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If that happens, we would lose our down payment, and the bank would take control of the motel. Since it’s an age-old industry with a long history of cash flows, the only thing that can trash its prospects is a prolonged recession. Or with bank financing, we can buy a small motel for $50,000.
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“Either we work on minimum wage at $1.6 per hour, netting ~ $6,000 per year ( if both elders in the family worked full time). The thinking of the head of the family would’ve been something like this:
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They saw the motel business as a way of making a decent living, while getting free family accommodation. After spending decades there, a few thousand of them came to the US as refugees. At the same time, thousands from the Patel community were kicked out from Uganda (Africa) after it came under a dictators rule.
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Ch 1: Patel Motel Dhandhoĭuring 1973, USA was entering a recession as a result, many properties were on sale at relatively cheap prices. Mohnish here sets the tone by sharing four remarkable stories which defy business school logic and emphatically state that one needn’t undertake high risk to seek high returns. Part 1: Four stories of “low-risk, high-return” business endeavours
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You can learn about Mohnish Pabrai’s investment philosophy by reading his two books: Mosaic: Perspectives on Investing, and The Dhandho Investor: The Low-Risk Value Method to High Returns.Last week I wrote about, The Evolution Of Media ( link to its summary). Currently Pabrai has more than $500 million in assets under management (AUM). Triple digit returns helped him to get more funds flowing in. He strongly recommends Atul Gawande’s Checklist Manifesto. He says he’s using a checklist now in order to avoid past mistakes. Mohnish Pabrai had a complete reversal in performance in 2009, returning around 120%. Pabrai’s fee structure isn’t as investor friendly as Warren Buffett’s was because of Pabrai’s seemingly high beta. Warren Buffett had better downside protection 50 years ago. They seem to have very limited downside protection, if any at all. His funds lost around 60% in 2008 sending a clear signal about the risks of his investment style. Mohnish Pabrai was very popular prior to 2008. He doesn’t charge any management fees and takes 25% of returns that are greater than a 6% threshold. He even set up the fee structure of his hedge fund the same way Warren Buffett did more than 50 years ago. He is clearly a value investor following the footsteps of great value investors like Warren Buffett and Joel Greenblatt. Mohnish Pabrai doesn’t hide the fact that he is trying to monkey Warren Buffett’s investment style. We don’t remember anybody who got this much publicity for a pricey lunch.
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His best investment ever was probably the $650,100 he paid for lunch with Warren Buffett. Mohnish Pabrai is an entrepreneur who later switched to money management.