“I have heard [Warren Buffett’s business partner] Charlie Munger more than once say that a well-diversified portfolio needs four stocks,” says Pabrai, in a phone interview from his office in Irvine, Calif.
Pabrai’s portfolios aren’t quite that concentrated. But the value hound is OK with buying a stock that makes up 10% of his fund house’s assets, and even letting it run a bit higher than that. He takes a go-anywhere approach, seeing opportunities ranging from the U.S. to South Korea.
Barrons.com: Would you say it is easier or harder to find cheaply valued stocks than it was, say, a year ago?
Pabrai: I would say it’s harder. We haven’t had any meaningful investments in U.S.-listed stocks in probably two years. I’ve found a few things, but they are just really small. The stocks that we have found of any meaning are all out of the U.S.
A: I’ve found stocks in India, China and South Korea.
Q: In analyzing a business, are you also analyzing the country where the business is based?
A: Yes. For example, no matter how cheap it gets, we will not invest in Russia. There’s a lack of respect for capital. The same applies to Zimbabwe.