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Cloning Investments

Case Study 1 – Monish Pabrai

Mohnish Pabrai started investing in 1995 with $1 million in savings. By 1999, he had amassed $5.1 million, growing initial capital at a rate of 43.4% per annum, thereafter which he started Pabrai Investment Funds.


He left his Masters degree in Engineering at Illinois Institute of Technology, he left midway to start his company TransTech.


From 1999–2007, his returns averaged a whopping 37.2% per annum and from 2007-2009 when the world was hit by a financial crisis, his rate of return was at a negative 47.1% compounded per year. His overall track record since 1995-2013 has been impressive at 25.8% per annum even after the Dotcom crisis of 2000 and the housing bubble of 2008. 


Let's look at what Mr. Pabraihas has to say about cloning investments:


"I think the reason you will get an advantage (in cloning your investments) is that most people don't have the temperament or the patience. They may buy IBM because [Warren] Buffett bought it and it may get a bump in price, but they will not hold it until Buffett holds it. They will buy it in November 2011 and by February 2012 they will have already sold it making 10%. He also said: "I am such a genius". And that's the problem. This gene of cloning is very quirky – most people are willing to clone but only partially. They will buy what Buffett buys, a lot of people do that, but they don't do the rest of it. That is stupid cloning. Half-baked stupid cloning. We don't want to do stupid cloning. You do it all the way."


Stock holdings of Mohnish Pabrai:



The Shamelessly Cloned Portfolio:


The shamelessly cloned portfolio is a portfolio created by MohnishPabrai. This portfolio comprises of the five most convicting ideas of the cloned managers which are selected for the portfolio. The shameless portfolio is inspired by the "Small Dogs of the Dow" and at the beginning of each year, the portfolio is invested and left untouched for that particular year.


Mr. Mohnish picked eight value managers for this portfolio himself. After setting up an algorithm using the "R" programming language, the mathematical constant "Pi'' picked up all the stocks. "Pi '' is used to avoid all the possible human biases when picking up the stocks.


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