# focus on profit growth
PE ratio 1
PE ratio 1 Menas company share price equals trailing 12months EPS.
Property 2 crores annual rent 1 crore = 2 PE ratio (Rent will be double* like earnings)
Hidden PE of 1
CUrrent PE / Current Earnings
DMAT PE 100, but earnings 25% growth every year it takes 21 yers to reach pe 0f 1.
TIME TO reach PE of 1
| PE ratio | 100 | 10 |
| Earnings | 20% | 10% |
| time to reach PE of 1 | 25.3 | 24.2 years |
Leanings:
PE of 1 in 5 years only in mid & small caps.
EPS growth,
earnings can be accounted & economic earnings free cash flow per share.
Beware of cyclical business
Focus on sales & profits growth also pricing power
turnaroun comapnies.
Mohnish Pabrai: How To Earn A 25% Return Per Year (6 Investing Rules)
- shameless cloner copy the investetor portpolion quaterly or yearly
- buy stocks with moat (competitive advantage)
- Patience: you make money by waiting.
- Don;t engage in short selling
- low risk high uncertainity (high returns) (how can i lose money minimize downside)
- have a checklist 7-8 questions (normalizerd earnings or boom earnigs, debt, managment,win win ecosystem, etc)
Mohnish Pabrai’s 10 Commandments Investment Strategy
- fees fixed and then return based sahring ex: 2%+ 25% of return.
- never use team
- shalt be wrong at least 1/3 of the time 4out of 10 expected to down. dont surprise. (10 stocks 7 zero 1st 30, 2nd 20, 3rd 10 then 10 years cagr 19.6%)
- look for PE of 1 Market cap = NET profit of company.
- neve use excel
- rope to climb from deepest well
- focus on concentration
- never short stock
- never borrow or lend
- shall be a shameless cloner
THE DHANDHO INVESTOR (BY MOHNISH PABRAI) – high returns with low risk
i win or dont loose,
DHANDHO frame work
- foucs on existing business (stocks peform better than other asset classes)
- buy simple businesses in the industries slow rate of change (change is the enemey for investment)
- buy distressed business and distressed industries
- buy businesses with durable competitive advangate
- bet hevily when the odds overhlemingsly your favour
- focus on arbitrage risk free return
- buy business with huge discount with their underlying value.
- look for low risk and high uncertainity businesses
- its better to be a copy cat than inventor
2. Investing is all about odds
cash 25
Heads Probality 60%, payout 100% Tales: probality 40% payout -100%
One channce in two trades its gamble.
3 DCF Analyis discounted cash flow
1000 todays is better 1k after 10years
5% disocunt rate every year, 95%, 91% 86, 81 for 10 years 7722
10% discount rate for 10 years 6142
4. Look for row risk and high uncertinity businesses
| Probabiliyt | payout |
| 10% | 1000% |
| 40% | 30% |
| 40% | -20% |
| 10% | -100% |
according kelly BET on 75%
Agrresive, standard, conservative
Others wall street loves low risk low uncertainity,
| Probabiliyt | payout |
| 90% | 10% |
| 9% | 100% |
| 1% | -100% |
5. THE Art of selling
- Cannot sold at loss with 2-3 years of buying unless current instrinic value less than the market price. price cnange fast but busines doesn’t), time is money
