but 20% of that business is in one fund it's 20% of that business is in one fund it's 20% of that business is in one fund it's our offshore fund which has about 400 our offshore fund which has about 400 our offshore fund which has about 400 odd million in assets and so if we look odd million in assets and so if we look odd million in assets and so if we look at the 20% of you know something north at the 20% of you know something north at the 20% of you know something north of a billion more than half of that of a billion more than half of that of a billion more than half of that portfolio is a single Turkish stock and portfolio is a single Turkish stock and portfolio is a single Turkish stock and we have another stock in Turkey which we have another stock in Turkey which we have another stock in Turkey which has also gone up and also become sizable has also gone up and also become sizable has also gone up and also become sizable I think that's like 17 or I think that's like 17 or I think that's like 17 or 18% of the portfolio they're both very
Other18% of the portfolio they're both very undervalued so doesn't really make sense to trim those so we are talking about like kind of more than two-thirds of the portfolio in two two businesses in Turkey then we have in the same fund a couple of bets in the coal business which are around 15 20% of assets so by the time you you know look at the two Turkish businesses and the two coal businesses you're we are already at about 90 plus% of the portfolio and most of my investors individual High net worth families we don't have really institutions and such so what I told my investors is I said look if you have an investment in this fund and the total amount you have invested in the fund is less than 1/5 of your total net worth then if I were you I would just do nothing just let it be because that what that would mean is that on a lookth
Otherthat would mean is that on a lookth through basis no single investment inthrough basis no single investment inthrough basis no single investment in the fund is more than 10% of their netthe fund is more than 10% of their netthe fund is more than 10% of their net worth which is pretty reasonableworth which is pretty reasonableworth which is pretty reasonable concentration and I said that if it'sconcentration and I said that if it'sconcentration and I said that if it's more than 1 then you should trim mymore than 1 then you should trim mymore than 1 then you should trim my recommendation would be that you shouldrecommendation would be that you shouldrecommendation would be that you should withdraw some of your Holdings from thatwithdraw some of your Holdings from thatwithdraw some of your Holdings from that fund to bring it within that sort of afund to bring it within that sort of afund to bring it within that sort of a limit and you know you know invested inlimit and you know you know invested inlimit and you know you know invested in something non-correlated so I told themsomething non-correlated so I told themsomething non-correlated so I told them that I wasn't going to kind of adjustthat I wasn't going to kind of adjustthat I wasn't going to kind of adjust the portfolio they needed to adjust onthe portfolio they needed to adjust onthe portfolio they needed to adjust on their end knowing what concentrations wetheir end knowing what concentrations wetheir end knowing what concentrations we have and we saw some investors act onhave and we saw some investors act onhave and we saw some investors act on that which is good and such theyve kindthat which is good and such theyve kindthat which is good and such theyve kind of you know adjusted things to kind ofof you know adjusted things to kind ofof you know adjusted things to kind of bring it within what they feelbring it within what they feelbring it within what they feel comfortable with and so we spent a lotcomfortable with and so we spent a lotcomfortable with and so we spent a lot of time now giving a lot of data andof time now giving a lot of data andof time now giving a lot of data and transparency to our investors on thetransparency to our investors on thetransparency to our investors on the degree of con concentration and how theydegree of con concentration and how theydegree of con concentration and how they can you know mitigate some of it and so
Questionercan you know mitigate some of it and so you know it doesn't make sense for us to trim something that is sitting at less than half of liquidation value that just doesn't make much sense to do especially because good investment ideas are very rare and hard to find and I take the example of the Walton family Sam Walton so Sam Walton when the IPO when Walmart had its IPO in 1970 or there out his family owned about 36% of Walmart at that time and he had already at that well before the IPO he had already transferred the shares to his kids so basically the when when Sam Walton passed away the shares were already in the hands of the Next Generation and they didn't have any taxes or anything to pay it just passed on to the next Generation which was very efficient from an estate planning perspective if we look at entire Walton family stake in
Questionerlook at entire Walton family stake in Walmart today it is actually higher than it was at the time of the IPO the entire walon family stake today is in the kind of low 40% range so they've actually gone from kind of mid-30s to low 40s right and what that means is that probably the overwhelming portion of the net worth of that family is in a single stock it's in a stock where Sam Walton hasn't been around running that place for more than 30 years and there are no family members in senior positions at Walmart and there's maybe just one or two of them on the board so they don't have control from board perspective and basically they're extremely concentrated and so I told my investors that we are not founder or part of the management or on the board of the large position we have in Turkey of RAR but I think of it as a family business I think of it like Walmart I
Todd Combsbusiness I think of it like Walmart I business I think of it like Walmart I think it's a very good business because think it's a very good business because think it's a very good business because I've watched it for five or six years I I've watched it for five or six years I I've watched it for five or six years I think it's run by exceptional capital think it's run by exceptional capital think it's run by exceptional capital ators very good assets very good Capital ators very good assets very good Capital ators very good assets very good Capital allocation and don't really see anything allocation and don't really see anything allocation and don't really see anything going on there that gives me a pause to going on there that gives me a pause to going on there that gives me a pause to do something else and so the way to do something else and so the way to do something else and so the way to build wealth is to concentrate all the build wealth is to concentrate all the build wealth is to concentrate all the billionaires you see around you only got billionaires you see around you only got billionaires you see around you only got there because they were concentrated and there because they were concentrated and there because they were concentrated and like manger used to say there's very few like manger used to say there's very few like manger used to say there's very few times in your life that you're going to times in your life that you're going to times in your life that you're going to get a trip to the pie counter and when get a trip to the pie counter and when get a trip to the pie counter and when you get a trip to the pie counter you you get a trip to the pie counter you you get a trip to the pie counter you need to load up big time on the pie you need to load up big time on the pie you need to load up big time on the pie you don't need to just take one bite of the don't need to just take one bite of the don't need to just take one bite of the pie you need to load up because it's not pie you need to load up because it's not pie you need to load up because it's not going to happen that many times I don't going to happen that many times I don't going to happen that many times I don't expect to ever find another stock at 3% expect to ever find another stock at 3% expect to ever find another stock at 3% of liquidation value in my lifetime so of liquidation value in my lifetime so of liquidation value in my lifetime so that's the way it is that's how we think
Warrenthat's the way it is that's how we think about portfolio concentration all that we don't have any Hedges or anything we're not going to trim positions just because they get too large just like M the Walton family has not trimmed because Walmart got too large they bought stock bought St since the IPO
Questionerthank you for your time today my question is relating to your book D investor in light of changes in like Financial landscape and given that dando investor was written quite a while ago you have any additional insights or different opinions that on on on that you have written in a book if it was written today
Warrenyeah I mean I think what happens one of the good things about investing is that all knowledge is cumulative so unlike for example if I was a basketball player for example you know I would probably Peak maybe early 30s at the most or something and then
Other30s at the most or something and then would decline after that in the investing business like Charlie used to say Warren is still getting better in his 90s so this is a wonderful Pursuit because as long as this much of your body functions you can keep getting better you just need you know the top kind of 9 or 12 Ines of your body to function well and then the rest is fine and then the top N9 or 12 in can function well for your whole life hopefully and what happens over time is that you obviously see things and learn things and you learn a lot from the mistakes the winners don't teach you much but the mistakes teach you a lot and over time you parent recognition and things and you you tend to get better so yes if I were to do a second edition of the dandoo invest there would be two or three changes I would make to it one of the changes I
Otherwould make to it one of the changes I would make is that true wealth is going to come from a long-term buy and hold of exceptional businesses bought at reasonable prices held for a long time so that has to always be kind of the number one goal is our hunt for these great gems now we can couple that with other things like War six Swami knife and different things but the core has to be that's kind of like the anchor the anchor of the portfolio has to be great businesses run by great people with good capital allocators and just you know great economics and you know hold them for a long time so I think that's something I would emphasize a lot you have a gifted investor in the UK who hung up his boots but is beating everyone after hanging up his boots which is Nick sleep and it's difficult to get Nick sleep to come out and talk to people but maybe you can nudge him
Questionerto people but maybe you can nudge him and see if he's interested and you know when Nick shut down his fund he basically put all his money into three stocks one3 each one3 into Amazon one3 into Costco and one3 into Berkshire and I think his fund shut down in 2012 or 2014 thereabouts and I think he trounced the S&P and everything else since then doing nothing no work involved in the portfolio at one point he got concerned because Amazon went up so much that it became you know kind of 60% of the pie and he cut the Amazon position in half and bought what I consider to be a terrible business as a fourth position that fourth position didn't do well and he would have been better off just you know sticking to the ones he had actually originally selected even with that mistake he's still done very well so it's a very forgiving business from that point of view so
Otherbusiness from that point of view so that's what I would change the focus of the book to basically say that the real thrust of the effort needs to be to get to an ownership position of great businesses that you can hold for a long time so we don't need to be founders of Walmart and we don't need to be founders of Amazon to do well like Mr Bezos or Sam Walton it was possible to write their code Tales even having a 100 shares or th shares and so that's the beauty of the equity markets is that you can have in fact the smaller Advent investor has a big Advantage because they can go anywhere and do anything which is a huge Advantage size becomes a big negative and so that's what I would those are the changes I would make is a big emphasis on Buy on hold and couple that with a Swiss army knife for other things that look interesting with that
Otherthings that look interesting with that we have come to the end of the firesightwe have come to the end of the firesightwe have come to the end of the firesight chat with monish P once again we wouldchat with monish P once again we wouldchat with monish P once again we would like to thank monish for his time andlike to thank monish for his time andlike to thank monish for his time and insights on investing and life ininsights on investing and life ininsights on investing and life in general let's give a huge round ofgeneral let's give a huge round ofgeneral let's give a huge round of applause for monish again
Otherwell thank you so much it was a real pleasure and Iso much it was a real pleasure and Iso much it was a real pleasure and I wish you all the best bye
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