Invest Like a Billionaire

Good Evening! 👋

Welcome to Wealth Wednesday!

Here’s What You Missed Last Week:  

1. Powering AI: Top Stocks To Watch

2. How To Spot The Next Big Win

3. Portfolio Changes: January 2025

Dear Investor,

If there’s one book that completely changed how I think about investing, it’s The Dhandho Investor by Mohnish Pabrai.

I’ve read a lot of investing books over the years, but this one stands out. Pabrai, a billionaire investor, lays out a simple, no-nonsense approach to building wealth by taking low-risk, high-reward bets—a strategy inspired by the way Indian entrepreneurs, particularly the Patel family, built their motel empire in the U.S.

What I love about this book is that it cuts through the noise. No complex formulas, no Wall Street jargon—just practical, real-world investing principles that anyone can apply.

Today, I want to share the five best lessons from The Dhandho Investor that have had the biggest impact on my investing strategy.

Let’s get into it.

1. The Dhandho Framework: Low Risk, High Uncertainty

The first time I read this line, it hit me like a lightbulb moment. Pabrai’s entire investment philosophy boils down to one thing: finding opportunities where the downside is small, but the upside is massive.

Most people think of investing as taking on big risks for big rewards. Pabrai flips that idea on its head. The best investments don’t require you to take extreme risks. They just require you to be patient and wait for the right moment.

Think about it like this. If you could bet on a coin flip where you lose nothing on heads and double your money on tails, you’d take that bet all day, right? That is exactly how Pabrai looks at investing.

One of the best real-world examples is Warren Buffett’s investment in American Express during the Salad Oil Scandal. Back in the 1960s, AmEx’s stock tanked after a fraud scandal. Investors panicked, assuming the company was doomed. But Buffett looked deeper. He saw that despite the short-term crisis, AmEx’s core business was still strong, and customers weren’t going anywhere. He bet big when uncertainty was high but risk was low, and it turned into one of his best investments ever.

That is what Dhandho is all about. Seeking out high-uncertainty, low-risk situations where everyone else sees chaos, but you see opportunity.

2. Cloning the Best Investors

Pabrai has no problem admitting that he is not trying to reinvent the wheel. He built his billion-dollar fortune by studying the best investors in the world and applying their strategies.

He calls this cloning, and it is one of the most underrated investing strategies out there.

Most people think they need to be original and discover hidden gems on their own. The truth is that the best opportunities are often hiding in plain sight. You just need to know where to look.

Pabrai follows great investors like Warren Buffett, Charlie Munger, and Seth Klarman. He studies what they buy, how they think, and why they make their moves. One of the easiest ways to do this? Tracking 13F filings. These reports show what top investors are buying and selling each quarter.

One of the best examples of this strategy? Buffett’s investment in Apple.

Back in early 2016, Buffett’s Berkshire Hathaway started buying Apple stock. At the time, a lot of investors still viewed Apple as a hardware company that was too dependent on iPhone sales. But Buffett saw something else.

Apple had two massive moats:

• The App Store created a locked-in ecosystem where millions of developers and businesses depended on Apple to distribute their apps.

• Hardware integration made Apple products work seamlessly together, making it hard for customers to switch to competitors. (More on moats later.)

But what really caught Buffett’s attention was Apple’s cash flow.

Apple was sitting on a mountain of cash and had the ability to aggressively buy back its own stock, which increased shareholder value over time. After Buffett started building his position, legendary investor Carl Icahn also pushed Apple’s management to return capital to shareholders through stock buybacks. That is exactly what Apple did: buy back hundreds of billions of dollars in shares over the years.

If you had cloned Buffett’s Apple investment back in 2016, here’s what it would have looked like.

Buffett started buying in Q1 of 2016. The highest closing price that quarter was $27.06 per share (adjusted for Apple’s stock split). Since then, Apple has split multiple times, meaning those shares would now be worth much more.

Today, Apple is trading at $238 per share. That is a return of nearly 780% in eight years.

Buffett didn’t try to find the next big tech startup. He simply saw a dominant business, with strong moats and a shareholder-friendly management team, and made a bet.

You don’t have to copy every move a great investor makes, but studying their plays can help you think better and spot opportunities you might have missed.

Let’s move on to the next lesson.

3. Be Opportunistic: Look for Distressed Sales

One of the biggest themes in The Dhandho Investor is buying when there is blood in the streets. Pabrai teaches that the best deals happen when assets are in distress and being sold for pennies on the dollar.

A perfect real-world example of this strategy is Apollo Global Management’s purchase of Caesars Entertainment during the financial crisis.

Back in 2008, the economy was in freefall. Casinos were struggling as fewer people had money to gamble, and Caesars, one of the biggest names in the industry, was drowning in debt. Its stock price collapsed, and the market wrote it off as a dead business.

But Apollo saw something different.

Instead of buying the company outright, they bought its distressed debt at a massive discount. This gave them a controlling stake in Caesars without paying full price for the equity. They weren’t just buying a struggling casino company. They were buying prime real estate in some of the most valuable locations in Las Vegas at a fraction of its worth.

For years, Caesars continued to struggle, eventually filing for bankruptcy in 2015. But Apollo had structured the deal in a way that protected their downside. By holding the debt, they maintained control of the assets even through bankruptcy.

Here’s where it gets interesting.

Apollo didn’t just wait for the casino business to turn around. They split Caesars into two separate companies:

1. Caesars Entertainment (CZR) – This held the core casino operations.

2. VICI Properties (VICI) – A real estate investment trust (REIT) that owned the land and buildings Caesars operated on.

By doing this, Apollo unlocked the hidden value of the company’s real estate, which had been overlooked when the business was drowning in debt.

After years of restructuring, Caesars rebounded. The stock recovered, and VICI Properties became a powerhouse in the casino real estate industry. Apollo walked away with billions in profit.

How You Can Apply This Strategy Today

Most investors don’t have the ability to take over a company like Apollo did, but you don’t need to.

The key lesson is to look for companies with great assets that are temporarily in distress.

You don’t have to sell off the assets like Apollo did. You just need to find businesses with valuable real estate, brands, or intellectual property that are being thrown out by the market.

For example, during downturns, you can often find:

• Hotel chains with valuable properties trading at distressed prices.

• Retailers with prime real estate locations but struggling short-term business performance.

• Industrial or energy companies with valuable infrastructure but market fear driving down their stock.

The best investments don’t always look obvious at the moment. But if you can spot great companies with great assets that are facing temporary struggles, that’s where massive upside exists.

Let’s move on to the next lesson.

4. The Importance of Moats

One of the biggest mistakes investors make is buying companies with no real competitive advantage. They chase cheap stocks without asking the most important question: What stops competitors from taking this company’s market share?

This is where moats come in. A moat is a company’s built-in protection against competition. It makes the business difficult to replicate and allows it to sustain profits over the long term.

A perfect example of a temporary moat is Pfizer’s patent on Viagra.

When Pfizer released Viagra in 1998, it was a blockbuster drug that completely dominated the market. It became one of the most successful pharmaceutical products of all time, generating tens of billions in revenue over its lifetime.

But what made Viagra so profitable wasn’t just demand. It was Pfizer’s patent.

For nearly 20 years, no other company could legally produce a generic version of the drug. This patent gave Pfizer a monopoly, allowing them to charge whatever price they wanted without worrying about competitors undercutting them.

But here’s the problem.

In 2017, Pfizer’s patent on Viagra expired. Almost overnight, generic versions flooded the market, driving the price down and cutting Pfizer’s profits from the drug significantly.

This is a great example of a moat that had a time limit. While it gave Pfizer an incredible advantage for two decades, it eventually disappeared. Since then, the company hasn’t been able to replace Viagra’s lost revenue with another product of the same scale.

In theory, you want a moat that lasts forever. But in reality, some moats are temporary, and smart investors need to recognize the difference.

Other Types of Moats

Not all moats rely on patents. Some are much harder to break:

• Network Effect: Companies like Visa and Mastercard benefit from a network moat because millions of businesses already accept their cards. The more people who use them, the harder it is for competitors to break in.

• Cost Advantage: Companies like Costco and Walmart use their massive scale to buy products cheaper than competitors, allowing them to keep prices low and still make a profit.

• Brand Loyalty: Luxury brands like Louis Vuitton and Rolex have such strong branding that customers willingly pay a premium, even though the actual cost of materials is much lower.

The best investments are in companies with moats that last for decades, not just a few years.

Let’s move on to the final lesson.

5. The Dhandho Mindset: Invest Like a Business Owner

One of the biggest mistakes investors make is treating stocks like lottery tickets. They look at a ticker symbol, check the price, and hope it goes up.

That is not how real wealth is built.

Pabrai argues that you should invest like a business owner, not a stock trader. Instead of obsessing over stock price movements, focus on what actually matters: the quality of the business itself.

In The Dhandho Investor, he tells the story of the Patels, a group of Indian immigrants who built a multi-billion dollar motel empire in the U.S.

The Patels didn’t just buy motels. They ran them.

• They kept costs low by living in the motels themselves, eliminating management overhead.

• They reinvested profits into buying more properties.

• They understood the business inside and out, giving them an advantage over corporate competitors.

This is exactly how you should think about stocks.

When you invest in a company, ask yourself:

• Would I want to own this business if I couldn’t sell the stock for 10 years?

• Does this company generate real cash flow, or is it just running on hype?

• If I were running this company, would I be confident in its future?

A great example of this mindset in action is John Malone, one of the greatest media investors of all time.

Malone didn’t just invest in cable companies. He built them, structured deals, and reinvested cash flows to grow his empire. His business-owner mindset allowed him to compound his wealth exponentially, and today, he is worth over $10 billion.

The takeaway? Stop thinking like a trader. Start thinking like an owner.

If you focus on businesses that generate real cash flow, have strong moats, and are run by great management teams, you’ll naturally invest in the kind of companies that build wealth over the long term.

Final Thoughts

The Dhandho Investor isn’t just another investing book. It is a blueprint for building wealth the smart way—by taking calculated risks, following proven investors, buying distressed assets, focusing on strong moats, and thinking like a business owner.

Pabrai built a billion-dollar fortune by following these principles, and they can work for you too.

Now, I want to hear from you. Which of these five lessons stood out the most to you? Reply and let me know.

Disclaimer for BeanWealth

BeanWealth is a publisher of financial education and information. We are not an investment advisor and do not provide personalized investment advice or recommendations tailored to any individual's financial situation. The content provided through our website, newsletters, and any other materials is for educational purposes only and should not be construed as financial or investment advice.

All information is provided “as is,” without warranty of any kind. BeanWealth makes no representations or guarantees regarding the accuracy, completeness, or timeliness of the information presented. The opinions and views expressed in our content are those of the author(s) and do not necessarily reflect the views of BeanWealth, its partners, or its affiliates.

Investors should perform their own due diligence and consult with a professional financial advisor before making any investment decisions. None of the information provided herein constitutes a solicitation to buy or sell any securities or financial instruments. Any projections or forecasts mentioned are speculative and subject to risks and uncertainties that could cause actual outcomes to differ.

BeanWealth, its employees, and affiliates may hold positions (long or short) in the securities or companies mentioned, and these positions may change without notice. No guarantees are made regarding the continuation of these positions.

Forward-looking statements, estimates, or forecasts provided are inherently uncertain and based on assumptions that may not occur. Other unforeseen factors may arise that could materially affect the actual outcomes or performance of the securities discussed. BeanWealth has no obligation to update or correct any information after the date of publication.

BeanWealth disclaims any liability for losses or damages, whether direct or indirect, resulting from the use of the information provided. By accessing or using any BeanWealth content, you agree to this disclaimer and our terms of service.

Unauthorized distribution, reproduction, or sharing of this content is strictly prohibited and subject to legal action.