Mohnish Pabrai: P/E Of 1 StocksRupert Hargreaves
In 2016, Mohnish Pabrai gave a speech to students at Peking University on the topic of finding multi-bagger stocks. According to Pabrai, there are five particular buckets potential multi-bagger stocks fall into.
If a stock sits in one of these buckets, it is not guaranteed to be a multi-bagger, but if the environment is right, it could be.
One of Pabrai's five criteria is "upside without downside." Here's how he described it at the time:
"The final and fifth model I want to talk about is upside without downside. I also call this playing the bubble. In the late '90s, the dot-com boom was on in a big way, and everyone thought it's going to be transformational, it's going to change everything. Companies like Pets.com, etc., had huge valuations. Even Amazon (AMZN) was a huge valuation, Yahoo - all these companies. I had spent some time in technology. I knew that the internet was important but I could not tell which company would make it, which company would not make it. I was definitely not interested in buying anything which was even trading at 10 times earnings. I like to buy things at three times earnings, or even better, like Fiat, one times earnings."
Pabrai has had tremendous success finding equities that fall into this bucket over the years. His record of investing has earned him a reputation as one of the best value investors of all time.
Hidden Value Stocks
ValueWalk’s exclusive quarterly value magazine, Hidden Value Stocks is always on the lookout for hidden value. In each issue, we profile two value-orientated hedge funds, which follow similar rules to Mohnish Pabrai and ask them to pick out a total of four value ideas.
His Pabrai Investment Funds flagship fund, PIF2, has earned 15.3% annualized since inception in 1999. Over the same period, the Dow Jones Industrial Average only produced a positive annual return of 6.8%.
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