During this interview with CNBC, Mohnish Pabrai discusses the two key questions investors should ask before making an investment. Here’s an excerpt from the interview:
Pabrai: Basically we want to not be thinking about buying stocks, what we’re buying is fractional interests in businesses.
And basically when we are buying these businesses the first question we should ask is how much can I buy the whole business for?
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Sometimes people would say hey you know Apple’s at 150, should I buy it?
And I ask the person well what’s the market cap of Apple? And they have no idea what it is.
I said well so the first question when you’re trying to buy a business is what can you buy the whole business for?
And then the second question is that if you’re interested in buying the business would you be comfortable putting one third of your family’s entire assets, let’s assume you had hundreds of crores, or thousands of crores, would you be willing to put a third of that to buy the entire company.
And if the answer is no, then you shouldn’t even buy one share.
You can watch the entire discussion here:
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Article by The Acquirer’s Multiple
