Comments on: Pabrai’s Law of Large Numbers http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: LC http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/#comment-1028 LC Thu, 06 Dec 2007 05:17:00 +0000 http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers#comment-1028 I have a ton of respect for Pabrai. However, he seemed to forget Buffett's "law" of preserving capital at all cost when he went big into DFC even after the initial phase of the credit crises. They filed for bankruptcy yesterday. I have a ton of respect for Pabrai. However, he seemed to forget Buffett’s “law” of preserving capital at all cost when he went big into DFC even after the initial phase of the credit crises. They filed for bankruptcy yesterday.

]]> By: Joe Ponzio http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/#comment-624 Joe Ponzio Thu, 25 Oct 2007 05:23:20 +0000 http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers#comment-624 Great point! Great point!

]]> By: Nelson http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/#comment-618 Nelson Wed, 24 Oct 2007 06:09:06 +0000 http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers#comment-618 In one of his recent speeches Buffet said if he was a small investor he wouldn't care whether he company was large or small cap. However a study (Arie De Geus) referenced in Pabrai's Dhandho book found that the average Fortune 500 company has a life expectancy of 40 - 50 years and it took 25 - 30 years from formation to get on the Fortune 500. This implies large cap companies are well past middle age. This brings raises questions about Buffet's permanent holdings - how permanent are they? Charlie Munger also referenced in Dhandho says "Of the fifty most important stocks on the NYSE in 1911, today only one, GE, remains in business.." My take is, whether investing in large or small cap, keep reviewing their moat and be prepared to sell. In one of his recent speeches Buffet said if he was a small investor he wouldn’t care whether he company was large or small cap.

However a study (Arie De Geus) referenced in Pabrai’s Dhandho book found that the average Fortune 500 company has a life expectancy of 40 – 50 years and it took 25 – 30 years from formation to get on the Fortune 500. This implies large cap companies are well past middle age. This brings raises questions about Buffet’s permanent holdings – how permanent are they?

Charlie Munger also referenced in Dhandho says “Of the fifty most important stocks on the NYSE in 1911, today only one, GE, remains in business..”

My take is, whether investing in large or small cap, keep reviewing their moat and be prepared to sell.

]]> By: Joe Ponzio http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/#comment-595 Joe Ponzio Mon, 22 Oct 2007 15:34:20 +0000 http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers#comment-595 I agree with both of you. $1 worth of a business, selling for $0.50, is still a great deal. The problem with the smallest companies is that they have more fierce competition, with less means to ward it off. Then again, they can fly under the radar and get some good growth in the process. I agree with both of you. $1 worth of a business, selling for $0.50, is still a great deal. The problem with the smallest companies is that they have more fierce competition, with less means to ward it off. Then again, they can fly under the radar and get some good growth in the process.

]]> By: Casey Mattson http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/#comment-594 Casey Mattson Mon, 22 Oct 2007 13:25:23 +0000 http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers#comment-594 I agree with your assesment, but over a certain amount of time, I believe the "small-cap" has a means to grow more rapidly, thereby giving one the chance to find bargains more often. Which is what I think Mr. Pabrai is contending. The large cap arena, is good for Plan A stocks, but Plan B stocks are more likely small cap in a nature. Lack of analyst coverage etc etc. I agree with your assesment, but over a certain amount of time, I believe the “small-cap” has a means to grow more rapidly, thereby giving one the chance to find bargains more often. Which is what I think Mr. Pabrai is contending. The large cap arena, is good for Plan A stocks, but Plan B stocks are more likely small cap in a nature. Lack of analyst coverage etc etc.

]]> By: Babui http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers/#comment-593 Babui Mon, 22 Oct 2007 11:13:47 +0000 http://www.fwallstreet.com/article/78-pabrais-law-of-large-numbers#comment-593 I don' think it really matters if a company is large cap, mid-cap etc. All that matters is that the company stock price is selling at a significant MOS to intrinsic value and that the company's numbers are solid and it is doing business in the same fundamental way, it has always done its business. The only time it matters if you buy small cap vs large cap is if you plan to buy and hold forever (or at least for 20 yrs). Even then, some long term CAGR for large caps can put many a small cap to shame (e.g., MMM). I don’ think it really matters if a company is large cap, mid-cap etc. All that matters is that the company stock price is selling at a significant MOS to intrinsic value and that the company’s numbers are solid and it is doing business in the same fundamental way, it has always done its business. The only time it matters if you buy small cap vs large cap is if you plan to buy and hold forever (or at least for 20 yrs). Even then, some long term CAGR for large caps can put many a small cap to shame (e.g., MMM).

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