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One Up On Wall Street SUMMARY Conclusion Chapter 20 – 50,000 Frenchmen Can Be Wrong

The market, like individual stocks, can move in the opposite direction of the fundamentals over the short term Be optimistic about America and investing in general Market declines are great opportunities to buy stocks in companies that you like You can never predict the market It takes years, not months to produce big results You can make serious money by compounding a series of 20-30 percent gains in Stalwarts Stock prices often move in opposite direction but the long term, the direct and sustainability of profits will prevail Buying a company just because its cheap is a losing strategy Selling an outstanding fast grower because its stock slights overpriced is a losing technique You don’t lose anything by not owning a successful stock Stock doesn’t know that you own it Don’t be attached to a winner Don’t stop monitoring the story If you don’t think you can beat the market then buy a mutual fund Keep an open mind to new ideas Read One Up On Wall Street by Peter Lynch Chapter 19 full su...
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The Dhandho Investor SUMMARY Chapter 15 Abhimanyu’s Dilemma – The Art of Selling

Selling a stock is a more difficult decision than buying one so having a strong framework will help in making the decision. Based on the ancient epic poem Mahabharata, Mohnish talked about how Abhimanyu died during the ancient war when he managed to penetrate in a spiral like battle formation but failed to get out of the formation. The lesson from Abhimanyu story is to have a crystal-clear exit plan before we ever think about buying a stock. Before entering always ask yourself:
1. Do you understand this business and is it within your circle of competence?
2. Do you know what is the intrinsic value of this business and how it will change over the years confidently?
3. Is the business priced at a large discount to its intrinsic value today and in two to three years? Over 50 percent?
4. Are you willing to invest a large part of your net worth into this business?
5. Is the downside minimal?
6. Does the business have a moat?
7. Is it run by able and honest managers?
Look, this an important checklist to buy a business. What about the exit?

Traversing The Rings
Mohnish Pabrai used a gas station as a model to explain. To simplify; any stock that you buy cannot be sold at a loss within two to three years of buying it unless you can say with high certainty that the intrinsic value is less than the current price the market is offering.

No matter what, you shouldn’t sell a business if:
1. It have been less than 2 to 3 years since you bought.
2. You are unable to come up with a realistic intrinsic value with a very high degree of certainty
3. Present offered price is well below our conservative estimate of present intrinsic value.

What if a stock can be sold at a loss within 2 to 3 years? What are the conditions for it?
1. Able to estimate its present and future intrinsic value, 2 to 3 years out, with a very high degree of certainty
2. The price offered is higher than present or future estimated intrinsic value.

Always remember Warren Buffett’s two main rules:
Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1

Real business changes takes time. 2 to 3 years, works like magic. Joel Greenblatt stated in his book The Little Book That Beats the Market, call for all stocks to be held for exactly a year especially deep value stocks and you know nothing about the business. The 2 to 3 years rule is actually helping you to be patient because as Munger said, you make the most money in waiting.

Universal Stainless & Alloy Products
Mohnish bought this company investing 10% of the fund and made the money back with good returns by patiently waiting for 3 years despite the low dips and the industry affected as well. That patience paid him. Don't hesitate to take a realized loss once three years passed. They can shape you better.

Exiting The Chakravyuh
Within three years of buying, feel free to sell and exit if the intrisinc value and price converged and the gap narrows to under 10 percent. Sell once the market price exceeded intrinsic value unless for tax purposes you can wait longer to cover the costs.

How Many Simultaneous Chakravyuh Battles?
Warren Buffett and Charlie Munger highlighted the benefits of concentrated equity ownership especially with the famous quote by Buffett asking us to make investment decisions as you have a punch card with 20 holes in it and that’s all you can have. He even said 20 is quite a lot too. In Mohnish’s words the mantra is: Few Bets, Big Bets, Infrequent Bets all placed when the odds are overwhelmingly in your favor.

Watch The Dhandho Investor Chapter 14 full summary here 👇:
https://youtu.be/gavl3FI5O28

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