This page serves as a written record of my investing principles. Markets are noisy, emotions are persistent, and long periods of success or failure can distort judgment. Writing these principles down is a way to anchor decisions to a coherent framework that can impair following short-term market behavior.
| My Investing Manifest | |
|---|---|
| Value Investing | link |
| Risk and Capital Peservation | link |
| Cloning | link |
| Buffett Piles | link |
| Circle of Competence | link |
| The Dhandho Way | link |
| Valuation Framework | link |
| Mental Models | link |
| What I Avoid | link |
My investment philosophy follows the value investing tradition established by Ben Graham and later refined and practiced by Warren Buffett, Charlie Munger, Mohnish Pabrai, Howard Marks, and other value long-term investors. I approach investing as the acquisition of partial ownership in real businesses, and not just as the trading of price fluctuations. Capital is allocated only to businesses with understandable economics, durable competitive characteristics, and cash flows that are both real and sustainable, purchased at prices that offer a clear margin of safety.
I do not engage in short selling, leverage, or margin borrowing. These tools increase fragility, introduce unfavorable asymmetry, and interfere with the long-term compounding of capital. My focus is on avoiding permanent loss and not maximizing short-term returns, with the understanding that survival and discipline are the foundations of long-term success.
Capital is deployed selectively and patiently. Inactivity is often preferable to forced action, and concentration is accepted when opportunity is clear. The objective is to remain rational, conservative, and consistent across full market cycles.
This philosophy is intended to be durable, repeatable, and resistant to both excitement and fear. It reflects an approach to investing based on business value, prudence, and time.
Value investing, as I practice it, is the discipline of allocating capital based on business reality ignoring market opinion. A stock is not a ticker symbol or a chart, but a fractional ownership of a real company with assets, liabilities, cash flows, and management decisions that unfold over time. Price is important, but only in relation to value, and value is derived from what a business can reasonably produce for its owners over its life.
My framework follows the lineage of Ben Graham, with its emphasis on margin of safety, and the later evolution expressed by Warren Buffett and Charlie Munger, where business quality and durability play a central role. I seek businesses that are understandable, economically resilient, and operated by rational managers. Complexity for its own sake is avoided, and areas where outcomes depend on prediction are deliberately excluded.
Markets fluctuate constantly, but business value changes slowly. I am not interested in forecasting macroeconomic variables, interest rates, or short-term earnings surprises. Instead, I focus on whether a business can compound capital over long periods and whether the price paid offers sufficient protection against error, uncertainty, and bad luck. The gap between price and value is the source of return, while discipline and patience are the sources of survival.
Value investing is therefore less about activity and more about judgment. Most opportunities are rejected. Time is allowed to work without interference. By anchoring decisions to business fundamentals and valuation without emotions and sentiment, the objective is the steady compounding of capital with controlled risk.
Risk, in investing, is not just volatility (\beta). Price fluctuations are unavoidable and irrelevant. Real risk is the permanent loss of capital, whether through overpaying, misunderstanding the business, excessive leverage, or exposure to fragile financial structures. Capital, once impaired, loses its ability to compound, and no amount of future opportunity can fully repair that damage.
For this reason, capital preservation is my primary objective. Every investment decision begins with the question of what can go wrong and whether the downside is survivable. Businesses with excessive debt, opaque accounting, cyclical fragility, or reliance on favorable external conditions introduce risks that cannot be reliably controlled and are therefore avoided.
Leverage, margin, and short selling are explicitly excluded from the process. While they may amplify returns in favorable conditions, they also introduce non-linear losses and forced outcomes at precisely the wrong time. Long-term compounding requires staying power, and staying power requires a balance sheet and a portfolio structure that can endure stress without external support.
Risk is managed through simplicity, selectivity, and valuation discipline. Investments are made when the price provides a sufficient margin of safety relative to underlying business value. Concentration is accepted when understanding is high and downside is limited, while cash is held patiently when attractive opportunities are absent. By prioritizing survival and capital integrity, returns become a consequence and not a target.
My thinking about risk resonates with Howard Marks’ memos at Oaktree. Risk is rarely what is visible or easily quantified; it is what causes permanent damage when assumptions fail and conditions change. As Marks often quotes in his interviews John Kenneth Galbraith: “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know. Risk and uncertainty are inherent to investing and cannot be eliminated through prediction.
I openly embrace the idea that Mohnish Pabrai describes as being a “shameless cloner”. Originality is not a requirement for success in investing, while sound judgment and discipline are. I am not searching endlessly for unique ideas by myself, but I actively to learn from investors with long records of rational capital allocation, and demonstrated alignment with owners.
On a quarterly basis, I review the publicly available filings of a small group of “superinvestors”, primarily through their 10-Q disclosures and related reports, reading their memos for investors (when publicly available), and listening to their interview. These documents reveal how experienced investors are positioning capital in real time, subject to real constraints. They serve as a filtering mechanism and place to steal their ideas.
Cloning isn’t mechanical, since there are hundreds of new positions and situation available. Every position is evaluated independently through my own analysis of the business, its economics, its risks, and its valuation. More often than not they end in the “too hard for me” bucket. Differences in timing, portfolio size, business knowledge, risk appetite, tax situation, and cost basis should be explicitly taken into account. A position is considered only when it fits within my framework for valuation.
There are some limits to cloning. Public disclosures are delayed, incomplete, and backward-looking. They do not reveal position sizing logic, ongoing changes, or the full context behind an investment decision. Responsibility for every decision remains entirely my own. Still, these ideas are invaluable.
By learning from investors who have already demonstrated discipline across full market cycles, and by combining that information with independent judgment, cloning becomes a repeatable way to improve the quality of decisions, while remaining firmly anchored to long-term value investing principles.
Warren Buffett often described investing as the process of sorting opportunities into piles: those that are clearly understandable and attractive, and those that are not. I follow the same approach. The objective is to quickly identify what belongs in the “too hard for me” pile and move on. I passed on Nvidia and Tesla, and I will pass to the next ones too. I don’t have any regrets.
I focus on simple businesses with straightforward economics, limited reliance on exceptional management, and operating models that can endure change. As Peter Lynch once observed, “it is wise to invest in businesses that even an idiot could run, because sooner or later one probably will”.
Complex organizational structures, intricate financial arrangements, and business models that require continuous brilliance could mask fragility. When success depends on constant perfection, narrow expertise, or favorable conditions, the odds are rarely attractive. These situations are placed decisively into the “too hard for me” pile, regardless of how compelling the narrative or valuation may appear.
By sorting opportunities early and decisively, attention and analytical effort are preserved for situations that appeal compelling. This discipline reduces cognitive overload, limits exposure to hidden risks, and reinforces focus on businesses that can be owned with confidence over long periods.
A clear understanding of one’s circle of competence is essential to sound valuation and risk control. The concept is simple: investing should be confined to businesses whose economics, drivers, and failure modes can be reasonably understood. The size of the circle is far less important than knowing its boundaries and respecting them consistently.
Operating within a defined circle of competence allows valuation to be based on analysis and not on assumption. When the underlying business model, competitive dynamics, and capital structure are familiar, it becomes possible to distinguish temporary problems from structural ones and price fluctuations from genuine deterioration. Outside that circle, confidence often replaces understanding, and valuation becomes guesswork.
The circle of competence expands slowly through study, experience, and post-mortem analysis of past decisions. If a business cannot be explained in clear terms, or if its success depends on variables that cannot be reasonably assessed, it remains outside the circle regardless of valuation.
Respecting these limits reinforces discipline across the entire investment process. It reduces the need for complex forecasts, lowers the probability of severe error, and aligns analysis with reality. By combining a well-defined circle of competence with appropriate valuation methods for each business category, the investment framework remains both flexible and robust over time.
The concept of a circle of competence is closely connected to Peter Lynch’s insistence on having a clear and simple “story” for every investment. A story is a concise explanation of why a particular business is worth owning, how it makes money, and what must go right for the investment to succeed.
If the rationale for owning a company cannot be explained clearly in a few minutes to someone who has no understanding of the company, or summarized in a small number of lines, it is usually a signal of insufficient understanding. Either the business lies outside my circle of competence, or the situation belongs in the “too hard for me” category. In both cases, the correct action is the same: pass and move to something else.
Within a defined circle of competence, it is possible to identify the key economic drivers, the sources of competitive advantage, and the main risks without relying on excessive detail or fragile assumptions. When that clarity is absent, valuation becomes dependent on hope.
This discipline acts as a filter before valuation even begins. Only businesses that can be explained simply, and whose outcomes can be assessed using familiar economic principles, are evaluated further. By requiring a clear story as an entry condition, the investment process remains grounded in understanding, reinforces humility, and prevents capital from being committed to situations that cannot be judged with reasonable confidence.
The Dhandho way, a concept proposed by Mohnish Pabrai and inspired by the practices of some successful business stories, can be summarized as “heads I win, tails I do not lose much”. It is an approach that focuses on favorable asymmetry. The objective is to structure decisions so that the upside is meaningful, while the downside remains limited.
An illustration is the experience of the Patel family in the U.S. motel industry. Many Patel entered the business by purchasing distressed motels at very low prices and running with the family, so that staff cost wasn’t necessary. In the worst case, the downside was capped by the value of the underlying real estate, and the modest capital invested. In the favorable case, operational improvements, long holding periods, and gradual industry consolidation led to substantial long-term gains. The structure of the decision favored large upside with limited downside.
In investing, this translates into seeking situations where pessimism is already reflected in the price, balance sheets are resilient, and the business can endure adverse conditions without permanent impairment. Losses, if they occur, are limited and manageable, while gains are allowed to compound over time if conditions normalize or improve. Precision is unnecessary when the payoff structure is skewed in one’s favor.
My valuation framework is influenced by Peter Lynch’s classification of businesses into distinct categories, each requiring a different analytical approach. Businesses behave differently depending on their growth profile, maturity, and economic drivers, and applying a single valuation lens across all situations invites error. Understanding what type of company is being analyzed is therefore a prerequisite to valuation. I have a page describing my valuation framework here.
The framework distinguishes between slow growers, stalwarts, fast growers, cyclicals, asset plays, and turnarounds. Each category implies different risks, different sources of return, and different failure modes. A slow grower demands strong cash generation and sensible capital allocation. A stalwart requires reasonable expectations and disciplined pricing. A fast grower must be evaluated with caution, as growth alone does not guarantee attractive returns. Cyclicals require an understanding of industry cycles and balance sheet resilience. Asset plays depend on realizable value and not earnings. Turnarounds are driven by change and carry the highest operational risk.
The core of the portfolio is concentrated in high-quality, understandable businesses where long-term economics are durable and valuation provides protection. These situations offer steady compounding with limited dependence on external events. Alongside this core, a smaller and clearly bounded portion of capital is allocated to turnaround situations. These are selected only when the balance sheet allows survival, the causes of distress are identifiable, and the probability-weighted outcomes exhibit favorable asymmetry.
Turnarounds are approached explicitly through the Dhandho lens. The downside is constrained by asset values, cash generation, or financial flexibility, while the upside derives from recovery, normalization, or strategic change. Precision is less important than structure; the decision is justified when failure does not lead to permanent impairment, while success can produce big returns.
By tailoring analysis and valuation to the specific business category, the investment process remains grounded in realism and not in generalization. This framework reinforces discipline, clarifies expectations, and ensures that different types of businesses are evaluated on terms appropriate to their underlying economics.
My approach to investing is influenced by Charlie Munger’s emphasis on mental models. Good investing comes from building a broad framework that draws from economics, accounting, psychology, mathematics, and business history. Reality does not operate in silos, and neither should analysis.
Mental models are tools for thinking, and they help identify cause-and-effect relationships, recognize recurring patterns, and avoid common errors. Concepts such as incentives, opportunity cost, competitive advantage, scale effects, and human bias recur across industries and market cycles. Understanding how these forces interact provides a more reliable foundation than reliance on detailed forecasts or narrow metrics. I have a page on mental models here.
Equally important is the avoidance of psychological misjudgments. Overconfidence, confirmation bias, envy, jealousy, and social proof routinely distort decision-making. By being aware of these tendencies and deliberately slowing the process, the goal is not to eliminate mistakes but to reduce their frequency and severity. Charlie in a famous speech list twenty-four possible causes for human misjudgment, and I have a page on these here.
Mental models reinforce simplicity and humility. When a situation cannot be explained using a small number of well-understood principles, it is usually better left alone. By consistently applying a latticework of mental models in place of a single analytical lens, decisions become more robust, errors become less costly, and capital allocation improves over time.
Mental models are valuable only if they translate into clear constraints on behavior. Over time, a consistent pattern emerges: most permanent investment losses are not caused by bad luck, but by avoidable errors in judgment, incentives, and structure. This section formalizes the outcomes of that understanding.
I avoid short selling, leverage, and margin borrowing. These practices create unfavorable asymmetry, amplify psychological pressure, and introduce forced decisions that are disconnected from business fundamentals. They convert uncertainty into fragility and turn small analytical mistakes into irreversible losses.
I avoid businesses that cannot be understood through a small set of durable economic principles. When success depends on precise forecasts, complex financial engineering, or external variables beyond reasonable control, analysis gives way to speculation. Such situations tend to reward confidence.
I avoid paying excessive prices, even for exceptional businesses. Valuation is a risk control mechanism. When future returns rely on sustained optimism in place of business performance, the margin of safety disappears and the odds turn negative.
I avoid unnecessary activity. Frequent trading, constant change in positions, and the pursuit of novelty introduce friction, taxes, and cognitive noise. In the absence of clear opportunity, inaction is a deliberate and rational decision. By respecting these limits, capital is protected and compounding is allowed to operate without interruption.
This investment philosophy is intentionally conservative, simple, and repeatable. It is built around protecting capital first, thinking independently, and allowing time and compounding to work without interference. The objective is rational decision-making across full market cycles avoiding constant activity or short-term validation.
By focusing on business value, margin of safety, favorable asymmetry, and disciplined constraints, the process aims to reduce the probability of irreversible mistakes. Outcomes will vary, and periods of underperformance are inevitable, but adherence to a coherent framework is more important more than any single result.
This document serves as a personal reference point, and are updating as my investment journey is progressing. When markets become noisy or emotions intrude, coming back to the principles written here are meant to guide behavior back toward patience, humility, and long-term thinking.