Investing is often shrouded in complexity, with analysts and retail investors alike trying to predict the future of companies like Nvidia, Tesla, and Palantir. But according to legendary value investor Mohnish Pabrai, most of these stocks belong in what Warren Buffett calls the “too hard” pile—a concept that could save investors from unnecessary speculation and potential losses.
Pabrai, in a recent interview with Sonia Shenoy, shared an anecdote from his visit to Buffett’s office. He noticed a box on Buffett’s desk labeled “too hard” and jokingly pointed out that it was empty. Buffett’s response was telling:
“Mish, it’s not supposed to be empty.”
Buffett then grabbed a bunch of papers, dumped them into the box, and said, “See, it’s full now.” The message was clear—most investment opportunities should be passed on because they are simply too difficult to evaluate with confidence.
Take Nvidia, for example. The company has been at the center of the AI boom, with its stock soaring. However, Pabrai asks a critical question:
“Tell me what you think Nvidia’s cash flows are going to be five years from now, ten years from now, fifteen years from now.”
For most investors, the answer is uncertain. Without a clear understanding of future cash flows, determining whether Nvidia is fairly valued becomes guesswork rather than investing. “I don’t know what Nvidia’s cash flow is going to be five years from now, ten years from now, fifteen years from now,” Pabrai admits. “Too hard pile.”
Pabrai extends this logic to other high-profile companies like Tesla and Palantir, both of which are known for their innovative potential but also their unpredictable financial futures.
When asked about Tesla, he responded bluntly: “Tesla? Definitely too hard pile.” While acknowledging Tesla as a “tremendous company” that has “done great”, Pabrai questions its valuation. “The valuation doesn’t make sense based on current cash flows,” he says.
Yet, Tesla has something unique—Elon Musk. “We have Elon, who’s not human, you know? And Elon is constantly underestimated by everyone. Now he’s fixing the US—that’s incredible.” While Musk’s capabilities may be extraordinary, Pabrai still places Tesla in the “too hard” pile because an investment shouldn’t rely on the brilliance of one individual alone.
Pabrai’s perspective is a reminder that successful investing isn’t about chasing hype or making bold predictions. Instead, it’s about understanding what you know and avoiding what you don’t. If a company’s future is too difficult to forecast, it belongs in the too-hard pile.
You can watch the entire interview here:
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