Mohnish Pabrai has sent a timely warning against blind cloning even as he and Dolly Khanna are basking in massive riches from their stock pick. Motilal Oswal has now recommended a buy of the stock with the assurance that in the ‘Bull case’, the stock has a magnificent upside potential of 100%
After inducing novices to clone, Mohnish Pabrai counsels them not to be “blind cloners”
Today, the pendulum has swung to the other extreme.
At one time, Mohnish had to coax novice investors to clone the stock picks of the wizards.
Now, he has to warn them of the risks of blind cloning.
Mohnish talked extensively about the concept of cloning in a talk that he delivered on 22nd August 2012 at the UC Davis’s MBA Value Investing class.
Mohnish gave some fine examples on how copying the moves of successful people are a good way to make progress in life.
Example 1: Petrol pumps
Mohnish cited the example of two petrol pumps which were opposite each other. While the first one was flourishing, the other was languishing.
The secret of the first one’s success was that it gave its customers little freebie services at random. This created affection and loyalty amongst the customers and they would go out of the way to get their cars serviced by it.
The second petrol pump owner saw the technique of the first but still did not bother to copy it. He thought the technique would not work over long periods of time.
Yet, the first petrol pump prospered immensely over the years while the second owner suffered.
“” Mohnish said, with wonderment in his voice at the naivety of people.
Example 2: Billionaire Sam Walton, the founder of Walmart
Some of the biggest businesses in the world are built on the concept of cloning, Mohnish said.
He cited the example of Sam Walton of Walmart who built a multi-billion dollar business by copying what other retailers like Sears did and increasing the scale.
Sam Walton was obsessed with what his competitors were doing and implemented their concepts and ideas if it appealed to them.
“” Mohnish said with admiration at the Billionaire’s ability to clone.
Example 3: Microsoft
Even Microsoft, the World’s biggest software producer of famous products like ‘Windows’, is a cloner, Mohnish said.
“” he added with a chuckle.
“” he said to underline the enormous benefits of cloning.
Imitation is the sincerest form of Flattery- A study on cloning Warren Buffet’s picks
“” Mohnish said @18.00.
Mohnish referred to a study by Gerald Martin and John Puthenpurackal titled “” in which the duo has analyzed what the results would have been if an investor had bought the same stocks that Warren Buffett had bought and sold them after Buffett had sold them.
The researchers found that even the most inefficient investor who bought at higher prices, and sold at lower prices, than Buffett’s buying and selling prices would have outperformed the benchmarks by a wide margin.
This proves conclusively that cloning works and works well, Mohnish said with a big smile on his face.
I am a “shameless cloner”
“, Mohnish said @18.45, much the merriment of the audience comprising of young students.
(Mohnish Pabrai in the distinguished company of Rajiv (Dolly) Khanna & Porinju Veliyath)
Warning! Never buy a stock without doing your own research
Novices have taken Mohnish Pabrai’s advice to heart and are indulging in rampant cloning.
They are buying stocks left, right and center, without any application of mind, only because some illustrious investor has bought it.
This sorry state of affairs has alarmed Mohnish and he has now rushed out a warning.
“” Mohnish said in a stern tone in response to a query whether Kolte-Patil, one of his portfolio picks, is likely to walk on the same path as the illustrious Rain Industries and shower massive riches on investors.
But if Mohnish has already done “intense drill down research” do novices have to do it all over again?
A wit, who prefers to remain anonymous, asked that if Mohnish has already done “” and given the all-clear signal to a stock, would it not be pointless and counter-productive for a novice to do the research all over again.
Of course, the comment was made in jest. Mohnish’s core point is that novices have to develop self-conviction in the stock.
Cloning Mohnish and Dolly Khanna in Rain Industries would have given us up to 985% gain
It goes without saying that we have to follow Mohnish Pabrai’s advice against “” in the same obedient manner in which we have cloned his stock picks.
It is unbelievable that since I first reported in April 2015, the stock has given an eye-popping 985% gain.
Rain Industries has “enduring tailwinds” and target price of Rs. 615 in “Bull case”: Motilal Oswal
Now, the best news is that it is still not too late for us to join Mohnish and Dolly because Motilal Oswal has issued an in which it has recommended a buy.
The logic is quite compelling:
Motilal Oswal has also predicted a ‘Bull case’ target price of Rs. 615 and a ‘Bear case’ target price of Rs. 214.
If the ‘Bull case’ does come into being, we are talking of 100% gain from the CMP of Rs. 309.
Mohnish himself predicted 4x gains from Rain Industries
Motilal Oswal’s Bull case target price of Rs. 615 may not be farfetched because Mohnish Pabrai himself predicted that the stock has the potential to give magnificent 4x gain.
“” Mohnish said.
Mohnsih was addressing the students of UCI Paul Merage School of Business in the University of California.
While Mohnish’s warning against ‘blind cloning’ is timely and has to be diligently followed by novices, we shouldn’t go into a shell and close our eyes to all stock ideas. Instead, we have to have a judicious balance between cloning and application of mind and ensure that we buy only those stocks in which we are able to develop conviction!