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  • About Pinnacle Airlines, and Concentrated Risk
    Excellent article.

    Judging by Mohnish Pabrai's Form 4 purchase history, I'd say Mr. Pabrai has learned a few hard lessons by trying to smash a value investing "home run" with super-cheap small caps. It really just doesn't work that way. Perhaps it was a desire to rapidly catapulting himself to a level where others will bid $650,100 to have lunch with *him*. Pigs gets slaughtered, and the market ate Monish for lunch. I'm not one for excessive schadenfreude and I have a great deal of compassion for the huge losses he's had to swallow, but I'm sure Pabrai is digesting a lesson that will only make him come back stronger.

    Always keep in mind: small/micro cap + "great" value = value trap. (Much more often than not.)

    As quaint as the story of David and Goliath may be, no matter how great/underappreicated a particular micro-cap "David" may seem... 99 out of 100 times, Goliath smashes him and soon everybody forgets he ever existed. But that 1 time out of a 100 makes for great CNBC news fodder and bedtime stories. Everybody kicks themselves for "missing the boat" and so are on the look-out for that next undervalued David to pick up a rock.

    Remember, all the present day "Goliaths" were once "Davids"-- because they have a proven track record for surviving and thriving. Invest in Goliaths when the price is cheap... but not so cheap that their market cap makes 'em look like a scrawny David. And don't gamble your hard earned money on the next chump to toe the line and throw rocks at the giants.
    Aug 17 15:12 pm |Rating: 0 0 |Link to Comment |View article

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