Purchase The Dhandho Investor via Amazon (affiliate link)
Patel Motel Dhando
Dhan-dho means "endeavours that create wealth."
The Patel's were known as landlords.
70,000 Patel's in Africa were stripped of their belongings and sent back to Uganda
No brainer bets "Heads I win, tails, I don't lose much.
Hard work, be frugal, invest in no-brainer businesses. Be patient. These are all the things Manila did to own and operate motels that are highly profitable today.
Richard Branson - invests with minimal capital and virtually no risk. This is Dhandho on steroids.
Marwari business people expect all their invested capital to be returned via dividends in no more than three years.
Huge upside with virtually no downside.
The Dhandho Framework
Nine core principles
- Focus on buying existing businesses
- But simple businesses in industries with the ultra-slow rate of change
- Buy distressed companies in distressed industries
- Buy companies with a durable competitive advantage - The Moat
- Bet heavily when the odds are overwhelmingly in your favour
- Focus on arbitrage
- But companies at significant discounts to their underlying intrinsic value
- Look for low-risk high-uncertainty businesses
- It's better to be a copycat than an innovator
Have the purchase price be so attractive that even a mediocre sale gives good results - Warren Buffett
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful - Warren Buffett
Dhandho 101: Invest in Existing Businesses
Invest in the stock market. Buying publicly traded businesses is a no-brainer.
Dhandho 102: Invest in Simple Businesses
The intrinsic value of any business is determined by the cash inflows and outflows - discounted at an appropriate interest rate - that can be expected to occur during the remaining life of the company.
Invest in simple businesses - ones where conservative assumptions about future cash flows are easy to figure out.
Dhandho 201: Invest in Distressed Businesses in Distressed Industries
List of distressed businesses
- Read the business headlines.
- Value line publishes a weekly summary. If a business is trading at a price to index P/E of 3, it's worth a closer look.
- Publication called portfolioreports.com
- Look at public filings (SEC Form 13-F) Nasdaq.com or access.edgar-online.com.
- Value investors club
- The Little Book That Beats the Market by Joel Greenblatt (affiliate link)
Dhandho 202: Invest in Businesses with Durable Moats
Please limit the number of years we expect a business to thrive. For example, never calculate a Discounted cash flow stream longer than ten years.
Most companies don't survive for long periods. Eventually, they wither away.
Dhandho 301: Few Bets, Big Bets, Infrequent Bets
Mr. John Larry Kelly Jr - came up with the Kelly formula]to determine the optimal way to bet on a favourable bet.
Edge/odds = fraction of your bankroll you should bet each time.
Book reference - Fortunes Formula by William Poundstone.
Dhandho 302: Fixed on Arbitrage
Look for arbitrage opportunities with long spreads—ten years vs ten months.
These investments offer a high return on invested capital with virtually no risk.
Dhandho 401: Margin of Safety - Always!
Benjamin Graham - The Intelligent Investor affiliate link
- Make the market serve you. The C section in the wall Street journal is my business broker.
- Stock is a piece of the business. Value-based on cash in and out
- Buy less the business way less than its worth.
The large margin of safety.
Dhandho 402: Invest in Low- Risk High-uncertainty Businesses
Only invest in low-risk, high uncertain stocks.
Dhandho 493: Invest in the Copycats rather than the Innovators
Invest in businesses that scaled ideas from others. For example, Microsoft took lots of pictures from the competition. Just like Facebook.
Abhimanyu's Dilemma - The Art of Selling
The Mahabharat is the grandest poem
7 Rules to Enter the Market
- Do I understand the business very well?
- Do I know the intrinsic value today and, with a high degree of confidence, how likely will it change over the next few years?
- Is the business priced at an enormous discount to its intrinsic value today and in two to three years? Over 50%,?
- Willing to invest a large part of my bet worth?
- Is downside minimal?
- Does the business have a moat?
- Doable and honest managers run it?
Any stock you buy cannot be sold at a loss within two to three years unless you can say for specific its intrinsic value is less than the current price the market is offering.
Rule 1. Never lose money
Rule 2. Never forget Rule #1
- Warren Buffett
To Index or Not to Index - That Is the Question
-The Little Book affiliate link
Focus on highest-earning yields (lowest P/E ratios)
The Value Investors Club. Valueinvestorsclub.com
NYSE 52 week lows
Arjuna's Focus: Investing Lessons from a Great Warrior
Money can do so much; it's helping others that is genuinely moving.