The Dhandho Investor - Mohnish Pabrai

[petekoch]

I've read several interviews with Mohnish Pabrai on the web and this week Joe Ponzio ran a couple of pieces about Pabrai on F Wall Street:

October 2007 Archives at Joe Ponzio's F Wall Street Blog

I ordered The Dhandho Investor: The Low-Risk Method to High Returns last week. Should arrive soon; I'll post my comments. BTW, someone already commented on TDI somewhere on this site a while back.

After reading A Mathematician Plays the Stock Market (I left some comments elsewhere around here) by John Allen Paulos, I also picked up his A Mathematician Reads the Newspaper and Innumeracy: Mathematical Illiteracy and its Consequences. Almost finished with the latter. You really have to like math to appreciate these books. E.g., Paulos's idea of a put down is to say that some people are so 'innumerate', they think that

(X + Y)^2 = X^2 + Y^2

This actually made me laugh because, as anyone knows,

(X + Y)^2 = X^2 + 2XY + Y^2

I'm also about half-way through an eBook, Investing in REITs. This and other rather esoteric (and expensive) books are available through NetLibrary. I subscribe through my local public library; check to see if your local library is a NetLibrary provider. There are scores of books on investing available. Investing in REITs has a great section reviewing the history of REITs and the bull and bear markets in REITs since the 1960s.

I aborted my reread of Jeremy Siegel's Stocks for the Long Run. Firstly, I already buy into his thesis. Secondly, after about 80 pages, I started to remember how dull I found the book during my first go-around.

I sure hope Newman brings The Dhandho Investor today. It's not raining, so I have a shot.

[npg]

It's a much better book than Rule#1 IMO. Makes for a very good read and is quite accessible.

It underlines the importance for investors to think like a business man with very good examples.

I thoroughly enjoyed it.

[Xyvern]

I'm reading this book right now and so far it's been great. Also there's a video with Mr. Pabrai been interviewed by Morningstar.

[petekoch]

As is my custom, I ordered a used copy of The Dhandho Investor from one of the Amazon partners. I chose a seller not more than 50 miles away. That's about a 4 hour bicycle trip (assuming one doesn't wind up as a Mack truck hood ornament in NJ traffic). Two weeks later, still no book. This AM, I dashed off an email to said seller, threatening him/her with an angry letter to The Times if
I don't get no satisfaction.

But the real purpose of this post is to inform one and all that Pabrai's recent EDGAR filings revealed that he purchased over 6.5MM shares of Delta Financial (DFC) at $5/shr. DFC is down over 60% from its 52-week high. It closed today @40 cents above Pabrai's purchase price. Might want to look at this one, kidz.

[npg]

PE of 6, PB of 0.8???? Yummy

However: "Delta Financial originates, acquires, sells, and services home equity loans. The company's clients are individuals who have impaired or limited credit profiles and they typically have substantial equity in their homes."

Of course, this is strongly out of favor now. Apart from an endorsement from Mr Pabrai, what has this company got over their competitors that make it a better investment?

[NewMoney]

Well, last year it had -63.65% cash flow. In year 4 it had -30.85% cash flow. I think what it has to offer is a great way to lose one's money. :)

[NewMoney]

Originally Posted by petekoch

But the real purpose of this post is to inform one and all that Pabrai's recent EDGAR filings revealed that he purchased over 6.5MM shares of Delta Financial (DFC) at $5/shr. DFC is down over 60% from its 52-week high. It closed today @40 cents above Pabrai's purchase price. Might want to look at this one, kidz.

Whoohooo! Pete, have I mentioned lately that you rock! LOL!

You gave me an idea! I set up RSS feeds for the SEC filings for all companies and individuals that I want to watch. E.G. I receive Warren Buffett's SEC filings right in Firefox using an RSS reader (plug in).

I used a site called SECFilings.com that offers the free RSS feeds. This is way slick!

[petekoch]

Originally Posted by npg

PE of 6, PB of 0.8???? Yummy

However: "Delta Financial originates, acquires, sells, and services home equity loans. The company's clients are individuals who have impaired or limited credit profiles and they typically have substantial equity in their homes."

Of course, this is strongly out of favor now. Apart from an endorsement from Mr Pabrai, what has this company got over their competitors that make it a better investment?

Summary of DELTA FINANCIAL CORP - Yahoo! Finance

DFC | Value Investing News

Looks like one-on-one deal between company and Pabrai. Already an investor, it appears he gave them funds when they needed it and the concessions to him were probably less draconian than the alternatives. Also looks like there's been dilution, but that only hurts if you're already a shareholder.

There might be a lot of upside in DSF, but I'm already in CSE and I'd rather find a solid, cheap bank or two. Also looking at a beaten down mortgage insurer, MGIC (MTG).

[NewMoney]

DSF's cash flow has been in the negatives for several years. To me, not a good investment at all.

[joshuat]

I bought DFC at 3.69, sold at 5.40. Not to gloat or anything. ;) I need to point out I had bought at 12+, so I took a huge whack at the 3.69 price to get my cost basis down. I've been enjoying buying distressed stocks lately.