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Looking out for mispriced betting opportunities and betting heavily when the odds are overwhelmingly in your favor is the ticket to wealth. What’s left is a very small handful of simple, well-understood businesses under distress We begin by eliminating all businesses that are either not simple businesses or fall squarely outside our circle of competence. How can we ever get our arms around all of them? Well, we don’t. Last, but certainly not least, please read The Little Book That Beats the Market by Joel Greenblattīetween these sources, there are now a plethora of candidate distressed businesses to examine.Take a look at Value Investors Club (VIC It is a wonderful web site started and managed by Joel Greenblatt of Gotham Capital.If you’d like to avoid the subscription price tag for Portfolio Reports, then much of that data can be gleaned by looking directly at the public filings (e.g., SEC Form 13-F) that institutional investors have to make.
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Portfolio Reports lists the buying patterns of such luminaries as Seth Klarman of Baupost, Lou Simpson of GEICO, Marty Whitman of Third Avenue, Peter Cundill of the Cundill Group, Bruce Sherman of Private Capital Management, and Warren Buffett It gleans this information from the various filings that institutional investors are required by law to make. It lists the 10 most recent stock purchases by 80 of the top value managers.
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Markets aren’t fully efficient because humans control its auction-driven pricing mechanism It is this critical gap that is responsible for Mr. However, there is a huge difference between mostly and fully efficient. Trying to figure out the variance between prices and underlying intrinsic value, for most businesses, is usually a waste of time. IT’S BETTER TO BE A COPYCAT THAN AN INNOVATOR.LOOK FOR LOW-RISK, HIGH-UNCERTAINTY BUSINESSES.BUY BUSINESSES AT BIG DISCOUNTS TO THEIR UNDERLYING INTRINSIC VALUE.It is these nine principles that constitute the Dhandho framework:īUY SIMPLE BUSINESSES IN INDUSTRIES WITH AN ULTRA-SLOW RATE OF CHANGEīUY DISTRESSED BUSINESSES IN DISTRESSED INDUSTRIESīUY BUSINESSES WITH A DURABLE COMPETITIVE ADVANTAGE-THE MOATīET HEAVILY WHEN THE ODDS ARE OVERWHELMINGLY IN YOUR FAVOR These are my notes which I intend to go back to later.
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It is not a complete summary of the book. Later I turn those highlights into a blogpost. Note: While reading a book whenever I come across something interesting, I highlight it on my Kindle.