Past performance is not an indicator of future performance... remember this always. So if anyone tells you about their so called past performance, ignore it or ask for their contract notes.
On a different note, I still get calls asking for my past performance - this is silly at the least as I can always show my best trades or fictitious trades and there is no way for anyone to cross check anything.
Anyway coming to the main point and the example in question. This relates to Mohnish Pabrai, a value investor and an ardent follower of Warren Buffet and Graham Bell. I have high respect for the individual and have nothing against him; however this post highlights that anything can go wrong no matter how much analysis you do. Conversely, anyone with no analysis has same chance of succeeding as someone doing tons of analysis.
Pabrai's fund underperformed the broader indices, in my personal opinion, solely because of lack of position sizing. Many fundamental investors tend to have "concentrated portfolios" so if some stock call goes horribly wrong somewhere, you lose big time.
Following article is from a blog. Link at the end of article.
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In September 2013, the headlines screamed that Mohnish Pabrai had “crushed the market” thanks to the superior investment performance of his hedge funds.
Today, the headlines are screaming about how Mohnish Pabrai is “getting crushed” thanks to a 20% loss suffered by his hedge funds.
Such is the nature of the stock market that yesterday’s hero can become today’s zero and vice versa. One can never rest on one’s laurels because one can never say when the tables will be turned.
All three of Mohnish’s hedge funds named Pabrai Investment Fund 2, Pabrai Investment Fund 3 and Pabrai Investment Fund 4 have lost between 15% to 19% for the year.
This compares poorly to all three of the Benchmark indices being the Dow Jones, Nasdaq and the S&P 500 which gave a positive return ranging from 6.5% to 10%.
Read more at: http://rakesh-jhunjhunwala.in/mohnish-pabrai-suffers-crippling-loss-of-rs-400-crore-from-ben-graham-stock-imparts-valuable-investment-lessons<<<
On a different note, I still get calls asking for my past performance - this is silly at the least as I can always show my best trades or fictitious trades and there is no way for anyone to cross check anything.
Anyway coming to the main point and the example in question. This relates to Mohnish Pabrai, a value investor and an ardent follower of Warren Buffet and Graham Bell. I have high respect for the individual and have nothing against him; however this post highlights that anything can go wrong no matter how much analysis you do. Conversely, anyone with no analysis has same chance of succeeding as someone doing tons of analysis.
Pabrai's fund underperformed the broader indices, in my personal opinion, solely because of lack of position sizing. Many fundamental investors tend to have "concentrated portfolios" so if some stock call goes horribly wrong somewhere, you lose big time.
Following article is from a blog. Link at the end of article.
In September 2013, the headlines screamed that Mohnish Pabrai had “crushed the market” thanks to the superior investment performance of his hedge funds.
Today, the headlines are screaming about how Mohnish Pabrai is “getting crushed” thanks to a 20% loss suffered by his hedge funds.
Such is the nature of the stock market that yesterday’s hero can become today’s zero and vice versa. One can never rest on one’s laurels because one can never say when the tables will be turned.
All three of Mohnish’s hedge funds named Pabrai Investment Fund 2, Pabrai Investment Fund 3 and Pabrai Investment Fund 4 have lost between 15% to 19% for the year.
This compares poorly to all three of the Benchmark indices being the Dow Jones, Nasdaq and the S&P 500 which gave a positive return ranging from 6.5% to 10%.
Read more at: http://rakesh-jhunjhunwala.in/mohnish-pabrai-suffers-crippling-loss-of-rs-400-crore-from-ben-graham-stock-imparts-valuable-investment-lessons<<<
" anything can go wrong no matter how much analysis you do"
ReplyDeleteSir,you are absolutely right.I am your follower since very long.You have always said the practical truth about this market.I admire your openness.Regards ARVIND MODI